Freeport LNG Takes More Feedgas, But Restart Elusive

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Kpler data shows that the 15 million ton per year Freeport LNG plant on the Texas Gulf Coast received feedgas over the weekend. Market watchers are keeping a close eye on gas flows around the
facility — responsible for 17% of the US' LNG export capacity — as it looks to restart following a June 2022 explosion.

 

 

Freeport LNG begin to ramp up its feedgas intake over the weekend, but skepticism about an imminent restart of the US export facility abounds.

Kpler data shows that the 15 million ton per year Freeport LNG plant on the Texas Gulf Coast received feedgas over the weekend. Market watchers are keeping a close eye on gas flows around the facility — responsible for 17% of the US' LNG export capacity — as it looks to restart following a June 2022 explosion.

Unlike the nine-day steady trickle of about 25 million cubic feet per day of feedgas during December and a similar trickle of 22 MMcf/d for 21 days in July-August 2022, the current flow to Freeport has risen quickly from about 44 MMcf/d to 68 MMcf/d.

"We are still targeting second half of this month for the safe, initial restart of our liquefaction facility, pending regulatory approvals," Heather Browne, director of corporate communications for Freeport LNG, told Energy Intelligence on Tuesday.

Yet not all are sure those pending approvals will come in time. Freeport's planned initial restart most recently slid from mid-December to the second half of January
due to continued regulatory approval delays — and in spite of feedgas volumes also flowing last month.

Even if Freeport is able to stick to its targeted timeline, full operations would not be expected until March.

Safety First

"The last thing [safety regulators] want is evidence they moved too quickly," says Gary Kruse of DC-based consultancy Arbo, which closely follows US energy regulatory matters.

To actually get approval by the Federal Energy Regulatory Commission (FERC) and Pipeline and Hazardous Materials Safety Administration to restart by end-January would surprise me, he told Energy Intelligence, citing regulators' early December data request from Freeport and insistence they would take their time to read and respond to the information.

Kruse explained that responses to such data requests often take several iterations due to answers regulators deem insufficient. That said, he admitted that the public does not have a complete view of all supplemental information provided.

"There could be more progress than I'm seeing," Kruse said, noting that there is at least a "path to restart" underway.

Perhaps tellingly, market sources say Freeport LNG canceled some upcoming shipments for February loading last week as regulators said they had not received applications yet requesting a restart. Those sources suggest even a February restart of the export terminal looks increasingly unlikely.

Rip Van Freeport

When Freeport LNG shut down following an explosion in June 2022, the closure sent US domestic gas prices plummeting by about 21%, heading off a run to $10 per million Btu for July 2022 gas futures as about 2 Bcf/d was suddenly going to be staying home.

The closure also caused about a 10% gain in the European TTF gas benchmark to about $28/MMBtu as Europe was in a relatively early phase of adjusting to a world without Russian piped gas supplies.

Fast forward a few months and Freeport could wake up in an entirely different short-term market, one in which the plant's return will have a limited impact. Europe has since shorn up more than enough gas for this winter, and as a result of that and other market factors, prices on both sides of the Atlantic are deflated.

The US February prompt-month futures contract hit an 18-month low last week of around $3.42/MMBtu — about half the price level seen pre-explosion.

Meanwhile, a mid-January plunge took Southwest European spot LNG below July 2021 levels this week. Spot LNG price assessments by Energy Intelligence for that region shed $6.15 week on week to settle at $14.15/MMBtu, also about half the price level seen post-explosion.

Longer-Term Impact

Before Freeport shut down, there was a major swing in deliveries from Asia to Europe, according to Kpler data, which underscores Freeport's importance to Europe next winter.

For 2021, the plant's first year operating near capacity, Freeport exported 13.5 million tons — 50% to Asia, 29% to Europe, and 20% to the Americas.

For the first half of 2022, Freeport's destinations flipped — it exported 6 million tons, 69% to Europe, 19% to Asia and 11% to the Americas.

There is also the issue of the inevitable rise in US gas prices upon Freeport’s restart, which will no doubt trigger a round of domestic political handwringing about the impact of LNG exports on US consumers.

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