Japan's JERA, Osaka Gas to secure alternative LNG to make up for Freeport supply loss

Japan's largest power generation company JERA and Osaka Gas each said June 15 they will procure alternative LNG supply to make up for the shortfall from the Freeport terminal in the US after its operator advised that the fire-hit facility would suspend exports for at least 90 days.

"While we are still in the midst of verifying the impact on our LNG procurements, we will respond with alternative procurements from other projects to make up expected LNG procurements from the Freeport," a company spokesperson said.

Osaka Gas expects it will need to procure alternative LNG cargoes from other projects and spot procurements to make up for the Freeport supply loss in order to ensure its stable supply in Japan, a company spokesperson said.

JERA and Osaka Gas lift 2.32 million mt/year each of Freeport LNG.

News of a prolonged outage at Freeport LNG sent shockwaves through the gas market June 14 as US and global gas prices diverged amid an update from the terminal operator of a minimum 90-day suspension of exports from the three-train facility.

"At this time, completion of all necessary repairs and a return to full plant operations is not expected until late 2022," Freeport LNG said in the June 14 statement.

"Resumption of partial operations is targeted to be achieved in approximately 90 days, once the safety and security of doing so can be assured, and all regulatory clearances are obtained."

Atlantic LNG prices surged following the bearish supply news. The FOB Gulf Coast Marker was assessed up $4.40/MMBtu day on day at $24.50/MMBtu June 14. Platts DES Northwest Europe for July was assessed up $3.525 /MMBtu over the same period at $ 25.853 /MMBtu.

Atlantic LNG traders said the volatile surge in the underlying European natural gas markets dried up physical bids and offers.

The Freeport facility has been offline since a fire June 8, backing up about 2 Bcf/d of what would have been feedgas into the Gulf Coast gas market. Freeport LNG initially said June 8 that the facility would be offline for at least three weeks.

Stockpiling

In Japan, power utilities are stockpiling LNG for the country's summer season beginning in a few weeks, building a relatively high LNG inventory level.

LNG stocks held by Japan's major power utilities extended gains to a 23-week high June 12, rising 7.9% week on week to 2.31 million mt, the Ministry of Economy, Trade and Industry said June 15.

The June 12 total was up from 2.14 million mt June 5 and at the highest since touching 2.33 million mt Jan. 2.

METI does not have comparable June 12 data for last year but at the end of June 2021, inventory stood at 2.04 million mt, with the four-year average for end-May at 1.95 million mt, METI data showed.