Freeport LNG output remains offline as utility works to restore power after storm

Freeport LNG production remained offline for a second consecutive day Sept. 15, as power transmission operator CenterPoint worked to restore electricity to the facility that was knocked out by Hurricane Nicholas.

A spokesperson for the 15 million mt/year capacity export terminal was unable to say when the three liquefaction trains would be able to resume service.

"Our production remains offline until CenterPoint completes repair work on their system," the spokesperson, Heather Browne, said in an email responding to questions.

Nicholas hit the Texas Gulf Coast early Sept. 14 as a Category 1 hurricane, bringing 75 mph winds and heavy rain. The storm made landfall along the coast west of the small island in Brazoria County where Freeport LNG is located. Widespread power outages were reported in the county and across the Houston area.

As of the afternoon of Sept. 15, almost 67,000 CenterPoint customers remained without power, according to the utility's website.

US LNG feedgas demand totaled 9.4 Bcf/d on Sept. 15, down about 1.8 Bcf/d from Sept. 13, the day before Nicholas came ashore, S&P Global Platts Analytics data showed. The most recent total included nominations of about 915 MMcf/d to Freeport LNG, based on the morning cycle. That was likely to be revised downward during the evening cycle, given that the three trains were offline. Observable gas deliveries to Freeport LNG were at 2 Bcf/d before the storm.

An LNG tanker that arrived at the terminal on Sept. 13 for loading remained moored there on Sept. 15, according to Platts cFlow trade-flow analytics software. Another tanker that arrived on Sept. 12 for loading was in the Gulf of Mexico on Sept. 15 heading away from the channel that feeds the terminal. Three more LNG tankers with captain's destinations set for Freeport LNG were holding in the Gulf on Sept. 15.

The US Gulf Coast LNG netback from the Dutch TTF has surged to $14.71/MMBtu for October deliveries, which is now at a premium to the Platts JKM October derivative contract, suggesting that strong price action in Europe could incentive a large contingent of US LNG cargoes to remain within basin next month.

However, European buyers will still need to compete with persistent buying from South America, which has been exacerbated by constrained production at Trinidad and Tobago and Peru, according to Platts Analytics.

Freeport LNG is the only liquefaction terminal in the US and one of only a few in the world that uses exclusively electric motors instead of natural gas turbines to drive the liquefaction compressors. The operator has proposed adding a fourth train, though it has yet to sanction construction while it continues to build commercial support.

Currently, there are six major LNG export terminals in the US. That total will rise to seven next year and eight by the middle of the decade, based on what's already under construction.