Freeport LNG seeks approval for return to full commercial service with Liquefaction Train 3 ready, other units close

Freeport LNG wants permission to resume full commercial operations, the operator said in a Feb. 13 filing with US energy regulators, which came a day after the operator of the Texas export terminal shipped its first cargo since a June 2022 fire shut the facility.

Freeport told the US Federal Energy Regulatory Commission that its Liquefaction Train 3 is "ready to transition to full, commercial operations and production of LNG" after successfully completing restart activities. The remaining two trains of the 15 million mt/year capacity terminal south of Houston are close, the operator said.

To load the first shipment since the outage, Freeport used supplies that were in its storage tanks when the fire forced the terminal offline in June, an Atlantic market source said. The export was loaded onto the BP-chartered Kmarin Diamond, which departed the morning of Feb. 12. A second tanker, the SK-operated Prism Agility, docked at the Freeport terminal Feb. 12 and remained at the facility by early afternoon Feb. 13.

Freeport told FERC that Train 3 had been fully restarted and is "is ready to ramp up to full production rates," adding that it is ready to begin restart activities of Train 2 and expects Train 1 to follow "within the next few weeks."

Freeport spokesperson Heather Browne declined to comment Feb. 13, but an increase in feedgas deliveries to the Freeport terminal over the weekend was consistent with reports from market sources that a production restart was close.

Freeport was scheduled to receive more than 467 MMcf/d of feedgas Feb. 13, based on nominations for the morning cycle that could later be revised, S&P Global Commodity Insights data showed. The scheduled deliveries to Freeport were up from more than 216 MMcf/d Feb. 12, which marked the highest volumes of daily feedgas deliveries to Freeport since outage began.

Overall US LNG feedgas demand was nearly 13.3 Bcf/d Feb. 13.

Freeport told FERC that it completed a pre-startup safety review of Train 2 and that it had identified and completed work required to restart the LNG production unit. The operator said it planned a similar review for Train 1 and would complete any corrective work to safely restart the facility. Freeport told FERC that since its LNG trains were not involved in the June 8 incident and did not require restoration work, Freeport wants to be able to resume commercial operations once the safety reviews and other work deemed necessary for a safe restart of the units is complete.

Freeport asked in the Feb. 13 for FERC to respond the same day.

The request covers what Freeport described as the first phase of operations, covering the return to service of all three LNG trains, two LNG storage tanks and the LNG loading dock where the first shipment since the outage recently departed. The exporter said it would provide FERC with documentation of the restart activities for Trains 1 and 2 before restarting the units.

Reinstating a second LNG loading dock, additional LNG piping and a third storage tank will require additional approvals.

Exports resume

The BP-Kmarin Diamond appeared to be at least partially laden when it left Freeport, with its next destination set for Port Said, which suggested it would be heading through the Suez Canal, S&P Global data showed.

BP and with South Korea's SK Group are among Freeport's long-term offtakers. Freeport also has offtake commitments Japanese utilities JERA and Osaka Gas, and TotalEnergies, based in France.

Even with Freeport showing progress in its return-to-service activities in recent weeks, there has been significant uncertainty in the market about the timeline for the return of feedgas demand at the facility, which can take more than 2 Bcf/d when it is operating fully. The restored demand could help reduce a supply overhang that is weighing on US gas prices.

Changed market dynamics

US gas futures traders have shown a muted reaction to developments at Freeport in recent weeks amid bearish supply-demand factors that included disappointingly low US heating demand this winter, a rising storage surplus and a mild weather forecast for the balance of February.

Globally, the anticipated near-term resumption of shipments from Freeport has continued to help drive bearish price sentiment in the LNG market.

Freeport can export about 16-19 LNG cargoes per month when operating normally, according to figures collected from market sources. But global LNG market dynamics have changed dramatically over the 250 days from the outage to the next export from the terminal. LNG prices have fallen significantly from 2022 levels, although they remain high relative to historical norms.

The Platts Gulf Coast Marker for US FOB cargoes loading 30-60 forward was assessed at $12.70/MMBtu Feb. 13, down 68.5 cents from Feb. 10.