Freeport LNG's export terminal on Quintana Island, Texas, will not return to full service until late-2022, the terminal operator said June 14.
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The facility has been offline since a fire in the late morning of June 8, backing up about 2 Bcf/d of what would have been feedgas into the Gulf Coast gas market.
"... 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," Freeport LNG said in its June 14 press release.
Freeport LNG said June 8 that the facility would be offline for at least three weeks.
As news of Freeport LNG's extended outage whipsawed through the market, the NYMEX balance-2022 futures curve tumbled more than $1.50/MMBtu, or about 18%, to trade in the low-$7 range. In the cash market, benchmark Henry Hub gas down about $1.20 on the day, or almost 14%, to trade around $7.65/MMBtu, data from CME Group and the Intercontinental Exchange showed.
Conversely, Atlantic LNG prices surged following the bearish supply news. The FOB Gulf Coast Marker was assessed at $24.50/MMBtu June 14, up $4.40/MMBtu on the day. Platts DES Northwest Europe for July was assessed at $ 25.853 /MMBtu on June 14, up $3.525 /MMBtu on the day. Atlantic LNG traders said the volatile surge in the underlying European natural gas markets dried up physical bids and offers.
"I'm not sure the physical LNG market is that fast," A European trader said. "This wouldn't affect the prompt. It could effect further down the curve but no one was trading anything beyond August anyway because of the risk of further delays."
The moves largely followed gains in the underlying European natural gas markets. TTF July futures opened at Eur83.750/MWh, trading in a range during European hours of Eur83.750/MWh and Eur100.995/MWh, before finishing at Eur 96.125/MWh at 4:30 p.m. London time. The July contract was assessed at $ 29.353 /MMBtu June 14, up $3.98/MMBtu on the day.
On June 14, feedgas flows to Freeport LNG remained at zero for a sixth consecutive day -- down from a 30-day average prior to the incident at nearly 2 Bcf/d, according to Platts Analytics data.
This summer lost feedgas demand at Freeport LNG now promises to inject an incremental 2 Bcf/d into the Gulf Coast gas market where record LNG exports, strong power burns and low inventory levels have kept the spot gas market tightly supplied.
Prior to the shutdown at Freeport, US LNG exports were averaging about 12.5 Bcf/d. With feedgas flows to Venture Global's Calcasieu Pass terminal continuing to ramp up, prior estimates were for record summer exports averaging over 13 Bcf/d in June and July. Based on average terminal flows to Freeport, US LNG exports are likely to average closer to 11 Bcf/d as long as the three-train facility remains fully shut in.
This summer, domestic sources of demand in the Gulf Coast gas market should have no trouble absorbing the incremental supply from Freeport.
In Texas and the Southeast, gas demand from power generators could hit record highs this summer thanks to emerging limits on gas-to-coal fuel switching. Forecasts are already predicting the strongest season for power burn since the record summer of 2020. Assuming the National Weather Service's long-lead forecast is accurate, most of the US Lower 48 states are in for hotter-than-average temperatures through August.
Depleted inventories in the South Central region will also absorb some of the incremental supply from Freeport this summer. As of the week ended June 3, gas storage in the region remained at a steep deficit to the historical average, raising alarm in the futures and forwards market over the region's capacity to rebuild inventories prior to next winter. At 843 Bcf, South Central inventory currently stands about 129 Bcf, or roughly 13%, below the prior five-year average, data from the US Energy Information Administration shows.