Freeport LNG feedgas deliveries fall as major maintenance begins

Feedgas deliveries to Freeport LNG were scheduled to fall to about 1 billion cubic feet/day on July 10 as the exporter began a major maintenance turnaround, suggesting two of the plant's three liquefaction trains were offline.

The operator of the Texas facility announced the planned maintenance on July 9 but did not specify how many units it planned to take offline or how much production would be affected at the terminal, which can produce about 16.5 million metric tons/year of LNG.

Freeport said it expected to complete the work in late August. The exporter said the work would focus on the plant's pre-treatment and liquefaction facilities to ensure safe and reliable operations, but it declined to elaborate. The terminal can ship about 20 cargoes per month when operating normally.

The outage during peak summer demand months stands to reduce Atlantic Basin supplies available for Asia-Pacific seasonal cooling demand and for refilling European storage inventories, according to S&P Global CERA LNG analysts.

It comes as the global LNG market is grappling with ongoing supply disruptions in the Middle East amid an escalation of military hostilities, keeping spot prices elevated.

For the US domestic market, the downturn at the Freeport terminal south of Houston contributed to a selloff in benchmark Henry Hub prices, which fell about 20 cents day over day on July 9 following the news. The slide continued on July 10, with NYMEX Henry Hub prompt month futures down about 9-10 cents to around $2.90/MMBtu in late-morning trading, CME Group data showed.

The impact on Houston Ship Channel cash prices, which coincided with cooling temperatures across the Southeast, was muted as of July 10.

The scheduled feedgas deliveries to Freeport on July 10, based on nominations for the morning cycle that could later be revised, marked a decline of more than 700 million cubic feet/day from July 9 and amounted to about 35% of the maximum observed flows to the facility. That's down from about 2.5 Bcf/d during the first six days of July.

Overall US LNG feedgas demand fell to about 18.3 Bcf/d on July 10, CERA data showed. Flows had averaged about 19.7 Bcf/d from the start of the month through July 6, which was before feedgas demand at Freeport began declining ahead of the planned turnaround.

Global LNG spot prices remain volatile as the conflict in the Middle East continues to constrain about 20% of global supply that normally passes through the Strait of Hormuz.

Platts, part of S&P Global Energy, assessed the August JKM benchmark price reflecting LNG delivered to Northeast Asia at $17.867/MMBtu on July 10, down 10.9 cents/MMBtu from the previous assessment but still about 67% higher than prewar levels.

In the Atlantic, Platts assessed the DES Northwest Europe marker for August at $16.045/MMBtu on July 10, down 55.4 cents/MMBtu day over day and about 62% higher than before the conflict.