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Cheniere tank leak 'near-term headache,' but no major impact, analysts say


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Cheniere tank leak 'near-term headache,' but no major impact, analysts say

An LNG leak that forced two of five 3.4-Bcf storage tanks to be removed from service at Cheniere Energy Inc.'s Sabine Pass terminal should not have a major impact on the company's ability to deliver super-cooled natural gas, analysts said.

Cheniere on Feb. 12 said it had "deinventoried" the two storage tanks after the U.S. Department of Transportation's Pipeline and Hazardous Materials Safety Administration ordered the facilities offline. The federal safety regulator's Feb. 8 order said storage tank 3 had released LNG into the space between the inner and outer tank walls, which eventually caused cracks in the outer wall. The order identified another problem in storage tank 1, which led to what Cheniere called "a minor vapor leak." No LNG was released from tank 1.

While taking the tanks out of service could prove a "near-term headache," Guggenheim Partners LLC Midstream Research Director Matthew Phillips saw no major impact from the incident. Phillips said in a Feb. 15 note that, with roughly 17 Bcf of storage capacity and 2.1 Bcf/d of LNG production capacity, Cheniere has excess storage to absorb "overflow." He also said the company could opt to bring in an LNG tanker for extra storage, "which insurance may cover."

Richard Langberg, director of infrastructure and utilities at S&P Global Ratings, also did not think the incident would have a material impact on operations. "One of the two tanks is likely to come online pretty quickly," he said in an email.

Cheniere has said LNG production has not been impacted by the removal of the storage tanks from service. An LNG tanker was docked at the terminal as of 1:30 p.m. ET on Feb. 16.

Natural gas deliveries to Sabine Pass scheduled for Feb. 16 dropped to roughly 1.5 Bcf, down from daily deliveries of more than 3 Bcf/d in each of the seven days prior, according to SNL Energy pipeline flow data. Gas flows to the facility often fluctuate during routine maintenance.

S&P Global Ratings and S&P Global Market Intelligence are both owned by S&P Global Inc.