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US knocks Cheniere over response to LNG storage tanks mishap agreement

Highlights

Promised corrective actions followed 2018 gas release

Two of five tanks at Sabine Pass terminal remain offline

Houston — US regulators warned Cheniere Energy on Tuesday that they will not allow the operator to return two LNG storage tanks to service that have been offline at its Louisiana export terminal since an inadvertent release of gas more than a year ago until promised corrective actions are completed.

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Market concerns that a prolonged shutdown could affect global supply have abated as Cheniere has continued to produce and ship significant volumes of LNG supplies from the facility and a second one in Texas, and as additional capacity has been brought online by other developers.

Even so, strong demand and routine maintenance outages will require higher utilization by liquefaction units that remain in operation, giving Cheniere an incentive to bring the two storage tanks back online as soon as it can. The shutdown has lowered Sabine Pass storage capacity from the facility's full, five-tank, 17 Bcf design.

In a joint letter to the operator, the US Department of Transportation's Pipeline and Hazardous Materials Safety Administration and the Federal Energy Regulatory Commission reminded Cheniere of its obligations under an agreement it reached with the government that called for repairs and continued investigation of the root cause of the January 22, 2018, mishap.

The deal stipulated that once the modifications were made and its other terms were followed, the company would be able to seek approval to restart the tanks.

The two agencies, however, said Cheniere has yet to complete a number of corrective measures. In the letter, they provided a list that includes requirements for additional testing and examination, procedure modifications and documentation.

"At this time, neither agency is prepared to authorize the approval of a return to service until the requirements identified as necessary prior to cool down are completed," the letter said.

In an emailed statement, Cheniere said it will continue to work with the regulators to safely bring the two tanks back to service.

"We are analyzing the letter from the agencies and will provide a formal response," Cheniere said. "We have been responsive and forthcoming throughout this process, and will continue to be."

Cheniere said it believes that repair work performed on the tanks thus far has been performed in accordance with plans approved by regulators.

But the agencies wrote that any work that Cheniere does to return one of the tanks to service before the requirements are met "is at your own risk." They said that many of the requirement items listed in the letter have been previously communicated to Cheniere.

"Therefore, at this point, it has become necessary to more formally issue the attached requirements based on your failure to provide the requested items during the course of the post incident process," the letter said.

-- Harry Weber, Harry.Weber@spglobal.com

-- Edited by Gail Roberts, newsdesk@spglobal.com