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Freeport LNG became the sixth major US liquefaction facility to start up, with the operator confirming Monday that production had begun at the Texas facility.
The facility south of Houston along the Gulf of Mexico experienced several construction- and weather-related delays, most notably following heavy rain in the aftermath of Hurricane Harvey in August 2017. It now joins Cheniere Energy, Dominion Energy, Sempra Energy and Kinder Morgan in liquefying US shale gas for export. Cheniere operates two facilities. Kinder Morgan's facility in Georgia has been producing LNG for several weeks but has yet to load its first cargo.
Freeport LNG registered initial output on August 12, but a gasket rupture the following day resulted in some refrigerant being released, requiring repairs before the startup process could be officially acknowledged. On Monday, the terminal reported sustained production, spokeswoman Heather Browne said in an email.
"This is an exciting and significant milestone which now paves the way for our first Train 1 cargo loading expected later this month," Browne said. "Freeport's Train 1 remains on schedule for a September start of commercial operations."
With the startup, all of the export facilities that make up the first wave of major US LNG terminals are producing LNG. A dozen or so other export facilities - the so-called second wave - are actively being developed for startup in the early- to mid-2020s, at a time when the global supply stack could face a shortage. Some are, however, having difficulty securing sufficient offtake contracts to finance construction.
Cheniere shipped its first LNG cargo from its Sabine Pass export terminal in Louisiana in February 2016. Shipments began at Dominion's Cove Point terminal in Maryland in March 2018 and at Cheniere's terminal near Corpus Christi, Texas, in December 2018. Sempra Energy's Cameron LNG in Louisiana exported its first cargo in May.
The primary long-term buyers of offtake from Freeport LNG Train 1 are Japanese utilities Osaka Gas and Chubu Electric, which each control 2.2 million mt/year of capacity. Additional long-term contracts were signed with BP for 4.4 million mt/year of offtake capacity for Train 2, and France's Total and South Korea's SK E&S, which are splitting another 4.4 million mt/year of offtake capacity at Train 3.
In total, long-term contracts cover roughly 13.2 million mt/year of the proposed 15 million mt/year three-train facility's output, with additional short-term contracts, including a three-year deal with commodity trader Trafigura, covering the remaining supply.
As Freeport LNG operates on a tolling model, buyers of the LNG produced there are responsible for the procurement and delivery of feedgas supply to the liquefaction facility, as well as arranging shipping and deciding where the cargoes are delivered.
As the production milestone was announced, the unladen Mitsui- and Kansai Electric Power-owned tanker LNG Jurojin remained anchored Monday offshore Freeport LNG, in a queue area for vessels bound for Freeport and with a captain's destination set for the port where Freeport LNG is located. The tanker last dropped off a load of LNG at Japan's Ohgishima receiving terminal around July 19, after picking up a cargo at Nigeria's Bonny facility around June 20, S&P Global Platts vessel-tracking data showed.
A second tanker, the Soshu Maru, continued its course for Freeport, with a scheduled arrival in September. That tanker last picked up a cargo around August 2 at Australia's Darwin terminal and unloaded the LNG at Japan's Negishi receiving terminal on August 12.
Freeport LNG reported its latest commissioning problem August 13 to the Texas Commission on Environmental Quality. Some refrigerant was inadvertently released to the atmosphere. Repairs to a ruptured gasket tied to a mixed-refrigerant system of the first liquefaction have since been completed, Browne said. The mishap followed Freeport LNG's completion of repairs August 9 to a flare vent line that had encountered a gas leak during the startup and cool-down process for Train 1.
(Adds additional detail, background, market analysis)
-- Harry Weber, Harry.Weber@spglobal.com
-- Edited by Keiron Greenhalgh Dart, firstname.lastname@example.org
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