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First export cargo departs from Freeport LNG: operator

Houston — A tanker departed from Freeport LNG Tuesday with the first export cargo produced at the Texas facility, strengthening the US' position as a major global supplier of the super-chilled fuel.

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The LNG Jurojin pulled away from the terminal about 60 miles south of Houston at about 3 p.m. CDT, the operator said in an emailed statement. The captain's destination log shows the tanker was headed to Jebel Ali, a deepwater port in the United Arab Emirates where Excelerate Energy operates an LNG receiving terminal from a floating storage regasification unit, according to Platts trade flow software cFlow.

The tanker has a capacity of 155,300 cu m, according to cFlow, Platts trade flow software. The operator said about 150,000 cu m of LNG was loaded.

According to a market source, the commissioning cargoes from Freeport LNG, including the first one that was loaded aboard the Mitsui- and Kansai Electric Power-owned Jurojin, are being taken by Shell. This means that the fate of the first few cargoes may be subject to portfolio optimization economics rather than independent price signals.

Weather also could play a role as Hurricane Dorian threatens the US East Coast, potentially affecting flows from the Gulf Coast to Europe over the next several days.

A second tanker, the GasLog Partners-owned Methane Heather Sally, remained anchored off Freeport LNG Tuesday. That tanker last picked up a cargo at Nigeria's Bonny liquefaction terminal around August 3 and dropped off that cargo at Mexico's Altamira receiving terminal August 22, cFlow data showed.

Freeport LNG has said that Train 1 would begin commercial operations in September. A third tanker, Soshu Maru, is scheduled to arrive at the terminal September 18.

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.

The Total agreement includes obligations it inherited from its acquisition of Toshiba's US LNG business. That deal, announced in May, was completed Tuesday. In a statement, Freeport LNG said Train 2 is expected to be in service in January, followed by Train 3 in May 2020.

US LNG netbacks continue to trend near year-to-date lows, with weak market pricing persisting on the October front-month contract.

The netback from the Platts JKM, the benchmark price for spot-traded LNG in Northeast Asia, to the US Henry Hub was estimated at 43 cents/MMBtu as of Monday, a slight premium to the Dutch Title Transfer index, or TTF. The minor differential is not likely enough to incentivize US cargo diversions away from Europe this fall, suggesting that US LNG may sell into the October TTF contract, which is still offering a roughly 32 cents/MMBtu spread, Platts Analytics data show.

All six of the export facilities that make up the first wave of major US LNG terminals are now 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.

Cheniere Energy shipped its first LNG cargo from its Sabine Pass terminal in Louisiana in February 2016. Shipments began at Dominion Energy's Cove Point terminal in Maryland in March 2018 and at Cheniere's terminal near Corpus Christi, Texas, in December 2018. Substantial completion of Tran 2 at Cheniere's Texas facility was announced Tuesday.

Sempra Energy exported its first cargo in May. Kinder Morgan's Elba Liquefaction in Georgia began production in July, though it has yet to export a cargo.

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

-- Ross Wyeno, rwyeno@spglobal.com

-- Edited by Bill Montgomery, newsdesk@spglobal.com