June 25, 2022

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Freeport LNG Texas terminal outage hurts Europe, may help African exporters

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Global liquefied natural gas (LNG) buyers – especially in Europe – and some U.S. shale producers have been reeling since a June 8 blast shut Freeport LNG’s massive export terminal in Texas.

Reverberations also are being felt in Africa, where LNG producers could get a boost from the months-long shutdown to repair the Texas terminal, analysts said, noting that European buyers moving away from Russian gas and pipeline operators have few supply alternatives.

The Freeport facility accounts for roughly 20% of U.S. LNG processing capacity, drawing 2 billion cubic feet per day (bcfd) of natural gas from U.S. shale producers.

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A full restart of the facility will not happen until late this year, the company said this week. The outage sent U.S. gas futures down 18% from the price a day before the fire, while European gas prices have surged more than 60%, with an additional boost from less gas on Russian pipelines.

Some 75% of Freeport LNG’s feed gas, or 1.47 bcfd, relies on Boardwalk Pipeline’s Gulf South Pipeline, with a unit of BP PLC supplying roughly half of that capacity, according to consultancy East Daley Capital.

JERA Energy America and Osaka Gas Trading also are shippers on that line, at about 0.355 bcfd and 0.220 bcfd, respectively. The day after Freeport suffered the explosion, pipeline operator Gulf South said its flows to the facility were zero.

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“Shippers will not be able to easily shift volumes to alternate delivery points without amending their contracts with the pipeline in which case the pipeline can raise rates or require a separate contract,” said Alex…


2022-06-16 14:12:07

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