An explosion June 8 at Freeport LNG, the 15.3 MMtpa (2 Bcf/d) export terminal on Quintana Island, TX, has knocked it offline at a time when the global market is already facing tight conditions because of the war in Ukraine and other factors. The explosion, fire and subsequent shutdown — which fortunately did not include any injuries — sent U.S. natural gas tumbling off recent highs and shot global gas prices higher. Much is still unknown about the developing situation, including exactly how long the outage will last. While Freeport has said it expects the terminal to be offline for at least three weeks, multiple regulatory agencies have investigations underway and will likely need to approve a return to service. In today’s RBN blog, we look at the latest news from Freeport LNG and run through the potential market implications, starting with impacts to the U.S. gas market.
UPDATE: Freeport LNG said Tuesday that it did not expect to resume full operations at its plant on Quintana Island, TX, until late 2022, with a planned return of partial operations in about 90 days. The plant was shut June 8 after an explosion and fire at the facility. Freeport said the incident occurred in the pipe racks that support the transfer of LNG from the facility’s LNG storage tank area to the terminal’s dock facilities. Preliminary observations suggest the incident resulted from the overpressure and rupture of a segment of an LNG transfer line, leading to the rapid flashing of LNG and the release and ignition of the natural gas vapor cloud, Freeport said. The July contract was down $1.50/MMBtu, or about 18%, to about $7.100/MMBtu early Tuesday after Freeport’s update. It fell 24.1 cents Monday to settle at $8.609/MMBtu.
Information about the incident has been trickling in as investigations got underway by state and federal regulatory agencies, including the Pipeline and Hazardous Materials Safety Administration (PHMSA), which typically handles major incidents, such as the storage tank leaks at Sabine Pass and the multiple ruptures on Texas Eastern Transmission (TETCO) in 2019-20. In a filing to the Texas Commission on Environmental Quality (TCEQ) last Wednesday, Freeport said it had to shut down all three of its liquefaction trains and their respective pre-treatment facilities due to a fire in the liquefaction delivery system. From preliminary reporting, it appears that a line, presumably a vapor and not a liquids line, near the storage tanks may have been the source of the explosion (red oval in Figure 1). PHMSA said Friday that there were early indications of a leak in the piping in that area and that it will take “a while” to complete the investigation, Bloomberg reported. PHMSA has the authority to oversee the terminal’s return to service, which may mean that it will take longer than three weeks to restart operations. Additionally, the extent of any damage is not yet known, and if new parts are needed, that might present a problem, given the issues with the global supply chain related to the pandemic. A May 2020 fire at Kinder Morgan’s liquefaction terminal, Elba LNG in Georgia, took one of its mini-trains, Unit 2, offline for about 18 months because Kinder Morgan had a difficult time procuring parts needed to repair the damaged unit.
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