Against the backdrop of strong demand for liquefied natural gas in the United States, one of the largest liquefaction facilities on the Persian Gulf coast, Freeport LNG, will be out of service for at least three weeks after yesterday’s explosion.
An explosion shook the Freeport liquefied natural gas liquefaction plant yesterday morning, the cause of which is still unclear. The investigation is ongoing, but according to the facility’s operator, Freeport LNG, the facility will remain closed for weeks. It represents one-fifth of the total US liquefaction capacity.
The Freeport facility has three liquefaction trains, and a fourth is under construction. Its current gas processing capacity is 2.1 billion cubic feet per day. With the interruption, the situation with the export of liquefied natural gas from the United States will become problematic, as can be seen from the reaction of the gas market to the news of the explosion.
Prices initially fell as traders worried the cut would reduce US LNG’s market share, according to an Financial Times report earlier today. Bloomberg noted that the fire means that much gas will remain blocked in the fields amid growing demand for gas abroad.
However, the prices of international liquefied natural gas markets may react differently, as the interruption of liquefied natural gas in Freeport effectively means that there will be less natural gas for export, especially for energy thirty Europe and Asia.
In Europe, gas prices have been falling over the past few days as the early start of summer reduced immediate demand. Sufficient supply of LNG also contributed to the price trend. With the break, this trend may be reversed at some point.
However, demand in Asia is growing strongly as buyers seek to build up stocks for the winter season, Bloomberg reported this week, which provides additional support for rising prices.
“Liquefied natural gas prices remain much higher than usual, even as they adjust to higher crude oil prices,” Sanford analysts C. Bernstein was quoted as saying by Bloomberg. “We expect this to be a lull before what looks like a severe winter ahead for consumers.
By Irina Slav for Oilprice.com
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