Freeport LNG, operator of one of the largest liquefied natural gas (LNG) export plants in the United States, will close for at least three weeks after an explosion at its facility on the Texas Gulf Coast. The fire rattled US natural gas markets on Wednesday and the impact is likely to spread to markets in Europe and Asia, analysts have warned.
US natural gas futures sank after news of the explosion on concern it could disrupt demand for gas from the plant. They closed down about 6% at $8.699 per million British thermal units (mmBtu), having hit a nearly 14-year high of 9.664 million Btu earlier in the day.
The US exporter, which provides about 20% of US LNG processing, announced the closure on Wednesday night, after assessing the damage to the huge facility. Its closure removes a major supplier from markets already strained by European buyers shunning Russian LNG after Ukraine’s invasion, and resurgent demand in China, analysts have said.
“This is a significant production disruption at a major US facility,” said Alex Munton, director of global gas and LNG at research firm Rapidan Energy. Freeport LNG ships about four cargoes a week and a three-week shutdown will take at least 1 million tons of LNG off the market, he has warned. “It’s going to mean one thing: scarcity. Competition for LNG will drive up global LNG prices,” added Munton.
The plant can process up to 2.1 billion cubic feet of natural gas per day (bcfd) and, at full capacity, can export 15 million tons per year (MTPA) of liquefied gas. US LNG exports reached a record 9.7 bcfd last year, according to the country’s Energy Information Administration (EIA).
Freeport LNG was founded in 2002 by billionaire Michael Smith and processes gas for companies including BP, JERA, Kansai Electric, Osaka Gas, SK E&S and TotalEnergies. It is in the midst of expanding the plant’s capacity to 20 MTPA. An investigation is underway into what caused the explosion, a company spokesman said, without giving further details on the cause of the fire.
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A US Coast Guard representative said Wednesday that a security zone had been established two miles east and west of the Freeport LNG facility, closing that part of the intracoastal waterway to vessel traffic.