Freeport LNG to shut for at least 3 weeks

The US' 15mn t/yr Freeport LNG export terminal will shut for at least three weeks following an explosion yesterday that has driven up European gas hub prices.

The outage could result in the loss of about 12 standard-sized cargoes, assuming Freeport would have operated at nameplate capacity and an average cargo size of about 160,000m³ of LNG.

Freeport LNG did not say what caused the fire or whether it had caused any damage. No-one was injured and the incident is under investigation, it said.

European hub prices climbed today in response to the shutdown at Freeport, home to around 15pc of US liquefaction capacity. The front-month gas contract at the Netherlands' TTF hub jumped to €92/MWh early in the morning from €78.40/MWh at yesterday's close. It had slipped back to just over €85/MWh at around 16:00 BST today, but was still on track for its highest close in three weeks.

Europe has been the primary destination for US LNG exports in recent months, offering greater returns than northeast Asia. European firms have sought to add as much to underground storage as possible to prepare for a winter with potential Russian pipeline gas supply disruptions.

That said, the inter-basin arbitrage for US exports has opened in recent days, which could encourage firms to deliver US LNG to Asia instead of Europe in the coming weeks.

Of the 23 cargoes produced at Freeport on 1 April-16 May, 18 were for Europe — five each for the Netherlands and France, three for Spain and one each for the UK, Lithuania, Poland, Italy and Greece.

BP is the biggest offtaker from Freeport, holding a contract for 4.4mn t/yr under a tolling liquefaction agreement. TotalEnergies has a 2.2mn t/yr agreement, while Germany's Uniper has a fob agreement to buy around 800,000 t/yr of Freeport production from Japan's Osaka Gas. Osaka Gas and Jera each have 2.3mn t/yr of offtake, while South Korea's SK E&S has 2.2mn t/yr. Additionally, trading firm Trafigura and Japan's Kansai Electric have agreements for 500,000 t/yr and 170,000 t/yr, respectively.

By Natasha Fielding and Jason Womack