Halt to Major Supplier Severely Impacted LNG Production in the U.S.
Production of liquified natural gas (LNG) within the US relies heavily on a handful of plants. Issues with one of the country’s largest, Freeport LNG in Quintana, Texas, shows how large an impact any shutdown can have on the energy economy. After a June 8, 2022 explosion, the plant had to shut down until it made mandatory improvements.
Natural gas prices soared after Russia slashed gas exports in March 2022. There was little hope of price relief in the U.S. until Freeport–the second largest US exporter of LNG– exploded. Prices continued to drop with every announcement of a delay getting back online because that meant more natural gas would go into storage instead of being exported. At the time of the accident, Freeport was responsible for 15% of the LNG production in the US. Despite initially predicting they would restart operations in October, Freeport LNG did not return online until February 2023 and is still not at total capacity.
Below is a timeline of the shutdown and delays at the Freeport LNG facility.
On June 8, an accident at the Freeport LNG facility resulted in property damage but no injuries. Pipeline officials said the site would shut down for three weeks after the accident.
On August 3, US Pipeline and Hazardous Materials Safety Administration (PHMSA) regulators investigated the accident and imposed corrective actions requirements before service could resume. Freeport LNG expected to complete repairs and restorations and resume operations by early October. After that, they would require PHMSA approval before starting production at the liquefaction facility.
The company updated its timeline, stating they expected to process gas into LNG in January, with full production achieved by March 2023. At the end of the month, the FERC (Federal Energy Regulatory Commission), Coast Guard, and PHMSA paid another visit to the facility.
After reviewing the initial work at the Freeport LNG export terminal, US regulators added a new list of requirements on December 12. The list included requests for additional information on 64 items, and any restart would be contingent on the responses. Among the items were the training status, safety and emergency plans, and detailed corrective actions.
Later in the month, Freeport operators announced most reconstruction work was complete, and they were finishing the final responses to the December 12 request. Since officials still needed to review and clarify certain information, the company pushed its expected restart date to the second half of January or early February 2023.
In February, the Freeport LNG Development LP received approval from federal regulators to commence operations on two of their liquefaction trains and slowly ramp up to the 2 Bcf/d production needed to meet their long-term contracts. There is still additional approval required for the final train.
Freeport received approval from the Federal Energy Regulatory Commission (FERC) to restart its final liquefaction train. They are expected to slowly ramp up to their full capacity over the next few weeks. Despite Freeport resuming operations, the LNG production dropped at the start of March and they canceled up to four shipments. There is still uncertainty as to when they will reach full capacity.
Events like the Freeport LNG shutdown significantly affect energy costs, and we must advise our clients accordingly. We’ll closely monitor developments and communicate updates as needed.
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