September 12, 2023 [S&P Global]- Gas flows to the Freeport LNG facility in Texas dropped sharply over the weekend to Sept. 11 amid an apparent operational issue, driving a broader decline in US feedgas deliveries and adding pressure on the East Texas gas market.
Total feedgas deliveries to Freeport plummeted from nearly 1.6 Bcf/d Sept. 8 to about 680,000 MMcf/d Sept. 9 and 270,000 MMcf/d Sept. 10, S&P Global Commodity Insights data showed. Freeport was on track to receive about 630,000 MMcf/d Sept. 11, or only about 28% of the maximum observed deliveries to the three-train facility south of Houston, which can produce about 15 million mt/year of LNG.
The cause for the outage was not immediately clear. Freeport spokesperson Heather Browne declined to comment Sept. 11 about the recent drop in utilization at the facility or the expected duration.
The operator of the Gulf South Pipeline, one of the lines that supplies the Freeport plant, issued a notice Sept. 10 saying that it anticipated reductions to the facility until further notice due to Freeport’s failure to take confirmed quantities of gas.
An LNG tanker, the Yiannis, departed laden from the Freeport LNG terminal Sept. 8, S&P Global Commodities at Sea data showed. Two additional unladen LNG tankers — the LNG Schneeweisschen and the Marvel Crane — were anchored near the facility in the US Gulf.
The plunge in feedgas demand at Freeport appeared to be adding pressure on the East Texas market. Cash prices at Houston Ship Channel were down about 7-8 cents from the weekend settlement price to about $2.30/MMBtu Sept. 11, while cash prices at the Katy Hub were down about 11 cents to about $2.27 MMBtu, Intercontinental Exchange data showed. The US benchmark Henry Hub, meanwhile, was down by only about 2 cents Sept. 11 to $2.50/MMBtu.
The recent operational issue at Freeport has occurred at a time of weak global demand for natural gas but as the market remains wary of any outages.
Total US LNG feedgas deliveries in September have averaged 12.7 Bcf/d as of Sept. 11, S&P Global data showed. That level would mark the highest monthly average since May, when flows were about 13 Bcf/d. But total US LNG feedgas demand has yet to recover to the levels reached before the start of seasonal maintenance, which was about 14 Bcf/d in April.
With seasonal demand preparing to ramp up as winter approaches, any global supply disruptions could push up prices for LNG across the world, with disruptions currently coming from Australia, where Chevron’s workers at its Gorgon and Wheatstone facilities have taken strike action against the global major.
The Platts Gulf Coast Marker for US FOB cargoes loading 30-60 days forward reached a near two-week high Sept. 11 at $9.86/MMBtu, the strongest it has been since Aug. 30, when Platts assessed the market at $10.37/MMBtu.
Freeport resumed exports in February after a lengthy outage that followed a June 2022 fire at the facility, and the return of the facility to operations was expected to be the single largest supply addition to the global LNG market in 2023. US regulators signed off on Freeport restarting the final liquefaction train in March, but the exporter continues to await regulatory approval to return to service its second LNG berth and its third and final LNG storage tank.
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