Fire at Texas LNG plant sends European gas prices higher

Fire at Texas LNG plant sends European gas prices higher
A shutdown of at least three weeks at Freeport LNG – operator of one of the largest US export plants producing liquefied natural gas (LNG) – is expected to delay cargoes to Europe.

The outage at the plant, which provides around 20pc of US LNG processing capacity, began with an explosion at its Texas Gulf Coast facility on Wednesday. It has triggered alarm bells among players in a market already struggling with reduced Russian supplies and resurgent demand in Asia.

The plant historically sent most of its cargoes to Japan and Korea, but the outage will affect Europe, which has been pulling US cargoes from the east because of the higher prices. Russia’s invasion of Ukraine shifted flows to Europe from Asia.

A three-week shutdown will mean the loss of up to 15 cargoes, although Europe should be able to make up its losses from gas storage. But the risk remains if the shutdown extends for a longer period, said analysts.

“An outage for three weeks minimum is a loss of around 940,000 tonnes of LNG. If you took an average cargo size around 70,000 tonnes, that’s about 13 cargoes,” said Alex Froley, LNG analyst at data intelligence firm ICIS.

The outage coincides with Nord Stream 1 maintenance and some Norwegian gas maintenance measures. However, the market might be able to deal with it by withdrawing some volumes from storage, said a person familiar with the market.

The news sent US natural gas markets down as traders anticipated the outage would free up supplies and help rebuild US storage for winter demand.

In Europe, gas prices rose by up to a fifth on Thursday morning on fears lost US shipments would stress a market already struggling with reduced Russian supplies. Prices cooled off later in the day.