Delays in restarting the blast-damaged Freeport LNG export terminal and weather forecasts.
By Wolf Richter for WOLF STREET.
US exports of liquefied natural gas (LNG) in 2022, at 81.2 million tons, matched that of Qatar, the world’s No. 1 LNG exporter, according to ship-tracking data compiled by Bloomberg.
The US would have been No. 1 had a June explosion not shut down the Freeport natural gas liquefaction plant in Texas, reducing LNG export capacity by 17%.
Qatar’s LNG exports have been relatively stable over the past 10 years, according to Bloomberg vessel tracking data. But the country is now involved in major expansion projects amid a surge in global demand for LNG.
US LNG exports started to soar almost out of nowhere in 2016 when the first major LNG export terminal – originally an LNG import terminal – came online. Since then, enormous sums have been invested in the construction and expansion of LNG export facilities, mainly in Louisiana and Texas, but also in Maryland and Georgia.
US LNG exports in billion cubic feet according to the latest US EIA data through October:
In addition, five export terminals are currently under construction in the United States, and 11 export terminals have been approved by the Federal Energy Regulatory Commission but are not yet under construction, according to FERC in its latest Dec. 13 update.
The June explosion at the Freeport terminal damaged part of the terminal. The reopening of the plant has been postponed several times. The company publicly announced on Dec. 23 that the conversion work required to begin initial operations was “substantially complete” and that it is “submitting responses to the final remaining questions identified in the Federal Energy Regulatory Commission’s Dec. 12 data request.” are included”. And it said it had delayed plans to restart the facility until the second half of January.
Faced with yet another delay – the information must have come days earlier – US natural gas prices plummeted from $6.60 per million Btu on December 15 to $4.98 on December 23, the day of the public announcement.
After that, the price continued to fall. Today, NG futures plunged another 11% to currently $3.98 per million BTU on the weekend’s forecasts of a milder first half of January for the US. This brings the plunge since December 15 ($6.60) to 40%! Are you praying for Freeport to resume exporting as soon as possible?
LNG exports provided a new market for the increasing US natural gas production, fueled by fracking, which had crashed the price of natural gas from 2009, as you can see in the chart above. Over the next 12 years, NG traded in the $2 to $4 per million Btu range and bankrupted many frackers – including major natural gas producer and pioneer fracker Chesapeake in June 2020.
With rising LNG exports, natural gas prices broke out of the $2-$4 range in 2021, then surged to almost $10 with the price surge in Europe, demand for US LNG now that LNG exports are pushing the price in the US with the global associated prices. But the explosion at the Freeport plant, which reduced exports and removed some demand from the US market, caused those prices to fall again. And then there is always the short-term weather.
In Europe, natural gas prices have completely unwound the crazy spike in 2022, falling back to October 2021 levels amid record LNG shipments from the US and elsewhere, record pipeline natural gas shipments from Norway, combined with a mild winter , and a reduction in consumption.
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