The restart of operations at the second-largest U.S. natural gas export facility is expected to be delayed through at least December, curtailing supplies to Europe and Asia at the start of the winter and raising prices for gas abroad.
The Freeport LNG terminal in Texas was hit by an explosion in June that knocked it offline and took down roughly 15% of total U.S. LNG export capacity, the majority of which had been sent to Europe.
The plant has since struggled to come back online, citing recent challenges with repairs, which have taken longer than expected. Regulators must also approve its restart plans. As of yesterday, Freeport had not yet submitted its plans to the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration, or PHMSA. Once submitted, the plans could take upward of two weeks for federal approval — prompting fears that commercial processing might not resume until early next year.
The lag threatens to delay key supplies for European and Asian buyers as they enter the winter heating season.
Concern about an extended Freeport outage caused benchmark gas futures in Europe to jump by 21% this week, according to Bloomberg.
Though several LNG vessels remain positioned outside Freeport, several have since turned to other ports.
One of those vessels has moved to just outside an LNG port in Corpus Christi, Texas, Refinitiv data shows, while the other two have turned around in the Atlantic and are heading east.
As recently as last week, Freeport maintained that it was on track to resume service in November. But it has since attempted to walk back those expectations.
This week, PHMSA regulators also released the findings of a third-party consultant’s report examining the root cause of the blast.
That report blamed the explosion on inadequate operating and testing procedures, such as deficiencies in valve testing procedures, failure to adjust alarms that could warn operators of rising temperatures, and control rooms that failed to show when temperatures in specific pipelines were rising fast.
Human error and fatigue were also to blame, according to the heavily redacted report.
Neither Freeport nor third-party consultants indicated when the plant could restart operations, and PHMSA said the investigation remains “ongoing.”