Texas LNG plant to shut for 3 weeks after explosion, roiling global energy markets

FREEPORT, TEXAS (REUTERS) - Freeport LNG said its massive liquefied natural gas plant on the Texas Gulf Coast will stay shut for a minimum of three weeks following an explosion and fire on Wednesday (June 8) that sent US natural gas futures sharply lower.

The fire prompted an evacuation of nearby beaches, left no people injured and was contained by noon, the company said earlier in the day. 

Freeport LNG, which provides around 20 per cent of US LNG processing, disclosed the shutdown late on Wednesday after appraising damage to the massive facility.

Its closure takes away a major supplier to markets already strained by European buyers shunning Russian LNG over its invasion of Ukraine - actions that Moscow calls a “special operation” - and by resurgent demand in China, analysts said.

“This is a significant production outage at a major US facility,” said Alex Munton, director of global gas and LNG at research firm Rapidan Energy.

Freeport LNG ships about four cargoes per week and a three-week shutdown will take at least 1 million tonnes of LNG off the market, he said.

“It’s going to mean one thing: shortages. The competition for spot LNG is going to drive global LNG prices higher,” Munton said.

US natural gas futures sank following news of the explosion on concerns it could disrupt the plant's demand for gas. They closed down about 6 per cent at US$8.699 (S$12) per million British thermal units (mmBtu), having hit a near 14-year high of US$9.664 mmBtu earlier in the day.

An investigation into what prompted the explosion was underway, a spokesperson for the company said, without elaborating on the cause of the fire.

A representative for the US Coast Guard said a security zone had been set up two miles east and west of Freeport LNG's facility, closing that portion of the intracoastal waterway to vessel traffic.

An LNG tanker that was docked was moved away on Wednesday as a precaution.

The explosion comes at a time when global demand for LNG has soared as European countries look to wean themselves off gas from Russia, following its invasion of neighbouring Ukraine.

The plant can process up to 2.1 billion cubic feet of natural gas per day (bcfd) into a supercooled liquid for export.

Earlier in the day, it was drawing about 2 bcfd of pipeline gas.

One billion cubic feet of gas is enough to supply about five million US homes for a day.

Several companies use Freeport to liquefy their gas, including units of BP, JERA, Kansai Electric, Osaka Gas, SK E&S and Total.

Join ST's Telegram channel and get the latest breaking news delivered to you.