Freeport LNG export plant set to resume operations in March, Rystad Energy says

Most of the cargo from the project will go to Europe, says consultancy

LNG tankers in Louisiana. US natural gas exports to Europe stood at an average of 6.4 billion cubic feet per day over the past 12 months. Reuters

Freeport, the second-biggest US LNG export plant, could restart operations in March this year after it was shut down due to a fire in June 2022, according to Rystad Energy.

The return of the plant, which can process up to 2.1 billion cubic feet of natural gas per day and export 15 million tonnes of LNG per annum, is expected to push up gas prices.

“Our current forecast anticipates the facility will begin to liquefy in March 2023,” said the Norway-based energy consultancy in a report.

Freeport’s closure came as European countries, faced with dwindling Russian exports, started increasing their imports of LNG from the US and Gulf countries, while simultaneously filling up their natural gas storage with existing supplies.

“At the time, we believed a prolonged outage would tighten global balances, especially considering EU gas demand, primarily driven by the industrial sector and winter consumption,” said Rystad analyst Ade Allen.

However, a sharp fall in industrial gas demand in Europe, along with an unusually mild winter and Covid-19 restrictions in Asia, helped to “balance” gas markets in 2022, said Mr Allen.

Rystad Energy expects EU industrial gas demand to expand “modestly” by 1.5 per cent this year.

The rise in gas storage levels has triggered a sharp fall in prices over the last few months.

Dutch Title Transfer Facility gas futures, the benchmark European contract, was last trading at €55.20 ($59.33) per megawatt hour on Wednesday.

Futures hit a record high of about €343 a megawatt hour in August last year.

Although prices have declined considerably on higher stocks, the region can still absorb incremental LNG volumes in 2023, said Rystad.

US LNG exports to Europe averaged 6.4 billion cubic feet of natural gas per day over the last 12 months.

“We expect this will continue; [although] gas prices have declined from the summer 2022 peak, the forward curve is still relatively elevated,” said Mr Allen.

“When Freeport LNG eventually restarts, most of its cargo will be sent to Europe as economics and transit times are competitive.”

Analysts and energy executives expect gas markets to be tight in 2023 as Russian exports fall and China’s economy recovers.

“The EU may find it more difficult this year to find substitutes for Russian gas supplies as the LNG market will likely tighten,” said Moody’s in a report last week.

“Although short-term gas prices have fallen sharply and are now back to where they stood before Russia's invasion of Ukraine, we expect energy prices to remain volatile and above historical levels.”

The EU could fall short by about 27 billion cubic metres (bcm) of gas this year if Russian gas deliveries drop to zero and China’s LNG imports rebound to 2021 levels, the International Energy Agency said in a December report.

The agency said the risk of shortages could be avoided through “stronger” efforts to improve energy efficiency, as well as use more renewable energy and further diversify natural gas sources.