One of the largest US plants that produces liquefied natural gas for exports has been damaged by an explosion and fire on Wednesday, forcing the Texas Gulf Coast facility to cease operations in a move expected to affect European and Asian markets.
“As a result of today’s fire, Freeport LNG’s liquefaction facility is currently shut down and will remain shut down for a minimum of three weeks,” the company announced on Wednesday night, providing no further details.
Earlier in the day, the company acknowledged an “incident” at its facility in Quintana, some 70 miles (112 kilometers) south of Houston, but said none of the employees were injured, and that there was no risk to the community.
The exact cause of the fire and extent of the damage remains unclear. After some witnesses reported a loud bang and a big fireball in the area, local TV broadcast aerial footage of water being poured at the facility, but no signs of open flames.
Been in the Freeport area all day for an “incident” at LNG facility on Quintana Island. Freeport PD and witnesses say no doubt about it: it was an explosion. 💥 The fire/release has been contained and employees are accounted for. Investigation underway. pic.twitter.com/8wuGEGazb2
— Erica Simon (@EricaOnABC13) June 8, 2022
The Freeport facility supercools and liquifies about 2 billion cubic feet of natural gas per day, or roughly 20 percent of the entire US export capacity. Overall US exports of LNG was around 9.75bcf per day in 2021, hitting a record total of 100 billion cubic meters, according to the Energy Information Administration.
Some context on the outage at a key US LNG plant:🚢 Almost 20% of all US LNG exports went through Freeport last month🚢 US sent ~75% of its LNG to Europe in Jan-April🚢 Freeport plant supplies BP and Total in Europe, as well as Japan’s Jera and Osaka Gas, and SK E&S in Korea pic.twitter.com/UdT1ikLlcy
— Stephen Stapczynski (@SStapczynski) June 9, 2022
Local US natural gas prices tumbled more than 6 percent on Wednesday, but the incident is expected to have the opposite effect and wider ramifications for global markets.
Europe in particular is already facing a major energy crisis as a result of the post-pandemic disruption to supply chains along with the unprecedented sanctions introduced against Moscow. Despite all efforts to cut ties, the EU still receives some 40% of its total natural gas imports from Russia, mostly via pipelines, having bought around 155 billion cubic meters in 2021.
Meanwhile, US exports to the EU were a little over 22 billion cubic meters last year. President Joe Biden allegedly promised to increase LNG deliveries by 15 billion cubic meters this year, but some analysts say the US is already producing the commodity at full capacity, and that for any additional gas to go to Europe it would have to be taken from exports initially aimed for other buyers.
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