Freeport LNG Targets October Restart After Agreement with Regulators  

Freeport LNG reports that it is on track to restart portions of its LNG operations and exports in early October. The company entered into an agreement with regulators on the steps required before the plant resumes operations after an explosion and small fire in early June. News of the plans to restart the operations comes at a critical time as European LNG demand continues to surge ahead of the winter season while U.S. exports are declining while Freeport remains offline.

The company reported on Wednesday that it has entered into a consent agreement with the Pipeline Hazardous Materials Safety Administration (PHMSA) related to the June 8 incident at Freeport LNG’s liquefaction facility. According to the company, the terms of the agreement are intended to ensure that Freeport LNG can safely and confidently resume initial LNG production and thereafter ultimately return to full operation of all liquefaction facilities.

The company’s three train, 15 MTPA liquefaction facility is the seventh largest in the world and second largest in the U.S. It has been exporting LNG since 2019 and the company has received all regulatory approvals for construction as part of its plans to expand by adding a fourth liquefaction train.

The suspension of the operations at the Freeport facility is cited as a contributing factor to the second monthly decline in U.S. LNG exports. Analysts estimate that the closure cut U.S. gas exports by about 1.9 billion cubic feet per day. 

Data from Refinitiv Eikon reported by Reuters estimates U.S. exports in July at just over 6.1 million tonnes of LNG down from 6.3 million in June and the lowest exports since September 2021. Europe remains the primary destination for U.S. LNG exports with the data showing nearly two-thirds of the volume in July went to Europe. Exports to Europe were up by 400,000 tonnes.

Freeport reported that it had agreed to certain corrective measures, many of which are currently underway, to obtain PHMSA approval for an initial resumption of LNG production from its liquefaction facility. In addition to the repair and replacement of Freeport LNG’s physical infrastructure that was damaged in the incident, the company reported that it is also evaluating and advancing initiatives related to training, process safety management, operations, and maintenance procedure improvements, and facility inspections as outlined in the PHMSA agreement.

The company believes it can complete the necessary corrective measures, along with the applicable repair and restoration activities, to resume initial operations in early October. Those initial operations are expected to consist of three liquefaction trains, two LNG storage tanks, and one LNG loading dock. They believe this will enable the delivery of approximately 2 BCF per day of LNG, enough to support its existing long-term customer agreements. The company had previously said it expected it would be offline till late 2022.

In July, the U.S. Energy Information Administration reported that the U.S. had become the largest exporter of LNG during the first half of 2022. Overall volumes were up 12 percent with EIA reporting utilization remaining on average near 2021 levels. Efforts such as Freeport’s planned expansion and new LNG facilities as expected to come online to further increase U.S. exports.