By Marwa Rashad

LONDON – A shutdown at Freeport LNG (one of America’s largest export plants for liquefied natural gases (LNG)), will delay European cargoes by at least three weeks. It is a further indication of Europe’s desire to get rid of Russian gas.

An explosion at the Texas Gulf Coast facility caused Wednesday’s outage. The plant provides approximately 20% of U.S. gas processing capacity. The incident has raised alarm among market players already facing reduced Russian supply and rising demand from Asia.

The majority of cargoes were sent to Japan and Korea in the past. However, Europe will be affected by the disruption. Europe has traditionally pulled U.S. goods from the east due to higher costs. Russia’s invading of Ukraine, which Moscow describes as a “specially military operation”, shifted flow to Europe via Asia.

A shutdown lasting three weeks will result in the loss of approximately 13-15 cargoes. However, Europe should still be able gas storage to compensate its losses. Analysts say there are still risks if the shutdown is extended for an indefinite period.

An outage of three weeks is equivalent to a loss in LNG of approximately 940,000 tonnes. If you took an average cargo size around 70,000 tonnes, that’s about 13 cargoes,” said Alex Froley, LNG analyst at data intelligence firm ICIS.

This outage is due to Nord Stream 1 maintenance, and Norwegian gas maintenance measures. A market person said that the market could be able handle it by removing certain volumes from storage.

“If the outage continues for several months, rather than weeks it could cause significant damage to the entire economy. Europe’s better inventory will also be affected and may not prove as comforting. Capra Energy managing director Tamir Draz said that the European LNG price premium will then be higher than Asia.

U.S. stocks fell as low as 14% in the initial news. It was initially due to traders anticipating that supplies would be available and U.S. stockpiles for winter could be rebuilt.

Prices recovered on Thursday, however, and rose by about 2%, as more attention was given to high demand for air conditioners due to the heatwave that had blanketed parts of Texas. [NGA/]

Gas prices in Europe rose up to one fifth Thursday morning due to fears that lost U.S. shipment would cause stress on a market already suffering from reduced Russian supply. The market closed and prices slowed down. [NG/EU]

Japan-Korea Marker (JKM), which is widely used to benchmark Asian LNG, also increased, with the The Platts JKM LNG assessed at $23.486 per metric Million British Thermal Units (mmBtu), on Thursday. This represents a 7.8% increase in prices, or $1.694 from the prior day.

FREEPORT’S BUILDERS

According to industry sources: BP (NYSE :), TotalEnergies and Osaka Gas are all listed as buyers for Freeport LNG cargoes. BP holds the largest contract, with 4.4 Million tonnes annually through 2040.

Japan usually imports 6-7% of its LNG supplies from the United States in June. LNG from Freeport accounts for approximately half the LNG volume. Ryhana Rasidi, Kpler gas analyst and LNG expert, stated that Japan is likely to be importing 6-7% of this LNG.

Over the past two years, South Korea imported on average 20% of its LNG in the United States each June. According to her, it could lose as much as 0.13 million tonnes (roughly 17%) of the LNG from the plant.

According to the U.S. Department of Energy, there were 21 cargoes that loaded at Freeport in March. They carried an estimated 64 million cubic feet of gas, which was delivered to Europe, South Korea, and China. This was an increase from the 15 cargoes that were loaded in February and the 19 in January.

In the last few months, around 70% of Freeport’s monthly supply went to Britain and the European Union. According to industry sources, the largest European importers of Freeport LNG were Turkey, France, Britain and Turkey this year.

“Of the 14 Freeport cargoes that arrived at destination in May, 10 went to Europe and 2 to Asia. The remaining two headed to Americas.” Froley added. (Graphic: Freeport exports by destination – https://graphics.reuters.com/UKRAINE-CRISIS/FREEPORT-EUROPE%20UKRAINE-CRISIS/akvezrkdypr/FREEPORT%20EXPORTS%20BY%20DESTINATION%20(AIS)%20-%20Refinitiv%20Eikon.png)