Asia-Pacific liquefied natural gas (LNG) markets are likely to be hit after a US export terminal was closed for at least three weeks on Wednesday after an explosion.
Freeport LNG, which provides about a fifth of processing capacity in the US, announced the closure after assessing the damage.
Asian markets are already strained by limited access to Russian LNG due to its war on Ukraine.
“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.
In March, 21 cargoes loaded at the Freeport facility, carrying an estimated 64 billion cubic feet of gas to destinations in South Korea and China as well as to Europe, according to the US Department of Energy.
That figure is higher than the 15 cargoes recorded in February and 19 in January.
LNG Shortage To Drive Up Prices
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.
The plant can process up to 2.1 billion cubic feet of natural gas per day (bcfd), and at full capacity can export 15 million tonnes per annum (MTPA) of the liquid gas.
US LNG exports hit a record 9.7 bcfd last year, according to the Energy Information Administration (EIA).
US gas futures sank following news of the explosion on concerns it could disrupt the plant’s demand. They closed down about 6% at $8.699 per million British thermal units (mmBtu), having hit a near 14-year high of $9.664 mmBtu earlier in the day.
Freeport LNG was founded in 2002 by billionaire Michael Smith and is not connected with Freeport-McMoRan Energy.
Smith’s company processes gas for companies including BP, JERA, Kansai Electric, Osaka Gas, SK E&S and TotalEnergies.
An investigation into what caused the explosion was underway, the company said.
The US Coast Guard on Wednesday said a security zone had been set up 3 kilometres east and west of Freeport LNG’s facility, closing that portion of the intracoastal waterway to vessel traffic.
- Reuters, with additional editing by George Russell