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Freeport LNG received some volume of gas but restart seems unlikely

Freeport LNG has received a small volume of gas on Thursday as reported by Reuters, quoting Refinitiv data as source. Gas flow was recorded at 22 mcfd on Thursday which may not be seen as a step closer towards restarting the Freeport LNG export plant, which is closed since June 8 fire incident. The second largest LNG export plant of the U.S. has the capacity to process 2.2bcf/day of gas to covert to super chilled LNG for export.

On January 22, in a letter to the U.S. federal regulator, Federal Energy Regulatory Commission (FERC), Freeport LNG had requested to grant clearance to allow gas flow to cool down the piping system. Freeport LNG was seeking FERC clearance for the gas supply within a day.

The energy sector experts strongly believe FERC will take its own time to grant clearance for the first stage of cooling down the piping system where the process itself will take approximately 11 days, according to Freeport LNG filing with FERC. For almost all the stages of restarting the liquefaction plant, leading towards resuming LNG export from the LNG terminal, Freeport will require FERC clearances. In most likelihood, Freeport LNG will not be able to resume LNG export until late March or early part of April when natural gas demand will ease in the US and prices will react in a limited manner to Freeport LNG demand for gas for liquefaction.

Freeport LNG consumes around 2% of the daily gas produced in the U.S. for liquefaction. And the best way to deal with any spike in demand and its impact on gas prices is to delay the restart of LNG export from the project, according to some experts. Many analysts believe even if Freeport LNG meets the stringent requirements of FERC and Pipeline and Hazardous Materials Safety Administration (PHMSA) for the clearance to resume restart process, Freeport LNG will not be allowed to resume export until the end of winter and sometime in spring. Freeport LNG management was possibly expecting this hence it made a kind of “public request” to FERC to allow it to resume gas supply to cool down the piping system.

Even if Freeport manages to resume LNG export in February or March, it will probably have little impact on prices because of prevailing warmer weather conditions in the U.S. and overall, in the Northern Hemisphere.

The natural gas prices are already at its lowest level, below $3 for the first time in last almost twenty months. Europe’s improved gas inventory levels and mild weather conditions in the Northern Hemisphere contributed towards steep fall in natural gas prices which had touched as high over $10 in last August. So apparently, market has already discounted the impact of Freeport LNG restart as of now.