Analysis by Energy Workforce SVP Government Affairs & Counsel Tim Tarpley
After the June 8 fire at the Freeport LNG export facility on Quintana Island south of Houston, the company estimated downtime would be a “minimum of three weeks.” It now appears that the damage is more extensive than originally believed and that downtime prediction was overly optimistic. Estimates now indicate that full operation of the facility may not restart until the end of the year.
The fire was caused by a rupture in a segment of piping that brought LNG from the storage area to the docks at the facility. The rupture allowed vapor to be released and ultimately led to a fire lasting about 20 minutes.
The damage could not have come at a worse time for the world energy markets, as the U.S. is working to replace gas supplies in Europe that have been displaced due to efforts by our European allies to ween themselves off Russian gas. The Freeport facility is responsible for 20% of U.S. LNG exports to Europe.
The fire will not only have effects on the price of natural gas in Europe, but the effects will also likely be dramatic even within the United States. The Freeport export facility has a capacity of 2.2 billion cubic feet a day of LNG shipments, consuming about 2% of U.S. natural gas supply. The news that this export capacity may be unavailable for a significant time period sent U.S. gas prices plummeting by 16% Tuesday to $7.20 per MMBtu. Prices had been over $9 earlier in June.
The Pipeline and Hazardous Materials Safety Administration, a part of the Department of Transportation, is currently investigating the cause of the rupture. We can expect news coming out of the facility to be watched closely by traders, with any further movement on the expected reopening date having the ability to swing markets significantly.
Incidents like this only serve as an exclamation point on the need to expand our energy infrastructure in the United States to avoid being dependent on just a handful of facilities. In order to truly perform on the promise President Biden made to our European allies, significant energy infrastructure investment is clearly needed.
If you would like to get involved with the Council’s advocacy efforts or the Government Affairs Committee, contact SVP Government Affairs Tim Tarpley.
Tim Tarpley, SVP Government Affairs & Counsel, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.