Does an insider pro want to prognosticate a realistic ETA for the Freeport LNG plant to be approved to come back online? When one checks the news feeds, there seems to be a regulator issue in regards to the plant's future safety per the June 8th explosion. Also, initially there was talk of the plant coming back online in 3 weeks. Now there's a bit of newsprint that mentions a possible two-month regulatory delay.
Note: Today's NG future's pricing crater is being tied to the curtailment of LNG export demand -- partly due to this explosion.
Argus Media / June 30
Freeport LNG, a key US LNG export terminal south of Houston, Texas, plans to resume partial operations in October, about one month past a previously planned restart.
The 2 Bcf/d (57mn m³/d) LNG export terminal, which represents roughly 15pc of US LNG export capacity, had planned to resume some service 90 days after it shut down because of an 8 June fire. Freeport said today that it would resume operations in early October and return to full service at year-end.
The Pipeline and Hazardous Materials Safety Administration (PHMSA) sent a notice today to Freeport saying a preliminary investigation found that conditions at the terminal appeared unsafe. It also required Freeport to hire a third party to assess the damage and establish a plan for the return to service. PHMSA must approve the restart, according to the notice.
"A comprehensive review by Freeport LNG is already underway to ensure that all necessary corrective actions are identified and fully implemented prior to resuming operations," Freeport said, noting that it would continue to work with PHMSA, the US Coast Guard and the US Federal Energy Regulatory Commission to obtain all necessary approvals.
The shutdown of Freeport has upended the US gas market, leaving more supply available to meet power sector demand or to inject into gas storage. Prompt-month prices plunged to a three-month low today of $5.424/mmBtu, down by 17pc. Prices have shed 42pc since hitting a 13-year settlement high above $9/mmBtu on 6 June.
U.S. regulator bars Freeport LNG plant restart over safety concerns
By Gary Mcwilliams reuters.com July 1, 2022
Regulator finds conditions posing public safety risk
U.S. set timeline for independent review of plant, repair plan
June 8 blast released 120,000 cubic feet of LNG, methane
Freeport sees partial resumption in early October
HOUSTON, June 30 (Reuters) - The second-biggest U.S. liquefied natural gas export facility hit by fire earlier this month will not be allowed to repair or restart operations until it addresses risks to public safety, a pipeline regulator said on Thursday.
The June 8 blast and fire knocked out Freeport LNG's 15 million tonnes per year (mtpa) Quintana plant, exacerbating global LNG shortages amid reduced gas flows from Russia, while weighing heavily on domestic U.S. natural gas prices.
"Continued operation of Freeport's LNG export facility without corrective measures may pose an integrity risk to public safety, property or the environment," the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) said in its preliminary report.
A problem with a safety valve led an 18-inch (46-cm) pipe with inner and outer stainless steel layers to overpressurize and burst, releasing LNG and methane that caused the blast, PHMSA said in its report.
It laid out a series of steps for investigating what caused a 300-foot (91-m) section of pipe to burst and release about 120,000 cubic feet of LNG.
The root cause analysis likely will delay a partial restart of the plant for 90 to 120 days, and could delay a full restart, analysts said.
Closely-held Freeport said it will continue working with PHMSA and other regulatory bodies to obtain necessary approvals to restart operations. It estimated resumption of partial liquefaction operations to be in early October and a return to full production by year-end.
U.S. natural gas futures tumbled 15% on Thursday due to the report and on a continued inventory build, contributing to a 33% price drop in June, the biggest monthly drop since 2018.
"The actual process (of reviews, repairs and approvals) will take longer than three months, and potentially take six to 12 months," said Alex Munton, director of global gas and LNG at consultants Rapidan Energy Group.
But based on PHMSA's past history, once it understands the cause of the blast and is confident in a repair plan, it likely will let a portion of the facility resume processing sooner, he said.
Freeport LNG has said the likely cause of the blast was an over-pressurized pipeline and that the equipment to chill natural gas into a liquid for export was not damaged.
The regulator ordered the company to submit within 60 days a plan for an outside investigator to provide a report on the extent of the damage to the facility. It did not say how long it would take to approve a plan. Freeport must also hire a third-party to review the state of its LNG storage tanks.
Only after the reviews are completed can the company submit a plan to repair the damage, it said, further complicating Freeport LNG's aim for a partial restart in September and full operation by year-end.
Years ago, I worked with a few gov regulators, both in the state of LA and at the federal level. And knowing what I know, at the pay grade that I worked at and per the no-conflicts laws on the books, I never smelled any political favoritism in regards to the official duties being performed. Of course, in other O&G states and maybe in a few other federal bureaucracies, there could be some less-than-fair shenanigans going down. I mean, it's possible.
Yet there's also two hot-button reasons which put the expectation of a rapid restart (via an above average scrutiny) in this case.
1) It's a national security issue.
2) I think Uncle Sam is all-in in regards to expediting as much LNG as possible and as quickly as possible to the EU. In other words, we want our NATO allies as strong as possible ASAP per Putin's deadly gambits.
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