Vessels

Freeport restart could be delayed, requiring LNG tankers to increase voyage time or idle offshore

Oct. 18, 2022

Cove Point returns online with Freeport LNG set to gradually resume operations next month. Two vessels are en route to Freeport off the US coast with combined export capacity of 158.74 million tonnes.

Freeport LNG has launched its liquefaction project to add more than 15 mtpa (equivalent to approximately 2.2 Bcf/d of gas) of liquefaction capacity to its Quintana Island facilities. Frreport LNG said the terminal is becoming the largest point of demand for natural gas in Texas.

Offshore staffOSLO, Norway — In the US, Henry Hub gas prices remain under $7/MMBtu, reaching $6.23/MMBtu at the time of writing, according to Rystad Energy's recent "Gas and LNG Market Update" report. US storage levels are at 3,231 Bcf, an increase of 125 Bcf week on week.

A combination of factors has helped boost storage in recent weeks.

On the supply side, dry gas production continues to be at record levels, averaging just shy of 100 Bcf/d so far in October.

Domestic balances have also been boosted by recent outages at the 2-Bcf/d Freeport LNG and the 700-MMcf/d Cove Point LNG export facilities, meaning that 2.7 Bcf/d of natural gas, which is usually exported as LNG, has instead been directed into the local market since June and late September, respectively.

The Prism Brillance LNG tanker, built in 2019, arrived at the port of Freeport Anch. in the Gulf of Mexico on Oct. 18.

Cove Point is scheduled to return online Oct. 18 with Freeport LNG set to gradually resume operations next month. Two vessels are en route to Freeport, Prism Brilliance and Prism Diversity, with combined export capacity of 158.74 million tonnes.

This suggests that Freeport could achieve 85% adjusted nameplate capacity by the end of November, Rystad reported.

However, the facility’s restart could yet be delayed, which would require the vessels to either increase voyage time or idle offshore in the Gulf of Mexico.

Freeport’s restart timeline could have a significant impact on gas prices as the US heads into the winter months.

Once both Cove Point and Freeport have restarted and are exporting into the global market, weather forecasts will likely be trending colder, putting upward pressure on natural gas prices.

In this scenario, Henry Hub gas prices could hover closer to $7 per million British thermal units this winter, supported by Rystad's expectation that LNG exports will remain robust and there will be increased demand for heating this winter on limited coal-switching options.

However, there is still much uncertainty over winter weather forecasts and hence demand.

10.18.2022