First Cargo Since June Leaves Freeport LNG

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--The Kmarin Diamond is moving through the northern waters of the Gulf of Mexico after receiving cargo from the Freeport liquefied natural gas (LNG) plant in Texas, the facility's first export since a June fire idled activity.

"The BP-chartered Kmarin Diamond departed the Texas facility at around 7:30 a.m. local time (Sunday)," a report from S&P Global Commodities Insights read. "It appeared to be at least partially laden, with its next destination set for Port Said, which suggests it would be heading through the Suez Canal, the trade flow data showed."

S&P added the vessel was loaded with supplies already in storage.

Freeport LNG (Houston, Texas) closed its three-train facility in Texas in June following an explosion triggered by a pipeline failure. The 2 billion cubic feet per day (Bcf/d) from Freeport represented about 17% of total U.S. LNG capacity at the time of the closure.

The company hinted for much of December that it could restart the facility, with some preliminary signs emerging recently that the plant was receiving gas from inland shale basins.

In January, the company filed a notice with the Federal Energy Regulatory Commission (FERC) to start sending liquefied natural gas into the facility's piping system. Freeport can't start unless federal authorities sign off on it, and the operator said additional approvals would be necessary before it can return to its nameplate capacity.

FERC last week approved Freeport's request to return to loading, though it could be March before the facility returns to its full capacity. Meanwhile, another ship--the Prism Agility--is queued up to take on cargo, according to Bloomberg.

Gas is moving quickly to the facility. Data provider Refinitiv showed flows were on pace to reach 0.5 Bcf/d by Monday, an increase from the average of 34 million cubic feet per day from Jan. 26-Feb. 11.

Freeport's return comes as U.S. natural gas is growing in importance. The U.S. Energy Information Administration (EIA), the statistical arm of the Energy Department, expects total natural gas production to average about 100 billion cubic feet per day for 2023.

The Appalachia Basin, which includes both the Marcellus and Utica shale plays, is the leading natural gas producer in the country, with an estimated output of about 35 Bcf/d. After that, it's the mighty Permian, with February's production expected to average 21.7 Bcf/d.

EIA expects LNG exports to remain suppressed due to the closure at Freeport. During the seven-day period ending Feb. 8, 24 vessels laden with LNG left U.S. export facilities, carrying a combined 90 billion cubic feet of product.

"But U.S. LNG exports in our forecast rise once the Freeport facility is back online, and LNG exports increase by 11% (1.2 Bcf/d) on an annual basis in 2023 compared with 2022," EIA's latest monthly forecast read.

Not only that, but EIA expects domestic supplies of natural gas will outpace demand because of a milder winter, an increase in the amount of renewable energy on the grid and lackluster economic activity.

That bodes well for a European economy looking to replace Russia's market share with reserves from friendlier nations. Countries such as Poland relied almost entirely on Russian supplies before the war. But last month, Sempra Energy (NYSE:SRE) (San Diego, California) signed a 20-year sale and purchase agreement with a Polish company for volumes from its LNG export facility in Port Arthur, Texas.

Despite concerns that the pace of shale production growth is slowing, volumes will remain at record-setting levels for at least the next few years. Crude oil production this year breaks a record at 12.5 million barrels per day (BBL/d) and expands to 12.65 million BBL/d by next year.

LNG production, meanwhile, jumps from 11.8 Bcf/d to 12.6 Bcf/d next year, an 18% increase over 2022 levels should the forecast prove accurate.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).