U.S. Natural Gas Prices Fall Over Texas Terminal Repairs That Will Take Months

HOUSTON — Ever since Russia invaded Ukraine in February, Europe has desperately tried to find new sources of natural gas, including from the United States, to reduce its dependence on Russian natural gas supplies.

Those efforts took a hit on Tuesday, when an American gas company announced that it would take several months before it could repair a Texas export terminal that suffered a fire and explosion on June 8.

The suspension — which would impact roughly 14 percent of U.S. liquefied gas exports —  was compounded by news that the Russian energy giant Gazprom would reduce its gas shipments to Germany via the Nord Stream pipeline.

The two announcements sent European gas prices higher by 16 percent on Tuesday, since Europe’s prices are set regionally, not globally like oil. Natural gas prices in the United States moved in the opposite direction, plummeting by more than 16 percent.

When an explosion damaged part of the Freeport LNG terminal this month, officials said it would probably take three weeks to return the plant to normal functions. Gas prices, which had more than doubled since last year, dropped modestly.

But on Tuesday, the company changed its public outlook and announced that it hoped a partial restart in 90 days was feasible.

“At this time, completion of all necessary repairs and a return to full plant operations is not expected until late 2022,” the company said in a statement.

The Freeport facility is one of seven active export terminals that sends supercooled gas around the world in supertankers.

The temporary closing, by reducing how much gas can be exported, will add natural gas supplies in the United States, bringing some relief to residential electricity customers as well as to refineries and other industrial plants that use gas for power and as a vital raw material. Gas that otherwise would have been exported will go into storage for use next winter since households in the United States will use less natural gas for heating during the summer months.

“Its significant for both the U.S. market and the global market,” said Lindsay Schneider, a natural gas expert at RBN Energy, a Houston consultancy. “It could mean lower prices here as more gas is available to refill storage inventories, and for global markets it means a loss of supply and potentially stronger prices in Europe and in Asia.”

European countries are expanding their gas import facilities and pipelines, and they are lobbying Qatar, Australia and other exporters to hurry up and ship more gas. But Europe is in competition with Asian countries that look to gas to replace coal, a major pollutant of city air around China and India.

While international markets are tight, the Freeport accident and decline in prices could bolster critics who say gas exports are raising domestic prices, which could go lower permanently if less were exported.

That the closing of one export terminal “is having such a significant impact to prices” should be “alarming to federal policymakers,” said Paul Cicio, president of the Industrial Energy Consumers of America, a lobbying group.

Oil and gas companies counter that there is plenty of gas in shale fields around Pennsylvania, Texas, New Mexico and Arkansas for export and domestic use if only regulators would approve the building of more pipelines.

While gasoline prices attract the most headlines, natural gas prices have surged over the last year and reached their highest level since 2008 last May, though they have eased in recent weeks.

The explosion at the Texas plant, on Quintana Island, did not cause any injuries. The fire ignited in some pipes between gas storage tanks and dock facilities used to transport the gas abroad. Experts say it appears that the explosion occurred because of the rupture of piping and the ignition of a gas vapor cloud.

Various state and federal agencies are now investigating the explosion and fire, including the Pipeline and Hazardous Materials Safety Administration, better know by its acronym PHMSA. PHMSA has wide discretion in deciding whether a facility can come back on line, sometimes overriding an operator’s assessment.

Energy experts warned that problems at the Texas plant could take a long time to fix. A fire at the Kinder Morgan terminal in Georgia took part of its operations off line for about 18 months because of difficulties with finding parts.

The Freeport plant has had problems over the last year with delayed maintenance and intermittent outages that were thought to be connected with impurities in some of its gas supplies.

The United States has long exported gas to Canada and Mexico by pipeline, while liquefied natural gas exports have gradually grown over the last decade as domestic production has increased in shale fields around the country.

In recent years most of the liquefied gas exports have gone to Asia, but since the Russian invasion of Ukraine, there has been a shift in sales to Europe, which has relied on Russia for 40 percent of its gas supplies.

Four new American export terminals are under construction, while more than dozen more are waiting for the go-ahead from regulators and investors.


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