Page 7 - NorthAmOil Week 24 2022

NorthAmOil PERFORMANCE NorthAmOil

European gas

market takes hit

from Freeport LNG

explosion

GLOBAL AN explosion at the 15mn tonne per year (tpy)
Freeport LNG export terminal in Texas that
occurred on June 8 may be bad news for Europe
and its already very tight gas market, but it also
opens up opportunities for North and West
African gas exporters to fill the void left from
the drop in US exports, Rystad Energy said in a
research note on June 13.
Freeport LNG, one of the largest sources of
US LNG exports, is due to remain shut for three
weeks, and the downtime could be longer given
that the extent of the damage is yet to be deter-
mined, Rystad said. The plant had been running
at close to its capacity in recent months, help-
ing Europe offset recent disruptions in Russian
supply.
Rystad notes that the bulk of Freeport LNG’s
output had been heading to Europe before the
incident – rising from 40% in March to close
to 60% in May. (See NorthAmOil Week 23) The
plant has been able to quickly divert extra sup-
ply to Europe amid soaring prices and Moscow’s first five months of the year, providing some
invasion thanks to the fact that most of its capac- downward relief to prices. Gas injection in June
ity is uncontracted. averaged 477mn cubic metres per day, up 17%
That also means Europe will be hardest hit compared to the same month last year. Overall
from the plant’s closure. Freeport LNG accounts volumes in storage amounted to 57.11 bcm on
for 10% of total import volumes into Europe, June 11.
Freeport LNG, while overall US volumes account for 45% of Rystad predicted that strong injection rates
the continent’s imports. Russia and Qatar each would continue during the summer, helping
one of the largest account for a further 15%, while the remaining fulfil the EU goal of having storage facilities at
sources of US third comes from Nigeria, Algeria, South Amer- least 80% capacity by November 1, to safeguard
ica and the Caribbean.
against winter shortages.
“While Freeport LNG is offline, it is unclear
Russian supply to Europe has now fallen to
LNG exports, is which alternative volumes could replace the 170 mcm per day, Rystad said, which is close to
due to remain drop in exports to Europe,” Rystad said. “How- the record low level seen at the start of 2022.
“The main cause of the flow decline is less
ever, with favourable spot prices, countries such
shut for three as Nigeria and Algeria that are producing well supplies via Ukraine … as one key transited gas
weeks, and the below capacity could increase production to help delivery point at Sudzha did not receive redi-
rected gas from Russia since the full stop of gas
fill the void.”
The Norwegian consultancy notes that US supplies via the Sokhranivka pipeline in early
downtime could uncontracted spot volumes from larger export- May,” Rystad said.
Russia’s Nord Stream 1 pipeline to Germany
be longer. ing facilities including Sabine Pass, Corpus is due to undergo maintenance between July 11
Christi and Cameron LNG could divert addi-
tional supply to Europe. and 21.
The price at the Dutch TTF gas hub gained “So far, the Nord Stream 1 supplies are the
$1.5 per mmBtu to settle at $26 on news of the most stable route for Europe and the coming
Freeport LNG explosion and a further decline 10-day maintenance work would mean a gas
in Russian pipeline gas volumes. European gas supply loss of 1.55 bcm for Europe during the
injection volumes have been strong this year, summer, which would further tighten the Euro-
amounting to 35.1bn cubic metres during the pean gas market,” Rystad said.™

Week 24 16•June•2022 www. NEWSBASE .com P7