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Freeport LNG reported to have retracted force majeure
TERMINALS
PRIVATELY owned Freeport LNG is reported to have retracted the force majeure it had declared after an explosion at the liquefaction and export facility in June. According to a document and trade sources cited by Reuters, the retraction could cost Freeport’s buyers billions of dollars in losses.
Force majeure is usually invoked for events outside of a company’s control, such as natural disasters, releasing it from contractual obliga- tions without penalty. Freeport’s force majeure would have allowed its LNG buyers to exit their own agreements to deliver gas to end users. But instead, with the revocation of the notice, they face a collective loss of $8bn and will need to source supplies from the spot market at elevated prices, Reuters reported, citing the trade sources and calculations by a consultancy.
According to the sources, Freeport declared force majeure on June 9 and retracted the notice around the end of June. Neither the notice nor
the retraction has previously been reported on, but a document seen by Reuters showed that the company blamed human error for the explosion in June.
“No facts have been revealed that would indicate that the incident was a result of force majeure,” Freeport told market participants in the notice on August 3.
Without force majeure in place, the company will need to pay compensation to its buyers, and the buyers in turn will still need to supply their end-users with gas from elsewhere. Freeport’s buyers include BP, TotalEnergies, Osaka Gas, JERA, SK Gas Trading and Trafigura.
Freeport LNG normally accounts for around 20% of US LNG exports. A partial restart of the facility is scheduled for October, with full oper- ations set to resume at the end of the year. The partial resumption was cleared by regulators last week. ™
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