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Fire at Texas liquified natural gas plant could worsen the European energy crisis

The Freeport LNG facility produces 18% of the country’s total LNG exports, 80% of which is sold to Europe

LNG Plant
LNG Plant | OlegRi

June 9, 2022 12:45pm

Updated: June 9, 2022 1:48pm

fire at one of the world’s largest suppliers of liquified natural gas in Texas deals a blow to Europe’s energy markets as they seek to move away from Russia’s natural gas.

Quintana, Texas liquified natural gas (LNG) producer Freeport LNG will close down for at least three weeks after a fire at the facility is being investigated.

"The cause of the fire at Freeport LNG's liquifaction facility on Quintana Island remains under investigation," Heather Browne, a company spokesperson, said.

Europe has turned to most LNG providers in recent months as it attempts to steer away from Russia’s natural gas after the Kremlin’s invasion of Ukraine. As a result, between February and April, Europe imported 28.2 billion tons, 29% more than the same period the previous year, according to Independent Commodity Intelligence Services.

The U.S. is the largest supplier of LNG, producing about one-fifth of global exports, according to analytics firm Vortexa. The Freeport LNG facility produces 18% of the country’s total LNG exports, 80% of which is sold to Europe.

The plant’s shutdown due to the fire will cut its output by 8%, dealing a blow both to the U.S. and Europe.

"This is going to take supply out of the market when it's badly needed. We were already moving into a very precarious set of market dynamics," Alex Munton, a director for global gas and LNG at Rapidan Energy, told CNN Business.

A three-week production halt at Freeport could equal a loss of 940,000 tons of LNG, or about 13 cargoes, according to LNG analyst at ICIS Alex Froley. To keep its current LNG production levels, Europe will have to purchase replacement cargoes from somewhere else.

Despite claiming that the facility will close for three weeks, experts believe that the LNG production might be affected until July.

After hitting a 14-year high on Monday, natural gas future prices fell 6.4%. However, because of the fire at the LNG facility increased future prices of LNG in East Asia by 4% on Thursday. Similarly, future natural gas prices in the U.S. fell by 6%.