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US Freeport outage, Nord Stream drop lift global gas markets

European TTF gas and East Asian spot LNG prices jumped this week because of an extended plant outage at Freeport LNG and lower Russian gas pipeline flows through Nord Stream 1.

The combination of supply issues looks certain to tighten the global balance over the remaining summer months, and potentially further into the year.

Fear over rising prices and tight supply are being raised globally, with Singapore this week the latest Asian country to express its concern over the availability of gas and discussing how it will take steps to manage potential shortages for power generators.

By Thursday morning, the ICIS TTF July ‘22 benchmark contract was trading close to $42/MMBtu, up from around $25/MMBtu one week before.

The August ‘22 ICIS East Asia spot LNG index was up by $7/MMBtu on Thursday to $35.75/MMBtu and likely to increase further given the close correlation with the TTF.

On 15 June, Russia’s Gazprom said that from 16 June, Nord Stream 1 would only be able to deliver 67 million cubic metres (mcm)/day, due to further declines in upstream compression.

In the first two hours of the new gas day on Thursday, flows along the pipe were at an average rate of 65mcm/day.

Typically, Nord Stream 1 flows at 163mcm/day.

Onward flows from Nord Stream 1 to the NEL pipeline, which delivers gas from north-eastern Germany towards the Netherlands were down sharply.

Following the reduction in flows, Gazprom’s CEO said that it sees no solution to the ongoing issues at the Portovaya compressor station as current sanctions imposed on the country is preventing the import of the necessary equipment from Canada, with further maintenance scheduled.

There was much noise about how sanctions meant that equipment needed to maintain the pipeline’s compressor pressure could not be delivered, but some sources said the reduction in gas flows was more politically motivated by Russia.

Nord Stream maintenance is scheduled to take place during 11 – 21 July, where flows are expected to fall to zero, slowing the rate of injections, or even tipping the country into withdrawals, as has been the case in the last three years.

On Wednesday, Italy’s Eni was informed by Gazprom that Russian gas supplies to Italy would see a 15% reduction due to the Portovaya issues.

System operator Snam Rete Gas data showed that imports via the TAG pipeline, through which Russian gas flows reach Italy, fell to 21mcm/day on Wednesday, 5mcm lower than the previous day.

Flows were expected to rise on Thursday to around 40mcm/day, Snam Rete data showed.

The increase comes as Eni submitted a gas request to Gazprom that was 44% higher than the previous day, to compensate for volumes not received.

Gazprom announced that it would only be able to deliver 65% of the requested volumes.


US Freeport LNG said in a 14 June statement that the operator is targeting a partial restart after at least 90 days, following an 8 June fire at the three-train Texas plant.

This is longer than the initial three-week outage that was reported last week.

The news gave one of the clearest indications to date on the impact US LNG has on both European and US gas prices.

The 13.92mtpa, three-train plant has been a key supplier of LNG to Europe in 2022, delivering 5.8m tonnes from January to May, according to ICIS LNG Edge.

The US Henry Hub price fell sharply due to the now lower feedgas demand into the Freeport plant. The July ’22 front-month contract fell more than 16% from the previous day to settle at $7.19/MMBtu on 14 June. But it soon rebounded on concerns over high summer gas demand in the US.

Freeport LNG estimated that all necessary repairs for full plant operations could take until late 2022.

However, the operator said that partial operations could be possible in about 90 days, once safety and security could be assured, as well as all regulatory clearances.

“Today’s announcement that the Freeport LNG export terminal will not be restarting until later this year, and the resulting significant drop in pricing, demonstrates the clear connection between LNG exports and the inflationary impacts to domestic prices for natural gas and electricity,” according to a statement from the Industrial Energy Consumers of America, an industrial trade association that has vocally opposed unrestricted US LNG exports.


According to Freeport LNG’s more detailed statement, the fire occurred at 11:40 local time on 8 June.

This resulted in a release of LNG, the formation and ignition of a natural gas vapour cloud and a subsequent fire.

No one was injured and no risk was posed to the surrounding community, according to Freeport LNG.

The fire was extinguished after about 40 minutes of the incident.

“None of the liquefaction trains, LNG storage tanks, dock facilities, or LNG process areas were impacted,” according to the statement.

Authorities are investigating, including local, state and federal agencies such as the Pipeline Hazardous Materials and Safety Administration.

“Preliminary observations suggest that the incident resulted from the overpressure and rupture of a segment of an LNG transfer line, leading to the rapid flashing of LNG and the release and ignition of the natural gas vapour cloud,” the statement said.

The failure investigation continues with no timeline for when regulators expect to complete the investigation into the root cause. The amount of time necessary can depend on a variety of factors including the ease of access, complexity of repairs needed and other factors.
Source: ICIS, By Ruth Liao, Additional reporting by Ed Cox and Arlind Neziri, https://www.icis.com/explore/resources/news/2022/06/16/10775809/us-freeport-outage-nord-stream-drop-lift-global-gas-markets/

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