US NatGas Rebounds As Major Texas LNG Terminal Set For Fast Reopening

US natural gas prices surged Wednesday and continued increasing Thursday morning after the Freeport LNG Terminal in Quintana, Texas, received regulatory approval to reopen in October.

The Freeport plant, which closed in June due to an explosion, received regulatory approval from the Pipeline and Hazardous Materials Safety Administration to ensure the plant can “safely and confidently” resume operations of its liquefaction plant, reported Bloomberg. 

“Those initial operations are expected to consist of three liquefaction trains, two LNG storage tanks and one LNG loading dock, which the company believes will enable delivery of approximately 2 BCF per day of LNG, enough to support its existing long-term customer agreements,” the company said.

The shuttering of the facility in late June reduced total liquefied natural gas export capacity by 2B cf/day, or 17% of total US LNG capacity, much of which was sent to Europe. 

“Freeport LNG is one of seven LNG export facilities operating in the United States,” the EIA said.

“The facility shipped its first LNG cargo in September 2019, and it was the fifth US LNG export terminal to come online in the Lower 48 states.”

The news surprised traders as the front-month NatGas contract for September delivery has risen nearly 11% to $8.37/mmBtu since 1100 ET Wednesday (but wqas dragged a little lower today as recession fears appeared to drag down the entire energy complex)…

“This is likely a little faster, and a little stronger [in terms of exports] than the natural-gas markets were expecting,” NatGasWeather wrote in a note to clients. 

Brayton Tom, a senior risk manager for energy at StoneX Group, said the “partial restart is bigger than previously expected.”  

The prospects of reopening the terminal should keep a bid underneath NatGas prices as LNG shipments to Europe will restart in the next few months. This will pressure US inventories and generate concerns about tight domestic supplies ahead of winter. 

Inversely, EU NatGas should move lower, though that doesn’t appear to be the case, probably because the Russians slashed Nord Stream 1 pipeline capacity to 20%.