Fire at Key US Gas Export Terminal a Blow for Fuel-Starved World

(Bloomberg) — An explosion at a Texas liquefied natural gas plant that promises to reduce exports for weeks, lowering prices for the fuel in the US while boosting them in Europe.

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The Freeport LNG export facility will remain closed for at least three weeks after a fire on Wednesday, a company spokesperson said. It issued a force majeure to buyers with shipments scheduled till at least June 30, according to traders with knowledge of the matter. Almost a fifth of all overseas shipments of gas from the US went via the terminal last month.

See also: The US Is Now Sending the Bulk of Its Export Gas to Europe

The US sent nearly three-quarters of its LNG to Europe in the first four months of the year, with the region now getting almost half of its supplies from across the Atlantic. Some European countries have been attempting to wean themselves off Russian gas due to the invasion of Ukraine, but remain dependent on it in the short term.

The outage will reduce supplies available to Europe and Asia while routing more shale gas into US storage caverns. US gas futures fell 5% to $8.263 per million British thermal units as of 9:08 a.m. in London after dropping 6.4% in the previous session. Dutch futures rose 10% to the equivalent of $27.48 per million Btu.

The Texas outage is also coinciding with the start of the northern hemisphere summer, when increased use of air conditioners boosts demand from power stations.

The US is one of the world’s top LNG exporters, along with Australia and Qatar. The Freeport plant, which has the capacity to ship about 15 million tons per year, supplies gas to BP Plc and TotalEnergies SE in Europe, as well as Japan’s Jera Co. and Osaka Gas Co., and SK E&S Co. in South Korea.

LNG buyers will probably start hunting for replacement shipments from the spot market, but there is a dwindling amount of supplies available, according to traders in Asia. The move is likely to boost already intense competition between Asia and Europe for gas. Prices in Europe fell to three-month low on Wednesday, due in part to expectations for more supplies from the US.