November 16, 2022


'Severe Damage' Could Further Delay Freeport Restart

A root cause failure analysis commissioned by Freeport LNG and released publicly this week has shed new light on the scale of destruction to Texas Gulf Coast facility, adding more uncertainty to when it can restart operations.

The report by IFO Group, dated Oct. 30, concluded that an isolated piping segment ruptured Jun. 8 after the LNG within it warmed and expanded because of exposure to ambient conditions. Employee fatigue and training issues contributed to the disaster, the report found. In the weeks leading up to the incident, 97% of staff worked in excess of their scheduled hours, with 20% of staff working in excess of 130% of their scheduled hours.

Two days before the incident, one of Freeport's operators noticed a pipe at the facility "had noticeably moved" and alerted supervisors. Although an engineer was sent to investigate, "no one at the site recognized the cause of the unusual pipe movement as thermal expansion resulting in increased pipe pressure applying forces to the expansion joints and other components of [the] line ... and events continued unabated until the [rupture]," the report said.

“This initial piping failure and explosion, together with the subsequent displacement of and damage to other process piping, instrumentation, wiring and pipe rack structures, caused severe damage to additional process equipment and associated piping in adjacent areas within and near the pipe rack.”

Freeport has repeatedly delayed a restart of its facility, originally set for October, confining 15 million tons per year (2.1 Bcf/d) of US gas to the domestic market.

Taking stock of the newly released assessment, Gary Kruse, managing director of research at Washington DC-based consultancy Arbo, said the January restart timeline he outlined last week is “still doable,” but that depends on the work Freeport has been able to accomplish to date.

“The question to me is what have they done about that,” he told Energy Intelligence on Wednesday. He noted that the Federal Energy Regulatory Commission (FERC) and Freeport likely had access to the report before they met Nov. 3. FERC is one of the agencies that must approve the facility's restart, along with the Pipeline and Hazardous Materials Safety Administration (PHMSA).

“If you go and look at the … readout from FERC, they’re talking about ongoing damage assessments being done. And my concern is if they waited to get this report on Oct. 30 to begin preparing or undertaking major repair assessments that are described in this report, I don’t know that January is doable,” he said. “You’d have to propose the work to FERC. You’d have to get FERC and PHMSA’s approval of it. And then you’d actually have to do it. I was always worried about collateral damage, but the report seems to say it was substantial.”

The report noted that assessments of vacuum insulated pipe (VIP) that may have been damaged in the blast must rely on “advanced inspection methods. … The same applies to all non-VIP lines but additional inspection methods may be utilized to determine the full current condition of the pipe and its welds, beyond leak tightness via a hydrostatic test.”

“That to me means … a more limited set of people that can do that type of inspection, and probably a longer timeframe to do that inspection and get the reports back those experts in order to tell FERC and PHMSA that none of these … systems were impacted,” Kruse said. “That would be the best case, that the report comes back and says ‘yeah, they’re all fine.’ But what if the report comes back and says you have to replace 1,000 feet of pipe?”

A Freeport spokesperson said Wednesday that the company is "continuing to progress our work toward the safe restart of our liquefaction facility. That work includes obtaining the necessary regulatory approvals required for the restart. Freeport LNG is not commenting on the continued market speculation about our facility’s restart and we do not comment on our commercial activity or our customers’ cargoes."
Everett Wheeler, Washington

India’s LNG Imports Rise in October as Prices Slide

India’s LNG rose 2% from September to October after falling for two consecutive months, as the price of Asian LNG eased. Regasified LNG suppliers are hopeful that if the prices continue to fall to levels below $20 per million Btu, demand will further pick up pace.

The world’s fourth-largest LNG buyer imported 2.41 billion cubic meters of LNG in October compared with 2.37 Bcm the prior month, according to the latest preliminary government data. The imports were down about 1% compared with the same month last year.

Northeast Asian spot LNG prices, which were around $65/MMBtu at the beginning of September, fell to around $36/MMBtu in the first week of October, according to the World Gas Intelligence assessment. The prices are now hovering around $22.50/MMBtu.

India's LNG Imports
Sep 2,3652,827-16.3

However, they still remain expensive for price-sensitive Indian buyers as term LNG is currently costing India around $13/MMBtu. India's LNG suppliers say demand will pick up if spot prices cool down to levels consumers pay for term deals.

For the January-October period, LNG consumption has contracted 12% on year to 23.86 Bcm, the data showed. India’s LNG consumption has suffered as Gail India saw disruption of supplies under its term contract with Sefe Marketing & Trading, previously known as Gazprom Marketing & Trading. Sefe has been been nationalized by the German government.

India’s domestic gas production also rose 1.3% for October on month to 2.83 Bcm. That rise, along with an increase in LNG demand, helped total gas consumption rise 1.6% month on month in October to 5.2 Bcm, the data showed.

The domestic gas consumption will likely see an increase from next year as Reliance Industries begins production from a new satellite field offshore the east coast block in the Krishna Godavari Basin starting next month.
Rakesh Sharma, New Delhi

In Brief

Siemens Energy's Russia Exit Slows

Siemens Energy’s exit from Russia is progressing more slowly than previously expected, but the company plans to complete it by the end of this year, according to the German engineering company’s financial report published Wednesday.

The restructuring of the company’s business activities in Russia continue to progress and Siemens Energy expects to close them in the first quarter of fiscal year 2023, which started Oct. 1 and will end Dec. 31, it said in the report. It previously planned to complete the exit by the end of fiscal year 2022, or by Oct. 1.

Like other western engineering companies and investors, Siemens Energy decided to withdraw from Russia following the February invasion of Ukraine.

Its withdrawal complicates Russia’s plans to develop domestic manufacturing of large gas turbines, which could be used in LNG projects — something where Moscow now has to rely on homemade technology and equipment due to EU sanctions in response to the war in Ukraine.

In line with withdrawal plans, Siemens Energy completed the sale of 65% in the Siemens Gas Turbine Technologies joint venture in Russia in the fourth quarter of fiscal year 2022. A further sale of a factory in the city of Voronezh was completed Oct. 12, the company said in the report.

For more coverage of the Ukraine crisis, visit Ukraine Crisis: Energy Impact
Staff Reports

FEED Contract Signed For Nigeria's First Floating Plant

Nigeria’s UTM Offshore on Wednesday signed a front-end engineering and design (FEED) contract for the west African country’s first floating LNG plant.

The agreement with Japanese Engineering firm JGC, France’s Technip and Kellogg Brown & Root, marks a further milestone for the project, with a final investment decision now targeted for 2023-24 and first production in 2027.

The project calls for construction of a 1.52 million tons per year LNG plant, fed by gas from a shallow water block OML 104 operated by Exxon in a joint venture with Nigerian National Petroleum Corp. (NNPC).

Details on feedstock remain to be firmed up. UTM had originally been counting on a deal with Exxon to supply the gas, but Exxon is trying to sell its shallow water assets to Seplat, and NNPC has opposed the deal, leaving it in limbo.

UTM says it can source the gas from NNPC, which owns 60% of the Exxon joint venture and which plans to take an equity stake in the plant.

Financing arrangements are still evolving. UTM signed a memorandum of understanding with Africa Export Import Bank in December for $2 billion for the plant. Afrexim is expected to catalyze export credit loans and guarantees from France, Korea and Japan, among other sources, UTM’s CEO Julius Rone told Energy Intelligence on the sidelines of the London signing ceremony.

Christina Katsouris, London

Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India17.7118.5317.3918.6016.4116.2719.8214.8319.5817.5615.8115.0515.94
Sodegaura, Japan16.7220.1220.1420.5016.256.7819.0413.0418.7121.3714.4911.9916.92
Zeebrugge, Belgium12.057.936.728.2410.7411.619.976.759.646.8810.978.4011.21
Huelva, Spain21.0416.9515.7617.2619.6518.9818.9515.5418.6515.9019.7016.8919.72
Isle of Grain, UK8.554.453.264.757.338.096.793.296.163.427.474.937.70
Everett, US4.440.151.030.483.613.030.012.591.93-0.955.03----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback13. Jun27. Jun11. Jul25. Jul8. Aug22. Aug5. Sep19. Sep3. Oct17. Oct31. Oct14. Nov10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia24.0022.35-0.15-1.65
SW Europe20.1021.80-2.801.70
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)
NBP, UK (futures)-3.4832.1335.6132.27
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-4.2631.0735.3329.85
Zeebrugge (Belgium)------10.10
German NCG-4.1328.8532.9825.38
NBP (UK)-2.869.7712.6311.08
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.155.755.903.43
Corpus Christi, Texas-
Cove Point, Maryland0.647.116.472.09
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.
Second Mth0.216.616.406.23
Third Mth0.216.356.145.97
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaJan '22Mar '22May '22Jul '22Sep '22Nov '220255075100125Energy Intelligence