Freeport LNG Withdraws Force Majeure
Freeport LNG has withdrawn the force majeure that was declared for an explosion at the site after it was found that the definition would not hold true for the incident, Rystad Energy analyst Lu Ming Pang revealed in a market note sent to Rigzone.
“Force majeure is typically declared only when production is impacted by unforeseeable circumstances outside of the producer’s control,” Pang said in the note.
“Without force majeure, Freeport LNG may be required to compensate offtakers for their replacement cargoes, based on a case-by-case scenario,” Pang added.
In the note, Pang also highlighted that Freeport LNG said this week that it aims for a partial restart in October, before returning to full capacity by the end of the year.
“This is after arriving at an agreement with U.S. regulators last week, pending the execution of corrective measures on site,” Pang said.
“The current recovery timeline closely follows the plan announced in June,” Pang added in the note.
In its latest short term energy outlook (STEO), the U.S. Energy Information Administration outlined that average Henry Hub natural gas prices fell over the last two months primarily because of additional supply in the domestic market following the shutdown of the Freeport LNG export terminal on June 8.
The STEO noted, however, that prices increased by almost 50 percent, from $5.73 per MMBtu on July 1 to $8.37 per MMBtu on July 29, because of continued high demand for natural gas from the electric power sector.
“We expect the Henry Hub price to average $7.54 per MMBtu in the second half of 2022 and then fall to an average of $5.10 per MMBtu in 2023 amid rising natural gas production,” the EIA stated in the August STEO.
In July, the Henry Hub spot price averaged $7.28 per MMBtu, down from $7.70 per MMBtu in June and $8.14 per MMBtu in May, the STEO highlighted.
An incident occurred at the Freeport LNG facility on Quintana Island at about 11.40 am on June 8, according to a statement posted on Freeport LNG’s official Facebook page. Last month, a market note from energy and environmental geo-analytics company Kayrros outlined that the Freeport LNG outage was starting to eat into U.S. LNG exports to Europe.
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