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Fire at US natural gas plant deals blow to exports

One of the largest liquefied natural gas plants in the US will be closed for at least three weeks after an explosion, which will be a blow to exports as the industry tries to ramp up supplies to Europe.

Freeport LNG said Wednesday it had been forced to shut down its operations, which account for nearly one-fifth of U.S. liquefaction capacity, a process that involves supercooling natural gas and loading it onto tankers for delivery overseas.

“As a result of today’s fire, the Freeport LNG liquefaction plant is currently shut down and will remain closed for a minimum of three weeks,” the company said.

US natural gas prices fell sharply after the incident as traders worried about losing a significant portion of the market. US futures for delivery in July traded at about $8.17 per million UK thermal units on Wednesday evening, down 12 percent from Tuesday’s settlement price, as traders considered domestic inventories would become stranded ashore.

The Freeport terminal’s three trains have the capacity to handle 2.1 billion cubic feet of natural gas per day. That represents about 17 percent of the total US 13 billion cu ft/d liquefaction capacity and 2 percent of the country’s total natural gas production.

The cause of the explosion and the extent of the damage remained unclear Wednesday evening. Freeport LNG confirmed that “an incident” had taken place at approximately 11:40 a.m. local time, adding that there were no injuries and there was no risk to the surrounding community. It declined to provide further details.

Located on the coast of the Gulf of Texas, Freeport LNG is one of only seven terminals operating in the US, all operating at full capacity to supply fuel shipments to a tight global market.

The US, the world’s largest natural gas producer, is seeking to increase exports to Europe, while the continent seeks to reduce its dependence on Russian imports.

Under a deal announced by President Joe Biden and European Commission President Ursula von der Leyen, the US pledged that another 15 billion cubic meters will reach Europe this year. Brussels said it would aim to increase annual demand for US LNG by 50 billion cu m, equivalent to 4.8 billion cu ft/d, by the end of the decade.

The optimistic outlook for demand has sparked a wave of investor interest in the sector. Michael Smith, the CEO of Freeport LNG, told the Financial Times in April that “the future for US LNG is off the table.”

Local police could not be reached for comment about Freeport LNG. In a statement from local media, law enforcement officials said the facility had experienced “some sort of explosion” but no evacuation was underway.

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