U.S. liquefied natural gas (LNG) operations were again disrupted on Wednesday as wintry weather continued to grip the Gulf Coast, forcing traders to shuffle cargoes as American exports continued to decline.
Power has been restored at Cameron LNG in Hackberry, LA, after a problem with the transmission grid knocked it offline Monday. But the terminal was still working to ensure it could safely restart operations, a spokesperson said.
Meanwhile, two of three liquefaction trains remained offline at Freeport LNG on Quintana Island in Texas in order to cut natural gas and electricity consumption in compliance with the state’s emergency declaration. Cheniere Energy Inc. also was said to be diverting cargoes away from Corpus Christi in South Texas to its Sabine Pass terminal in Louisiana for similar reasons.
Emstream LNG broker Melissa Lindsay told NGI that traders were likely working through operational management issues to accommodate the disruptions, saying it’s likely that a handful of cargoes from the Gulf Coast have for now been canceled.
Energy Aspects analyst James Waddell said his firm expects up to 10 cargoes would be lost or delayed because of U.S. outages, or a roughly 1 billion cubic meter bite out of global supply that should be spread between European and Asian markets. The loss, he added, is small compared to the number of cargoes that were drawn away from Europe last month when Asian LNG prices soared amid historic cold in the region and left European inventories depleted.
While Waddell told NGI that the latest U.S. outages should help drive some restocking demand on the continent, Lindsay added that Europe is for now comfortable on supply. She said LNG bids for March were trading in the price range of the Title Transfer Facility benchmark minus about 30 to 40 cents.
After jumping on Monday, gas benchmarks in Europe fell Tuesday. Meanwhile, spot prices in North Asia stopped falling. But significant gains in overseas prices aren’t expected because of the Arctic blast in the United States.
“I think these outages would have to be prolonged” to see any meaningful increases in European or Asian prices, said Jason Feer, global head of business intelligence at shipbroker Poten & Partners.
Three million people were still without power in Texas on Wednesday, while the grid operator there signaled it could be days before supply is fully restored.
“The ability to restore more power is contingent on more generation coming back online,” said Dan Woodfin, senior director of system operations at the Electric Reliability Council of Texas (ERCOT). Since the winter storm began on Monday, 185 generating units have tripped offline for one reason or another, ERCOT said. Some factors include frozen wind turbines, limited gas supplies, low gas pressure and frozen instrumentation.
Freezing temperatures are expected to last through Friday in parts of Texas and Louisiana. Ship channels feeding the Cameron, Corpus Christi, Freeport and Sabine Pass terminals have oscillated between being open and closed in recent days. Pilot services had resumed Wednesday at all but the Sabine-Neches waterway, which were expected to resume earlier in the day, but the weather offshore proved problematic.
Power outages, fog and icy conditions have upended port operations. Ten LNG tankers were clustered along the Gulf Coast between South Texas and Southwest Louisiana on Wednesday, up from eight the day before. No LNG vessels have left Gulf Coast terminals since Sunday, according to Bloomberg ship-tracking data.
Feed gas deliveries to U.S. terminals hit historic lows of 2.20 Bcf on Tuesday following late-cycle nominations, according to NGI data. They had bounced back to 6.27 Bcf early Wednesday, but that could change throughout intraday cycles.
Spot natural gas prices in the physical market in Oklahoma have traded this week over $1,000/MMBtu and gas at some Texas hubs has traded for hundreds of dollars.
“You’re seeing these insane spot prices in Texas for prompt supply, but nobody at any of these LNG terminals is paying anything like that,” Feer said.
Henry Hub prices haven’t been as wild. That’s one positive for U.S. liquefiers and offtakers, who typically pay for gas priced against the benchmark. LNG buyers also don’t rely on spot gas, particularly in the winter, Feer told NGI.
The March Henry Hub futures contract did break through the $3.20 mark Wednesday to again close higher at $3.219. April gained too to finish at $3.032. But U.S. LNG is still in the money, with Asian prices well over $6.00 and European prices at $5.00 or more through the remainder of the year.
© 2022 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |