US LNG exporters canceled cargoes amid freeze as US gas prices surged

US LNG exporters canceled multiple cargoes over the past week as freezing temperatures disrupted operations at terminals and caused US spot gas prices to soar, creating an incentive for those who could sell gas back into the domestic market instead of exporting it as LNG to do so, according to market sources in the Atlantic Basin.

At least one of the canceled cargoes was from the Cameron LNG terminal in Louisiana, while at least one other cancellation was a cargo from the Freeport LNG terminal in Texas, three market sources said. Two market sources reported at least five total cargoes canceled from the US.

Long-term contracts tied to US LNG export facilities typically require buyers who want to cancel a cargo to notify terminal operators well in advance. In the case of the biggest US LNG exporter, Cheniere, that is at least 40 days before a given loading month.

But a US LNG seller might have more flexibility, particularly if the seller is a customer of a tolling facility that supplies its own feedgas, according to market sources. A seller seeing the Henry Hub spot price soar beyond languishing prices in LNG import markets as it did in the week ended Jan. 19 could be encouraged to work with buyers to delay a shipment or cancel a cargo outright if conditions allow, such as if operational impacts at a facility or at a port were sufficient to declare a force majeure.

Most long-term sale and purchase agreements signed with US exporters contracted off of Henry Hub utilize the index's settlement at the end of the month, meaning the surging spot prices wouldn't have make it uneconomic to lift cargoes during the week.

Overall US feedgas demand plummeted during the cold snap, falling to an average 12.2 Bcf/d in the week ended Jan. 19, compared with an average of nearly 14.8 Bcf/d in the previous week, S&P Global Commodity Insights data showed.

The biggest drop-offs in plant utilization were at Cameron, Freeport and Cheniere's Sabine Pass LNG terminal in Louisiana, with overall feedgas demand hitting as low as 9.4 Bcf/d Jan. 16. Demand has since recovered to about 13.9 Bcf/d Jan. 22, the data showed.

At the port serving Cameron and nearby Sabine Pass, vessel traffic was temporarily limited during part of the week because of inclement weather. Extreme conditions also led to temporary restrictions at the port of Freeport.

At the Freeport plant, one of the facility's three liquefaction trains, Train 3, tripped for about 12 hours Jan. 17 because of an issue with a compressor, the operator said in a Texas state regulatory filing. Feedgas demand at Freeport, which averaged about 2 Bcf/d in the week to Jan. 12, dropped as low as 670 MMcf/d Jan. 18 and has since climbed back to about 1.5 Bcf/d Jan. 22, S&P Global data showed.

Price surge

Meanwhile, US natural gas prices skyrocketed as large-scale freeze-offs prompted a run-up in demand for the fuel.

Cash prices at the US benchmark Henry Hub traded at their highest level in years, settling as high as $12.97/MMBtu Jan. 15 and Jan. 16, surpassing the price of LNG in key end-user markets.

The Platts Gulf Coast Marker for US FOB cargoes loading 30-60 days forward reached a high during the week of just $7.82/MMBtu Jan. 15. During the same week, GCM reached a multimonth low, with Platts, part of S&P Global Commodity Insights, assessing the market at $6.76/MMBtu Jan. 17. The market was last seen lower on July 28, 2023, when Platts assessed it at $6.70/MMBtu. Global LNG demand remains muted amid high gas storage levels in key European and Asian import markets headed into the final stretch of winter, suggesting the impact of the canceled US volumes would be limited.

During the cold snap, some US LNG terminals that can import cargoes also did so. The Berkshire Hathaway-operated Cove Point LNG plant in Maryland and Kinder Morgan's Elba Island LNG terminal in Georgia both appeared to import LNG, S&P Global data showed.

The LNG sendout from the Cove Point plant averaged about 490 MMcf/d during the week ended Jan. 19, averaging another 1.1 Bcf/d from Jan. 20, when the flows reached a high of about 1.5 Bcf/d.

At Elba Island, flows averaged more than 300 MMcf/d in the week to Jan. 19 and climbed over the weekend, reaching a high of more than 600 MMcf/d Jan. 20.

Feedgas flows to Elba, which is by far the smallest of major US LNG export facilities, declined modestly. Deliveries to Cove Point also dropped off only slightly.

Sempra did not respond to a request for comment Jan. 22. A spokesperson for the Cameron facility declined to comment on the operations of the facility Jan. 18.

Freeport and Cheniere declined to comment.

US gas prices have moderated amid warmer weather forecasts. The National Weather Service's forecast into early February shows warmer than normal weather is expected across most of the country from Jan. 30 to Feb. 5.