Freeport LNG reaches agreement with US on corrective actions following June fire

Freeport LNG has reached an agreement with US regulators on certain corrective actions that must be taken before it can resume service, the operator said Aug. 3.

The three-train, 15 million mt/year facility in Texas has remained offline since an explosion and fire June 8. The terminal accounts for about 15% of US LNG supply, which has become increasingly important to serving European demand amid sharp cuts in Russian pipeline gas to the continent.

The operator said in a statement that it believes it can complete the necessary corrective measures, along with applicable repair and restoration activities, in order to resume initial operations in early October, maintaining its most recent target. It had previously targeted resumption of full service by the end of the year. Officials with the US Pipeline and Hazardous Materials Safety Administration did not immediately respond to a message seeking comment.

"The obligations under the consent agreement are intended to ensure that Freeport LNG can safely and confidently resume initial LNG production and thereafter ultimately return to full operation of all liquefaction facilities," the operator said. "In the near term, the consent agreement includes certain corrective measures, many of which are currently underway, that Freeport LNG is to take to obtain PHMSA approval for an initial resumption of LNG production from its liquefaction facility."

NYMEX Henry Hub August spiked 56 cents higher to settle at $8.266/MMBtu Aug. 3, data from CME Group shows. The contract had weakened in recent trading sessions, after reaching a 30-day peak of $8.993/MMBtu July 26.

The explosion and associated fire at Freeport LNG occurred in a pipe rack near the LNG storage tanks at the liquefaction facility. An estimated 120,000 cubic feet of LNG was reported to be released within the facility, according to PHMSA.

Following the incident, PHMSA told Freeport LNG it wanted the operator to take corrective actions and seek their approval before resuming normal operations. Corrective actions it sought included the submission of an evaluation of the LNG storage tanks operating modes. The agency had said it wanted the evaluation to be performed by an approved independent third party. Inspection and testing procedures also were sought, as was a root-cause failure analysis. PHMSA also had said a final report would have to include findings, any lessons learned, and whether the findings and any lessons learned are applicable to the entirety of Freeport's operations.

In its statement, Freeport LNG said that in addition to the repair and replacement of the terminal's physical infrastructure that was damaged in the incident, and as part of the corrective measures under the consent agreement, the company is evaluating and advancing "initiatives related to training, process safety management, operations and maintenance procedure improvements, and facility inspections."

Two LNG storage tanks at Cheniere Energy's Sabine Pass export terminal in Louisiana were offline for more than four years after a 2018 leak. The length of the tanks' outage stemmed in part from extensive corrective actions that PHMSA required of Cheniere before giving the go-ahead in March of this year for one of the two tanks to resume service. Cheniere has had use of its other storage tanks, and its export operations were not meaningfully impacted. In Freeport LNG's case, it cannot produce LNG with its three liquefaction trains offline.