Fire-Damaged Freeport LNG Gets U.S. Approval for Partial Restart

Freeport LNG, the second largest U.S. liquefied natural gas exporter, said on Tuesday that federal regulators had approved it to partially restart commercial operations at its Texas plant after an outage that lasted more than eight months.

A fiery blast last June knocked the closely-held LNG export facility was knocked offline. Gas processing was halted as federal regulators reviewed its operations and staffing. The blast resulted from inadequate operating and testing procedures, operator fatigue and other shortcomings, a review found.

The U.S. Federal Energy Regulatory Commission (FERC) approved the partial restart of two of the three gas-liquefaction units, two storage tanks, and a single tanker berth, a filing showed on Tuesday. Restart of the third unit and related facilities require additional permission, FERC said.

It will be "several weeks" before the plant can reach full processing capacity of 2 billion cubic feet per day. A third storage tank and second tanker berth will not be available until May, Freeport LNG said in a statement.

A spokesperson declined further comment.

GAS PRICES LOWER

U.S. natural gas prices settled 9% lower on Tuesday at $2.073 per million British thermal units (mmBtus), continuing a decline on less demand for heating and rising production and storage. U.S. gas is down more than 50% this year.

Freeport LNG produces about 15 million tonnes per annum of the superchilled gas for delivery to customers in Asia and Europe. As recently as last week, U.S. regulators cautioned it could be "a number of months" before the plant was operating at full capacity.

The company, founded by billionaire Michael Smith, initially had pledged to resume partial operations last October, but that proved too optimistic as investigators sought more details on operations and staffing. It agreed to increase staffing by 30% to address operator and training shortcomings discovered by investigators.

The approval "is a significant achievement for Freeport LNG," Smith said in a statement, noting operators had worked alongside regulators to meet their requirements for a restart.

The outage last summer sent LNG prices soaring, with futures prices in Europe hitting $60 (mmBtus) in July as buyers shunned Russian gas after its invasion of Ukraine. Europe restocked storage and prices fell back to trade about $16 per mmBtu this month.

The outage stalled new gains in U.S. LNG exports, which have steadily increased for years and became crucially important to Europe as Russia mostly cut supplies to the continent in response to sanctions placed on Moscow after its invasion of Ukraine.

The lengthy delays have forced big customers including JERA and Osaka Gas to book hundreds of millions of dollars of losses. Its other big offtakers include BP, TotalEnergies, and SK E&S.

(Reporting by Deep Vakil and Arathy Somasekhar; Additional reporting by Bharat Govind Gautam; Editing by Deepa Babington and David Gregorio)