U.S. and European Gas Levels are Strong, but Malaysia and Texas Disruptions Limit Deliveries
Tanker tracking data from Refinitiv Eikon shows that producers diverted additional cargoes to Asian consumers in response to a pipeline rupture in Malaysia, which limited supplies, and plant disruptions that hampered U.S. LNG exports. Due to a delayed winter, Europe's gas storage levels surged to above 90% of expected capacity, lowering current LNG prices. Over a dozen LNG-carrying ships remained anchored near Spain's Bay of Cadiz last week, while equipment that converts LNG back to gas were operating at full capacity in expectation of a hike in the European gas prices.
LNG clients in Japan are scrambling for alternative cargoes after the Malaysian state-energy major Petronas declared a force majeure on gas deliveries. As of 2021, Malaysia ranked as Japan's second-largest LNG supplier. The rupture in the Malaysian Sabah-Sarawak Gas Pipeline was brought on by shifting ground. The Bintulu, Sarawak, production facility was the only one directly affected.
The Refinitiv Eikon data indicated that in October, 88 tankers carrying a total of 6.27 million tons of LNG left U.S. ports, with most of the cargo bound for Europe. The percentage of sales going to consumers in Asia jumped to 24% from 19% the previous month, while exports to Latin America and the Caribbean dropped to a few containers. The number of tons exported nearly equaled September's high of 6.32 million. The price of gas in Europe has fallen to its lowest level since June due to an abundance of supplies and warmer-than-average weather; this week, the price at the Dutch hub fell to $27 per million British thermal units. This is good news for Europeans, as the continent has enough gas reserves to last through the winter barring an exceptionally cold spell.
A pipeline explosion on June 8 caused Freeport LNG in Texas to temporarily close. The 2.1 billion cubic feet per day plant is expected to resume partial operations by the beginning to middle of November, according to the business. Federal regulators have requested that Freeport LNG produce all necessary paperwork as soon as possible so that adequate time can be allotted for assessment prior to the plant's anticipated restart. Plant outages and the suspension of this terminal, the second-largest U.S. export terminal, have curtailed higher volumes, although U.S. LNG producers have continually expanded shipments to Europe this year in response to Russia's invasion of Ukraine.
According to data from Refinitiv, four ships are queued to load on LNG at Freeport: the Prism Brilliance and Prism Diversity are stationed nearby, the Prism Courage is anticipated to arrive on November 1, and the Grace Freesia is scheduled to dock near the end of November. More than 85% of the facility's pre-fire processing capacity is expected to be restored by Freeport LNG next month, and full repairs are expected to be completed by March to bring the facility to full capability. As winter quickly approaches in the Northern Hemisphere, the plant's restart will offer much-needed fuel for heating and electricity.
The shutdown of the U.S. LNG export plant has had a detrimental effect on several customers, including Japan's top LNG importer, JERA, which last week reported it will incur a $751 million loss, mostly due to higher buying expenses. However, in October, the U.S.’s third largest export plant, Cove Point LNG facility in Maryland, resumed services following routine maintenance. The United States has a substantial 3.34 trillion cubic feet of gas in storage.