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FACTBOX-Freeport LNG plant shutdown and main buyers at risk

(Updates with extended shutdown and impact)

LONDON, June 14 (Reuters) - Freeport LNG, operator of one of the largest U.S. export plants producing liquefied natural gas (LNG), said on Tuesday that last week’s fire damage to its Texas plant would keep it fully offline until September with only partial operation through year-end, raising the risk of gas shortages in Europe.

The Quintana, Texas, facility which provides around 20% of U.S. LNG processing, said that a resumption of partial operations is targeted to be achieved in approximately 90 days and a return to full plant operations is not expected until late 2022.

The plant, which was knocked offline by an explosion and fire on June 8, has been a major supplier to Europe, which has sought to move away from Russia over its invasion of Ukraine.

Below are key facts on the plant’s major buyers and the possible impact of the outage.

PLANT CAPACITY

- The Freeport plant can process up to 2.1 billion cubic feet of natural gas per day (bcfd) and at full capacity can export 15 million tonnes per annum (mtpa) of the liquid gas. U.S. LNG exports hit a record 9.7 bcfd last year, according to the U.S. Energy Information Administration (EIA).

- Freeport LNG has been operating at or just above its nameplate capacity of 15 mtpa so far this year.

- In March, 21 cargoes loaded at the Freeport facility, carrying an estimated 64 billion cubic feet of gas to destinations in Europe, South Korea and China, according to the U.S. Department of Energy. That was up from 15 cargoes in February and 19 in January.

MAJOR BUYERS

- BP, TotalEnergies, Osaka Gas, Japan’s biggest power generator JERA and South Korea’s SK Gas Trading are listed as the buyers of Freeport LNG cargoes, industry sources said.

- BP has the largest contract at 4.4 mtpa through 2040. Jera and Osaka Gas have contracts at 2.3 mtpa each through 2039, while SK and Total Energies have 2.2 mtpa contracts each that run through 2040, according to the International Group of Liquefied Natural Gas Importers (GIIGNL).

- Commodities trader Trafigura also has a small contract to buy gas from Freeport at 0.5 mtpa.

- The companies have tolling contracts, which means they buy the gas upstream, arrange shipping to the terminal, which then regasifies it and the offtaker lifts the cargo.

EXPORTS TO EUROPE

- Analysts said that around 70% of Freeport monthly supplies in the past few months went to the European Union and Britain.

- France, Britain, Turkey and Netherlands have been the biggest European importers from Freeport LNG this year.

- According to ICIS LNG Edge, “68% of Freeport’s cargoes went to Europe, UK and Turkey in last three months.”

“A delay in restarting Freeport will therefore likely feed into fears of the effects of this lower supply on European gas prices,” said Robert Songer, LNG analyst at data intelligence firm ICIS.

POTENTIAL DISRUPTION

- The longer outage will remove 40 cargoes based on an average cargo size of around 70,000 tonnes. The delay means between 4 million and 5 million tons of LNG in total will be lost from a 100 mtpa market, analysts said.

- The initial three-week outage at Freeport had been estimated to result in a loss of around 940,000 tonnes of LNG, or about 13 cargoes, according to Alex Froley, LNG analyst at ICIS.

“We estimate an additional loss of around 2.8 million tonnes of LNG following the extension of the Freeport outage from three weeks to 90 days. The biggest impacts are in July and August, which could lose around 1.3 million tonnes each.” Froley said on Tuesday.

“It looks like the plant won’t come straight back to full operations in September either, so there could be ongoing lesser reductions into early winter.”

- Rystad Energy said in a report that while it is unclear which alternative volumes could replace the drop in exports to Europe, with favourable spot prices, countries such as Nigeria and Algeria that are producing well below capacity could increase production to help fill the void.

Reporting by Marwa Rashad in London; Editing by Marguerita Choy, Veronica Brown, and Kirsten Donovan

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