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An explosion at a major natural gas production facility in Texas could leave the plant offline for at least three weeks, company officials said Thursday, affecting global energy markets at a time when supplies are already running low. ‘are appropriate.
The cause of Wednesday’s blast at the Freeport LNG facility in Quintana is unclear, the company said. There were no injuries and all employees were counted, spokeswoman Heather Browne told The Washington Post.
The natural gas liquefaction plant is one of the largest in the world and is a major exporter to Britain and other parts of Europe. Energy markets have been volatile for months due to inflation and the invasion of Ukraine by Russia, putting excessive pressure on US production and exports.
Prolonged closure of Freeport facilities could have a significant effect on energy prices, experts warn, especially as markets prepare for rising demand in the summer.
“The world is already on the edge, so to speak, for global LNG supply and demand, and the incident at Freeport, I wouldn’t say it’s pushing the world to the limit, but I think a little bit more close, “Alex said. Munton, Director of Global Gas and Liquefied Natural Gas (LNG) at Rapidan Energy Group.
“There is a lot of pressure on gas prices [Europe] right now, the biggest of which are the risks and shortcomings created by the war in Ukraine and Russian gas diplomacy and gas pressure in Brussels and on the continent, “said Kevin Book, CEO of ClearView Energy Partners, an independent research group. “This has affected prices downstream too.”
Dutch gas futures TTF, the international benchmark for natural gas, jumped on the news, rising 8.8 percent in the early hours of Thursday afternoon to 84.88 euros ($ 90.23) per megawatt. hour. They traded up to 92.05 euros ($ 97.87) per MWh earlier in the day.
The United States is the world’s largest exporter of natural gas, just ahead of Australia and Qatar, with much of its domestic production going to Britain and the European Union. Gas is used to heat homes and businesses and to power large-scale industrial facilities.
Europe is facing a crisis in energy supply as it tries to eliminate Russian fossil fuels due to the invasion of Ukraine. The eurozone recently announced plans to halt imports of Russian crude oil by the end of 2022. Russia supplies almost 40 percent of the bloc’s natural gas separately.
Europe also buys natural gas in Scandinavia and North Africa, but these areas are struggling to increase production and processing, experts say. LNG has also traditionally been traded on long-term contracts, but European officials opted for spot trading a few years ago, in the hope that flexibility would provide cheaper prices.
The measure aligned the European market with U.S. production and sales practices, Munton said. Tankers leaving facilities such as Freeport, which alone account for 20 percent of national LNG processing, carry up to 64 billion cubic feet of gas a month.
These shipments are more suitable for short-term exchanges, rather than gas flowing through pipes, which is more difficult to divert to new customers.
The model “works pretty well, but of course the elephant in the room is: what if things fall apart with respect to Russia?” said Munton.
And the demand picture, experts warn, could harden. Asia, and particularly China, which is also heavily dependent on liquefied natural gas, has experienced depressed demand in 2022 due to the slowdown in economic growth.
But Beijing announced dozens of new individual and business economic stimulus measures in late May to increase gross domestic product. shortly after lifting the draconian restrictions of the pandemic.
The result, Munton said, could be an increase in worldwide demand for supply contracts. U.S. energy producers are already preparing for a hot summer in the southeast and a turbulent hurricane season. Power outages in parts of Texas and Louisiana in recent years have put producers at a disadvantage in the past, and federal environmental officials have forecast an “above-normal” Atlantic hurricane season.
“There will always be risks when you have a hurricane-prone area that happens to be the site of most industrial activity in a particular sector,” Book said. “The risks are concentrated in the Gulf of Mexico by geography. Energy infrastructure is on display. “