Daily Market Report – August 24, 2022

Freeport issued a stated yesterday around 1:15pm EST stating a more clear timeline for the restart of the facility. Here is the official statement from Freeport:

“that initial production can commence in early to mid-November, and ramp up to a sustained level of at least 2 BCF per day by the end of November, representing over 85% of the export capacity of the facility. The recovery plan will utilize Freeport LNG’s second LNG loading dock as a lay berth until loading capabilities at the second dock are reinstated in March 2023, at which time we anticipate being capable of operating at 100% of our capacity”

Our original timeline suggested that the facility was planned to be operational by Oct 1^st. This comes from the last statement they issued that stated they submitted the 60-day restart notice to FERC at the beginning of August. With the latest press release, we now assume that the facility brings on the first train on Nov 15^th, the next one a week later, and the full 3 trains by the end of Nov. In this scenario, we calculate approximately 106 Bcf of natural gas being diverted back to US storage by the end of Nov.

Another interesting note in the press release was the suggestion that export capacity of 2 Bcf/d was 85% of facility operation. Prior to the incident, 2.22 Bcf/d was the highest volume of natural gas delivered to the facility. This volume includes roughly 5% onsite usage (less than other LNG facilities since Freeport is primarily powered up by the local power grid). So the latest statement now suggests that full export capacity is 2.35 Bcf/d and that the facility could take as much as 2.47 Bcf on a daily basis past March. This new higher export capacity level was authorized by the FERC recently after Freeport made a filing to the FERC in mid-2021 to increase its authorized level from 782 Bcf/year to 870 Bcf/d. FERC approved this expansion on July 28^th, 2022.

Links:
https://www.federalregister.gov/documents/2021/12/21/2021-27564/freeport-lng-development-lp-flng-liquefaction-llc-flng-liquefaction-2-llc-flng-liquefaction-3-llc#:~:text=Freeport%20LNG%20proposes%20to%20increase,Capacity%20Amendment%20Project%20(Project).
https://www.sierraclub.org/press-releases/2022/07/ferc-approves-expansion-lng-export-capacity-despite-lack-information-around

Today’s Fundamentals

Daily US natural gas production is estimated to be  98.1 Bcf/d this morning. Today’s estimated production is +0.05 Bcf/d to yesterday, and -0.28 Bcf/d to the 7D average.

Natural gas consumption is modelled to be 79.3 Bcf today,  -0.41 Bcf/d to yesterday, and +1.51 Bcf/d to the 7D average. US power burns are expected to be 42 Bcf today, and US ResComm usage is expected to be 8.2 Bcf.

Net LNG deliveries are expected to be 11.1 Bcf today.

Mexican exports are expected to be 6.9 Bcf today, and net Canadian imports are expected to be 5.8 Bcf today.

For week ending Aug 19th, the S/D storage model is point to a +59 Bcf injection and flow model is point to a +63 Bcf . This week we are leaning closer to the +59 Bcf this week.

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