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US natural gas prices drop following prolonged Freeport LNG outage  

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The United States is finding it difficult to uphold its pledge to supply Europe with natural gas. As nations attempt to reduce their dependency on Russia for this resource, they have been turning to other options. Although America was ready to answer the call, unforeseen circumstances have reared their head.

On Tuesday, June 14, Freeport LNG announced it would be months before it could repair a major export terminal in Quintana, Texas. On last Wednesday, June 8, the plant was rocked by a fire and explosion, which immediately affected operations. The source of the incident is thought to be a pipe rupture which led to the ignition of a vapor cloud.

The New York Times reports that this setback is estimated to affect approximately 14 percent of American natural gas exports. The news was made even grimmer when Russian energy juggernaut Gazprom announced it would be reducing gas shipments to Germany from the Nord Stream pipeline. This activity catapulted European natural gas prices by 16 percent on Tuesday. On the flip side, US natural gas prices dropped by 16 percent. This is due to European prices being set regionally instead of globally.

Officials estimate it will take at least three weeks to return the Texas terminal to normal working conditions. Natural gas prices more than doubled last year, so some welcome the modest drop. Yet, completion of all repairs and returning the facility to its pre-accident state will not occur until late 2022.

Freeport LNG’s terminal is one of only seven that sends natural gas worldwide. The closing will reduce the amount of exported gas, offering relief to domestic customers in the private and public sectors. Residential accounts, refineries, and industrial plants can see lower prices and full storage inventories.

In lieu of these export shortages, Europe is turning to sources like Qatar and Australia to pick up the pace and ship out more natural gas. The impact of closing a single export terminal is significant. It has ignited oil and gas companies to lobby even harder in favor of extracting natural gas from shale fields in Pennsylvania, Texas, New Mexico, and Arkansas.

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