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US regulator bans restart of Freeport LNG plant over safety concerns

  • Regulator discovers conditions posing risk to public safety
  • US sets timeline for independent review of factory and repair plan
  • The June 8 explosion released 120,000 cubic feet of LNG and methane
  • Freeport sees partial recovery in early October

HOUSTON, June 30 (Reuters) – The second-largest U.S. liquefied natural gas export facility hit by a fire earlier this month will not be allowed to repair or restart operations until it resolves the risks to public safety, a pipeline regulator said Thursday.

The June 8 explosion and fire destroyed Freeport LNG’s 15 million tonnes per annum (mtpa) Quintana plant, exacerbating global LNG shortages amid reduced gas flows from Russia, while weighing heavily on domestic natural gas prices in the United States.

“Continued operation of the Freeport LNG export facility without corrective action may pose an integrity risk to public safety, property, or the environment,” said the U.S. Pipeline and Hazardous Materials Safety. Administration (PHMSA) in its preliminary report.

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A problem with a safety valve led an 18-inch (46cm) pipe with stainless steel inner and outer layers to overpressurize and burst, releasing LNG and methane gas that caused the explosion, PHMSA said in his report.

It set out a series of steps to investigate what caused a 300-foot (91 m) section of pipe to burst and release approximately 120,000 cubic feet of LNG.

Root-cause analysis will likely delay a partial factory restart by 90 to 120 days and could delay a full restart, analysts said.

Freeport, a tightly held company, said it will continue to work with PHMSA and other regulators to obtain necessary approvals to restart operations. He estimated that the resumption of partial liquefaction operations would take place in early October and a return to full production by the end of the year.

U.S. natural gas futures fell 15% on Thursday on the report and continued inventory builds, contributing to a 33% price drop in June, the biggest monthly drop since 2018. read more

LONG PROCESS

“The actual process (of reviews, repairs and approvals) will take more than three months, and potentially six to 12 months,” said Alex Munton, global director of gas and LNG at consultants Rapidan Energy Group.

But based on PHMSA’s track record, once it understands the cause of the explosion and is confident in a repair plan, it will likely let part of the facility resume treatment early, did he declare.

Freeport LNG said the likely cause of the explosion was an overpressurized pipeline and equipment to cool natural gas into liquid for export was not damaged. Read more

The regulator ordered the company to submit a plan within 60 days for an outside investigator to provide a report on the extent of the damage to the facility. He did not specify how long it would take to approve a plan. Freeport must also engage a third party to examine the condition of its LNG storage tanks.

Only after the reviews are complete will the company be able to submit a plan to repair the damage, he said, further complicating Freeport LNG’s goal of a partial restart in September and full operation by the end of the year.

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Reporting by Gary McWilliams Editing by Marguerita Choy

Our standards: The Thomson Reuters Trust Principles.

Richard Dement

The author Richard Dement