Impact of Arctic Freeze on US LNG Exports

The recent Arctic freeze has had a significant impact on US liquefied natural gas (LNG) exports, resulting in inventories at export plants reaching a one-year low. This disruption has led to a diversion of gas flows to the domestic market. In addition, the Freeport LNG facility in Texas has experienced mechanical problems, further contributing to the decline in exports.

According to LSEG data, gas flows to the seven major US LNG export plants have decreased to an average of 13.9 billion cubic feet per day (bcf/d) in January, down from a monthly record of 14.7 bcf/d in December. The LNG feedgas was projected to increase by approximately 4.2 bcf/d over the past two days, reaching 13.5 bcf/d on Thursday after hitting a one-year low of 9.2 bcf/d on Tuesday.

It is important to note that one billion cubic feet of gas can supply around five million US homes for a day. Most of the decline in output occurred at facilities such as Cheniere Energy’s Sabine Pass facility in Louisiana, Corpus Christi operation in Texas, Freeport LNG’s plant in Texas, and Cameron LNG’s plant in Louisiana. At the Freeport plant, liquefaction train 2 experienced a shutdown on January 16, while train 3 tripped on January 17.

Industry analysts have highlighted that some of the gas supplies have been redirected back into the US domestic markets instead of being liquefied for sale overseas, particularly due to the high spot gas prices in the US market. For instance, next-day gas prices at the Henry Hub in Louisiana skyrocketed to a 22-month high of $13 per Metric Million British thermal unit (MMBtu). Additionally, global gas prices are at a five-month low of around $9/MMBtu at the Dutch Title Facility benchmark in Europe and a seven-month low of $10/MMBtu at the Japan Korea Marker in Asia.

The analysts further revealed that the US was the world’s largest exporter of LNG in 2023. This diversion back to the domestic market is especially likely given the significant difference in prices between the US and global markets.

The impact of the Arctic freeze and the subsequent decrease in LNG exports highlight the complexities of the global gas trade and its interplay with market prices. As the situation continues to unfold, it will be crucial to closely monitor the developments in the LNG market and assess the implications for both domestic and international trade.

In conclusion, the recent disruptions in US LNG exports due to the Arctic freeze and mechanical issues at LNG facilities have led to a significant drop in gas flows and a corresponding rise in domestic market prices. The interplay between global gas trade and market prices underscores the need for continued vigilance and analysis in the evolving LNG market landscape.