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Freeport LNG plant will be closed for 3 weeks, and global energy markets are raging

HOUSTON, June 8 (Reuters) – Freeport LNG, operator of one of the largest U.S. liquefied natural gas (LNG) export facilities, will close for at least three weeks after an explosion at the Texas Gulf Coast facility.

The fire hit US natural gas markets on Wednesday, and the impact is likely to spread across Europe and Asia, analysts said.

Freeport LNG, which provides about 20% of US LNG treatment, revealed the closure late Wednesday after assessing damage to the huge facility.

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The closure removes a major supplier to markets already strained by European buyers avoiding Russian LNG due to the invasion of Ukraine – actions that Moscow calls a “special operation” – and of resurgent demand in China, analysts said.

“This is a significant production shutdown at a large U.S. facility,” said Alex Munton, director of global gas and LNG at Rapidan Energy. Freeport LNG sends around four loads per week, and a three-week shutdown will take at least 1 million tonnes of LNG out of the market, he said.

“It’s going to mean one thing: shortages. The competition for spot LNG is going to increase global LNG prices,” Munton said.

The plant can process up to 2.1 billion cubic feet of natural gas per day (bcfd), and can export at full capacity 15 million tonnes per year (MTPA) of liquefied gas. US LNG exports reached a record high of 9.7 bcfd last year, according to the US Energy Information Administration (EIA).

In March, 21 cargoes were loaded at the Freeport plant, transporting an estimated 64 billion cubic feet of gas to destinations in Europe, South Korea and China, according to the US Department of Energy. It is up from 15 loads in February and 19 in January.

US natural gas futures sank after news of the explosion due to concerns that it could disrupt the plant’s demand for gas. They closed down around 6% to $ 8.699 per million British thermal units (mmBtu), after reaching an almost 14-year high of 9.664 mmBtu earlier in the day.

Founded in 2002 by billionaire Michael Smith, Freeport LNG processes gas for companies including BP (BP.L), JERA, Kansai Electric (9503.T), Osaka Gas (9532.T), SK E&S and TotalEnergies. It is in the middle of expanding the plant’s capacity to 20 MTPA.

An investigation into what led to the explosion was underway, a spokesman for the company said, without elaborating on the cause of the fire.

A representative of the US Coast Guard said on Wednesday that a safety zone had been set up 20 miles east and west of Freeport LNG’s facilities, and closed that part of the coastal road to vessel traffic.

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Reporting by Liz Hampton in Denver, Sabrina Valle in Houston and Scott DiSavino in New York; Edited by Marguerita Choy, Richard Pullin, Chris Reese and Kenneth Maxwell

Our standards: Thomson Reuters Trust Principles.

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