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OPEC+ Rules in an Increasingly Tight Oil Market

OPEC+ Rules in an Increasingly Tight Oil Market

The market is growing increasingly…

Freeport LNG Retracts Force Majeure, Leaving Buyers On The Hook For $8 Billion

The largest gas exporter in the United States, Freeport LNG, has retracted its force majeure, according to anonymous sources who shared the information with Reuters, leaving traders to source product on the spot market at significant losses.

Freeport LNG had declared a force majeure back in June after it suffered an explosion on June 8, triggering a shutdown of the facility to assess the repairs. Freeport originally said it would return to full operations in late 2022, but partial operations could resume within 90 days.

Freeport's force majeure was expected to last until September. But a document and trading sources now say that Freeport retracted the force majeure notice around the end of June, with Freeport blaming human error.

The force majeure would have given traders cover in defaulting on their current agreements to supply end users with product. Instead, the retraction has caused traders to scurry to the spot market to fulfill customer orders—at much higher prices that resulted in collective losses of about $8 billion, the trading sources suggested.

The retraction of the force majeure has not previously been reported.

Reuters cited the Freeport note to market participants from August 3 as saying, "No facts have been revealed that would indicate that the incident was a result of Force Majeure." The statement adds further confusion to the situation as it seems to suggest a reverse scenario in which a force majeure led to an incident, which does not fit with the timeline of the declaration and the explosion.

Reuters did not publish the full note, and there have been no clarifications from Freeport LNG.

Freeport LNG's liquefaction facility is the seventh largest in the world and the second largest in the United States, according to the company's website.

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Freeport LNG accounts for 20% of all the LNG export capacity in the United States, and is capable of processing 2.1 Bcf of gas per day.

By Julianne Geiger for Oilprice.com

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