Business & Environment


January 30, 2023

Here, Fires Have Knocked Out the All-Important LNG Terminals

Freeport in Texas is responsible for around one-fifth of all LNG exports from the USA. But due to repair work, these will now be out of commission for at least three months, as exclusive satellite images show. In Norway, a plant just went back online after a fire – after more than a year and a half.

“Economy from above” is a collaboration between WirtschaftsWoche and LiveEO. This is a translation of the original article written in German by “Jannik Deters“. Access the original article here.

The explosion is violent, but short. The fireball rises dozens of meters into the air, far beyond the tank vaults. Then it’s all over again. The video sequence, accidentally recorded from a safe distance and published on YouTube, lasts only seven seconds. But the effects of the fire at the LNG terminal in Quintana, Texas, in early June are devastating, especially economically.

That’s because Quintana, the country’s second-largest LNG production facility, is down until at least October. Exclusive satellite images from LiveEO now show how important the site is for Europe’s energy supply in times of a shift away from Russian gas – and why such an accident paralyzes operations for so long.

Europe obtains about 45 percent of its LNG imports from the United States. Between 15 and 20 percent of all U.S. exports of the liquefied natural gas, which is currently in such high demand, go onto ships in Quintana, an hour’s drive south of Houston, and are then shipped all over the world. That’s around 15 million tons of LNG a year. Prices shot up immediately after the fire became known. The share prices of energy companies that, like BP, produce in Quintana, reacted with price losses.

Freeport LNG Project, Houston

Quintana, a peninsula offshore from the city of Freeport directly on the Gulf of Mexico, is only a small part of a huge industrial plant. In the current satellite photo from the end of June, the dimensions, the many characteristic gas and oil tanks and some transport ships can be clearly seen.

The damage to the pipeline is not visible to the naked eye. But since the fire, no ships have been docking in the eastern part of Quintana, and more and more vehicles have been parked near the accident site, presumably for inspection and repair purposes.

The repairs and safety checks are likely to drag on. The plan to slowly restart the plant in September has already been scrapped by Freeport LNG, the company that owns it. A few days ago, the regulatory agency said it had identified safety deficiencies and required the company to detail and address potential risks to residents. An independent firm would have to record the damage and develop a plan for resuming operations.

According to Freeport LNG, the fire broke out because gas escaped from pipes between two storage tanks and ignited. These pipes lead to the dock facilities to the east. The accident was probably due to a rupture caused by excess pressure, the company said.

Freeport LNG Project
Freeport LNG Project

Freeport LNG Project

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Compared with the Deepwater Horizon disaster in 2010, the incident in Quintana has turned out to be mild. The explosion of the drilling platform a few hundred kilometers from Quintana killed eleven people at the time. The environmental damage caused by the spilled oil is unprecedented. The BP Group, which had leased the platform, had to pay many billions of dollars in fines.

“We’re dealing with industrial assets that are highly flammable,” says Alex Munton of Rapidan Energy, a consulting firm in Houston. “That’s just the way it is with oil and gas.” But no comparable mishaps have happened at LNG terminals, he says. Nevertheless, fires do happen from time to time.

Freeport LNG assumes that there was a mechanical or technical fault in the control systems. But there is another theory, which apparently the national investigative agency FBI has also looked into. The Washington Examiner magazine reported that Russian hackers may have sabotaged the facility. Industry expert Munton says in response: According to his information, the FBI was indeed investigating the explosion. “But there is no official statement that the explosion was caused by a cyberattack.” Freeport LNG denied the media report.

However, such attacks, which are controlled from a computer thousands of kilometers away, are certainly a realistic scenario, says Munton. A year ago, for example, hackers shut down an oil pipeline in Texas. And such an attack is also conceivable in the Freeport LNG case, Munton says. “We don’t know.” But surprisingly, he said, the fire occurred at a time when Russia had just cut gas supplies to Europe. For Russia, supplies from the Gulf of Mexico as an alternative to pipelines from the east have been an economic threat, and not just since the invasion of Ukraine.

The failure puts European countries that want to become less dependent on Russia under even more pressure to find alternatives. Alternatives like Norway. There, in Hammerfest, a terminal that was closed for more than a year and a half after a fire has just been reconnected.

Hammerfest LNG
Hammerfest LNG

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The reason for the extremely long downtime: The fire in September 2020 broke out in one of the turbines. And that can’t be replaced anywhere near as quickly as a pipeline. It would have to be custom-built, Munton says. “And that just takes time.”

The restart in Hammerfest could also have an impact on the German energy supply. This was pointed out by Norwegian Energy Minister Terje Aasland in an interview with WirtschaftsWoche. In the first four months of this year, Norway has already exported almost twice as much natural gas to Germany as it did in 2021, and Hammerfest LNG could decisively increase the supply volumes once again. State-owned Gassco is investigating how it can increase gas exports from the Barents Sea, Aasland said. “The alternatives are increased LNG production in Hammerfest, a new pipeline or investing in ammonia production as a way to export natural gas from the Barents Sea to the world market.” However, he said it is still too early to make a decision.

For LNG imports to Germany, however, another question is much more crucial: namely, how and where they can be accepted in the first place. For this to work, the planned LNG terminals in Wilhelmshaven, Brunsbüttel and possibly Lubmin must first be built. “When Germany has its LNG terminals ready, additional liquefied natural gas can reach Germany via them from our plant near Hammerfest,” Anders Opedal, CEO of the state-owned Equinor Group, told the Handelsblatt newspaper.

However, Hammerfest is far from being able to replace the lack of exports from an LNG hotspot like Quintana. The capacity of the Texas terminal is almost four times higher than Hammerfest. It is unclear how severe the safety deficiencies complained of are now. The material problems themselves are “nowhere near as critical as in Norway because the parts are not as difficult to replace,” Munton says. But a visit to the hardware store is not enough.

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