Before dawn on June 8 last year, workers at the sprawling Freeport liquefied natural gas export plant on the Texas coast heard “strange” noises emanating from some of its pipes. They notified their bosses but a follow-up inspection found nothing amiss. Then came a fireball.
The explosion at Freeport LNG knocked out a centrepiece of the US gas export industry just as the world was looking for more fuel as the war in Ukraine squeezed supplies from Russia. The terminal supplied about 10 per cent of European LNG imports at the time of the explosion.
Eight months later there are now signs that the plant is stirring back to life, taking in gas to condense and load on oceangoing tankers. Yet doubts persist about the operations of the nation’s second-largest such facility.
“There are a lot of things that Freeport LNG weren’t doing that similar facilities do,” Bryan Lethcoe, director of the south-west region at the Pipeline and Hazardous Materials Safety Administration, a federal regulator, said at a public hearing held this month at a local high school. “Up to now they’ve had some systemic issues. Part of what we’re working on with them . . . is to try to stamp out some of those systemic issues to make them a better operator.”
Consultants retained by Freeport LNG revealed slipshod controls before the accident. They put primary blame on a pressure safety valve improperly left closed for several weeks after routine testing. The oversight led to a pressure build-up and excessive heat that ultimately burst the line and ignited, investigators concluded in a report released in highly redacted form by the PHMSA.
The problem went unnoticed because the company lacked formal procedures and training to ensure the valves were returned to normal service after testing, the report concluded. The plant’s control room systems did not “alarm audibly or visibly” when temperatures reached dangerous levels.
In another missed opportunity, a staff member told bosses that a section of pipe had “noticeably moved” two days before the blast, according to the investigation. But “none of these more experienced personnel went out to the tank farm to evaluate the issue for themselves”, consultants wrote.
Elsewhere some plant staff reported “alarm fatigue”, with “alarms constantly indicating on equipment that had been placed out of service years ago”, the consultants reported.
Investigators also cited “clear patterns of concern” in the company’s staffing policy, saying employees were regularly called on to work 12-plus hour shifts and on scheduled days off, concluding “operator fatigue” was likely a contributing factor to the accident.
“The problems were serious,” said Clark Williams-Derry, an LNG specialist at the Institute for Energy Economics and Financial Analysis. “It was overworked operators, it was poor training and maintenance and a whole slew of problems that were only uncovered when the thing blew up.”
US President Joe Biden has called on exporters such as Freeport LNG to help European countries offset the loss of Russian pipeline natural gas supplies as part of his strategy to defend against Moscow’s aggression on the continent. When running at full throttle, the plant takes in about 2 per cent of total US natural gas production and accounts for roughly 20 per cent of LNG export capacity as the second-largest plant in the country.
But some of its neighbours on the Texas coast worry that not enough has been done by the company and federal and local regulators to safeguard the facility.
“We don’t feel like they’re ready to reopen at all. You know, there’s still so many unanswered questions,” said Melanie Oldham, a resident of the city of Freeport.
Oldham said the company has not done any outreach to local residents since the blast, which did not result in any deaths but shocked the small nearby community. No company officials attended the public hearing where regulators showed photos of gnarled pipes and support beams and a piece of kit hurled hundreds of feet from the blast site.
“They didn’t even show up for the meeting where we could ask them some questions and make comments directly. How can we trust this company when they’re not open and transparent and they don’t even bother to talk with the community?” she said.
Freeport LNG is majority owned by Michael Smith, a billionaire who first made a fortune selling oil and gas producer Basin Exploration for $410mn in 2001. Japan-based Osaka Gas owns about 10 per cent of the company, while Jera, a joint venture of Japan’s Chubu Electric Power and Tokyo Electric Power, has 26 per cent.
Smith, a Bronx, New York, native, moved into seaborne gas markets when he snapped up land on Quintana Island in Texas in 2002 to eventually build Freeport LNG. The facility was first constructed to handle LNG imports in 2008, a wrong-way bet just as the shale revolution received US output. But by 2019 the plant had been revamped and started exporting the supercooled fuel.
Freeport LNG initially said it would only take a few weeks to restart the plant after the June fire. It has offered only sporadic updates in the months since, and its latest in December said it planned to start up by the end of January, leaving locals, traders and others guessing about its status.
In recent regulatory filings, the group has said that it has “completed repairs” to the plant and “performed safety reviews, revised various procedures, implemented new safety systems and performed necessary training in order to safely begin” operations. Asked for an update on operations for this story, the company said it had no comment and referred the Financial Times to its regulatory filings.
Three tankers over the past week have loaded fuel that had been sitting in storage tanks since the blast, one of which is steaming towards Germany. Large amounts of gas are once again starting to flow into the plant, according to pipeline data from Refinitiv. And Freeport LNG is now asking regulators to allow it to resume processing and exporting gas again, a crucial step back to normalisation.
However, Ruth Liao, an LNG specialist at ICIS, said even if restarts soon, it could take until May to complete repairs and get back to full capacity.
“Michael was a pioneer in the industry, but Freeport has had some real growing pains,” said an executive at another US LNG firm.