Despite devastating much of Texas’ Gulf Coast, Hurricane Harvey has by all accounts spared Sabine Pass LNG, located on the Texas-Louisiana border. Owner and operator Cheniere has said operations were largely unaffected by the storm and corresponding deluge. Yet, no LNG cargoes have been loaded at the facility since Thursday 8/24 (just before the storm arrived) and pipeline flows have fluctuated wildly over the past several days.

Curiously, pipeline flows were actually strongest during the worst of the storm. Having averaged ~1.7 BCFD through the first three weeks of August, flows jumped to 2.2 BCFD from Friday 8/25 to Sunday 8/27. Over the next four days, intake subsequently crashed to 1.5 BCFD—the lowest levels since mid-June. Having gone a full week without loading a cargo, the 5 storage tanks at Sabine Pass are likely nearly full. EVA estimates storage volumes are approaching 14 BCF, with total capacity set at only 17 BCF.

As a result, pipeline flows are likely to remain low for the next several days, as the facility has little need for more gas. The situation could be short-lived, as several vessels are sitting nearby, apparently waiting for the all-clear to dock and start loading cargoes. Yet while export operations appear set to restart very soon, offtake will still be limited by the fact that Train 3 has been taken offline for maintenance—a surprising and unplanned announcement on Friday that was largely forgotten amidst concern over the impending storm. To date, Cheniere has not provided any additional details regarding the cause of the suspension, or an estimate as to how long the Train will be offline. Further, the status of Train 4 is also rather cloudy—Cheniere had earlier projected first LNG would come in mid-August, but has not yet confirmed the train has commenced liquefaction operations.

Combined, the situation could have a significant impact on Gulf Coast gas supply/demand dynamics. It’s possible that all four trains will very soon be running, in which case EVA would expect pipeline flows to approach 2.6 BCFD. However, if Trains 3-4 remain offline, flows would expected to be only 1.3 BCFD. In reality, EVA believes Train 4 will be producing LNG very soon and that Train 3 will be brought back online in 3-4 weeks. So far, Cheniere’s operations at Sabine Pass have progressed with little difficulty, but given the complexity of large liquefaction projects, multi-month unplanned outages are not uncommon. Thus, having largely avoided damage from Hurricane Harvey, the market will be watching closely to see whether engineering and technical challenges prove the more serious threat to Sabine Pass LNG.

 

Data: PointLogic, Bloomberg