A major US LNG export terminal is expected to be shut for at least three weeks after a fire on Wednesday.

The incident at the Freeport LNG facility in Texas could cut vital supplies to Europe just as the continent looks to reduce imports from Russia.

Almost one-fifth of all overseas shipments of gas from the US went via the terminal last month.

US gas prices came under immediate pressure, while European futures soared after a six-day losing streak, according to Fearnley Securities.

For the LNG carrier market, the investment bank expects limited changes to the current strong time charter environment, as shipping capacity is secured.

But the closure could affect spot availability negatively, Fearnleys believes.

The 174,000-cbm Elisa Larus (built 2020) is currently at the terminal, according to vessel-tracking data compiled by Bloomberg.

The NYK Line vessel is on long-term charter to French energy company EDF for seven years with the option to extend the hire to cover 13 years.

During the first four months of 2022, the US exported 74% of its LNG to Europe, compared with an annual average of 34% last year, the Energy Information Administration (EIA) said on Tuesday.

In the previous two years, Asia had been the main destination, accounting for almost half of total US LNG exports.

The US is one of the world’s top LNG exporters, alongside Australia and Qatar.

US shipments have surged 18% from 2021’s level to an average of 11.5bn cubic feet per day following a capacity increase at Sabine Pass and Calcasieu Pass terminals, according to the EIA.

The Freeport plant, which has the capacity to ship about 15m tonnes per year, supplies gas to BP and TotalEnergies in Europe; Japan’s Jera and Osaka Gas; and SK E&S in South Korea.

There were no injuries or risks to the surrounding community from the fire, and an investigation has begun, the company said.

According to traders in Asia, LNG buyers will probably start hunting for replacement shipments from the spot market, but there is a dwindling amount of supplies available.

Elsewhere in the LNG carrier market, newbuilding prices hit new highs, with Maran Gas reportedly paying $233.7m each for two vessels at Daewoo Shipbuilding & Marine Engineering in South Korea.

“This is up from the $230.6m paid by TMS for two 2026 deliveries earlier this year,” Fearnleys said.

The fire comes as European LNG prices drop to levels not seen since before Russia's invasion of Ukraine on 24 February.

The day before, Dutch TTF prices hit $89.88, before spiking. In late May, prices fell below the immediate pre-invasion levels and have stayed in the vicinity since. On Thursday, prices were just over $85.

Evercore's Sean Morgan suggested the fire could knock out 16% of US LNG production if the damage was bad enough.

The fire could put upward pressure on European prices, he said.