Freeport LNG feedgas falls below 0.5 Bcf/d for 3 consecutive gas days before Mar 31, 2027
A multi-day drop in Freeport intake can strand upstream gas, interrupt contracted LNG, and force counterparties to replace volumes while prices move against them. A fixed payout on the feedgas series pays while that utilization stays depressed.
- Reference facility
- Freeport LNG
- Trigger
- < 0.5 Bcf/d for 3 consecutive gas days
- Observation
- Oct 1, 2026 → Mar 31, 2027
Term sheet
Terms for discussion. Not an offer, solicitation, or recommendation to enter into any transaction. Size, availability, and pricing are agreed bilaterally with eligible contract participants.
- Structure
- Binary event-linked contract.
- Trigger event
- Freeport LNG feedgas is reported below 0.5 billion cubic feet per day for three consecutive gas days during the observation period.
- Reference facility
- Freeport LNG’s liquefaction facility at Quintana Island, Texas.
- Observation period
- The later of execution date or October 1, 2026, through March 31, 2027.
- Reference source
- Daily Freeport LNG feedgas data from the data provider and series specified at execution.
- Determination
- The trigger is satisfied when the governing daily series reports Freeport LNG feedgas below 0.5 Bcf/d for each of three consecutive gas days. The documentation fixes the governing publication and treatment of missing or corrected observations.
- Payout
- Fixed amount agreed at execution, payable upon the first qualifying three-day period. If no qualifying period occurs within the observation period, the contract expires at zero.
- Premium
- Premium fixed and paid at execution.
- Settlement
- Cash settlement within five business days of determination.
- Size
- Negotiated bilaterally.
- Customization
- Feedgas threshold, required duration, observation period, payout amount, and reference facility can be tailored to the exposure. The same risk can also be structured as a daily ladder or cumulative shortfall rather than a binary trigger.
- Documentation
- Bilateral contract specifying the reference facility, governing data series, threshold, duration, observation period, determination process, correction treatment, and settlement timeline in full.
The economic exposure
Freeport is both an LNG export facility and a large source of demand for Gulf Coast natural gas. A sharp drop in terminal intake leaves producers and marketers without a demand sink while committed production keeps arriving on the Gulf Coast. Basis can blow out, pipeline capacity loses value, and producers look for another buyer. LNG offtakers lose expected cargoes and pay for replacement, shipping changes, or downstream delivery shortfalls.
Those exposures correlate with natural-gas and LNG prices, and they are a different risk. Henry Hub futures hedge the price of U.S. gas. TTF and JKM derivatives hedge international benchmark prices. None of them settle on whether Freeport is consuming feedgas. An outage can leave you with a physical volume problem and a price hedge that only partly offsets it. A feedgas trigger uses an observable series for the operational event. Feedgas is a proxy for terminal utilization, and the same reduction hits an upstream producer, an LNG offtaker, and a pipeline capacity holder differently. You size the threshold, duration, and payout against your book at execution.
Why this structure
A one-day dip in feedgas can be maintenance or normal operating variability. Requiring feedgas to stay below a severe threshold for three consecutive gas days keys the contract to sustained disruption. You pick the threshold and duration around the point at which your book starts to incur replacement costs, basis exposure, or delivery shortfalls. The trader does not need to forecast how Henry Hub, Gulf Coast basis, TTF, JKM, or LNG freight will respond; the contract determines whether the operational event occurred.
What it does not do. Feedgas is a utilization proxy, distinct from LNG production and from the buyer’s realized loss. Freeport can run at reduced capacity, stay above the trigger, and still produce a real economic loss. Feedgas can also fall below the threshold while a particular counterparty is insulated, or even benefits from the resulting market move. Three qualifying days settle the same as a disruption lasting several weeks. A daily payout or cumulative feedgas-shortfall structure fits exposure driven by duration or lost throughput.
Other exposure areas
Discrete structures similar exposures the same way.
Contact Discrete for institutional inquiries.