![Oil Drillers, Refiners Struggle with Texas Deep Freeze](/sites/default/files/styles/hart_news_article_image_640/public/image/2021/02/oil-drillers-refiners-struggle-texas-deep-freeze.jpg?itok=wi30ACHI)
Snow on vehicle in North Texas on Feb. 17. (Source: Marouanesitti / Shutterstock.com)
[Editor’s note: This story was updated at 4:08 a.m. CT Feb. 18. It was originally published at 6 p.m. CT Feb. 17.]
Texas oil producers and refiners remained shut for a fifth day on Feb. 17 after several days of blistering cold, and the governor ordered a ban on natural gas exports from the state to try to speed the restoration of power.
The cold snap, which has killed at least 21 people and knocked out power to more than 4 million people in Texas, is not expected to let up until this weekend.
Governor Greg Abbott directed Texas natural gas providers not to ship outside the state until Feb. 21 and asked the state energy regulator to enforce his export ban.
“That will also increase the power that’s going to be produced and sent to homes here in Texas,” Abbott said at a news conference Feb. 17.
The ban prompted a response from officials in Mexico, which relies on imports via pipeline from Texas. More than 40% of U.S. natural gas exports come from Texas.
Texas produces more natural gas and oil than any other U.S. state, and its operators, unlike those in North Dakota or Alaska, are not used to dealing with frigid temperatures.
The state accounts for roughly one-quarter of U.S. natural gas production, about 27.8 Bcf/d, but it consumes only part of that, shipping the rest to other states or via pipeline to Mexico, according to the U.S. Energy Information Administration.
Texas’ energy sector has been hit hard by the cold, with about 4 million bbl/d of daily refining capacity shuttered and at least 1 million bbl/d of oil production out as well.
Natural gas output also slumped. At this time a week ago, Texas was producing about 7.9 Bcf/d, but that fell to 1.9 Bcf/d on Feb. 17, according to preliminary data from Refinitiv Eikon. Natural gas accounts for half of Texas’ power generation.
Christi Craddick, chair of the Texas Railroad Commission, the state’s oil and gas regulator, said late Feb. 17 the agency had received the governor’s request and was reviewing it.
The request set up a game of political football, according to a person familiar with the matter, between groups that do not have the authority to interfere with interstate commerce.
U.S. gas pipeline exports to Mexico dropped to 3.8 Bcf/d on Feb. 17, down from an average over the past 30 days of 5.7 Bcf, according to data from Refinitiv, about three-quarters of which comes from Texas.
Mexico’s economy minister, Tatiana Clouthier, said Feb. 17 she had contacted the U.S. government’s representative in Mexico, seeking to guarantee supplies of natural gas for Mexico during the cold snap.
“By not acting together, the results could be more complicated,” she said on Twitter.
One cargo of LNG loaded at Freeport LNG in Texas on Feb. 17 had been slated to sail to Mexico, according to Refinitiv Eikon data. The tanker remained off the coast of Texas. A Freeport LNG spokeswoman declined to comment.
Operations at Cheniere Energy’s Corpus Christi plant, the state’s largest LNG producer, were halted by weather disruptions this week. A spokesman declined to comment on the governor’s order.
Overall, daily U.S. natural gas production is down by roughly 19% from the end of last week to 71.9 Bcf/d on Feb. 17, according to preliminary Eikon data.
With more snow expected in key oil-and-gas production areas like the Permian Basin and northern Louisiana, production is expected to stay offline through Feb. 19, said Anna Lenzmeier, energy analyst at BTU Analytics.
“The second half of this week is shaping up to be just as tumultuous as the long weekend, and natural gas prices could continue to top triple digits before the weekend,” she said.
Several Texas ports, including Houston, Galveston and key LNG exporting sites at Freeport and Sabine Pass were closed due to weather, according to U.S. Coast Guard Petty Officer Jonathan Lally.
One billion cubic feet of gas can supply about 5 million U.S. homes per day.
Producers in the Permian Basin, the largest U.S. oil field, said electrical outages were the main issue, and that until power was restored, restarting any frozen equipment would be challenging.
Roughly 1 million bbl/d of crude production has been halted, according to Wood Mackenzie analysts, and it could be weeks before it is fully restored.
The supply disruptions drove further increases in oil prices, which ended the session up more than 1.5%. U.S. natural gas climbed to a more than three-month high after rising more than 10% on Feb. 16.
The freeze has also sent Canadian natural gas exports to the United States soaring to levels last seen in 2010, said IHS Markit analyst Ian Archer.
Net Canadian exports have jumped above 7.5 Bcf/d for the last couple of days and Archer estimated they were close to 8 Bcf/d on Feb. 17.
“We are seeing just absolutely huge withdrawals and exports to the U.S.,” Archer said.
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