Amid Texas Freeze, Oil Producers Still Closed; governor bans natural gas exports

HOUSTON (Reuters) – Texas oil producers and refineries were closed for a fifth day on Wednesday after several days of scorching cold, and the governor ordered a ban on natural gas exports from the state to try to speed up the restoration of the state. Energy.

Residents line up in their vehicles to enter a warming center and shelter after record winter temperatures, as local media reports that most residents are without power, in Galveston, Texas, USA, 17 February 2021. REUTERS / Adrees Latif

The cold snap, which has killed at least 21 people and left more than 4 million people without power in Texas, is not expected to stop until this weekend.

Gov. Greg Abbott directed Texas natural gas suppliers not to ship out of state until Sunday and asked the state energy regulator to enforce its export ban.

“That will also increase the energy that will be produced and delivered to homes here in Texas,” Abbott said at a news conference Wednesday.

The ban prompted a response from officials in Mexico, which relies on pipeline imports from Texas. More than 40% of the United States’ natural gas exports come from Texas.

Texas produces more natural gas and oil than any other state in the US and its operators, unlike those in North Dakota or Alaska, are not used to dealing with cold temperatures.

The state accounts for about a quarter of US natural gas production, about 27.8 billion cubic feet per day, but it consumes only part of that and ships the rest to other states or via pipeline to Mexico, according to the US Energy Information Administration.

The Texas energy sector has been hit hard by the cold, with about 4 million barrels per day (bpd) of closed daily refining capacity and at least 1 million bpd of oil production as well.

Natural gas production also plummeted. Right now, a week ago, Texas was producing about 7.9 billion cubic feet per day, but it was down to 1.9 billion on Wednesday, according to preliminary data from Refinitiv Eikon. Natural gas accounts for half of Texas power generation.

Christi Craddick, president of the Texas Railroad Commission, the state oil and gas regulator, said Wednesday night that the agency had received the governor’s request and was reviewing it.

The request sparked a political soccer game, according to a person familiar with the matter, between groups that have no authority to interfere with interstate commerce.

U.S. pipeline exports to Mexico fell to 3.8 billion cubic feet (bcf) a day on Wednesday, down from a past 30-day average of 5.7 bcf, according to Refinitiv data, of which roughly three-quarters come from Texas.

Mexican Economy Minister Tatiana Clouthier said on Wednesday that she had contacted the representative of the United States government in Mexico, seeking to guarantee the supply of natural gas for Mexico during the cold snap.

“By not acting together, the results could be more complicated,” he said on Twitter.

A cargo of liquefied natural gas (LNG) loaded at Freeport LNG in Texas on Wednesday was scheduled to sail to Mexico, according to data from Refinitiv Eikon. The tanker remained off the coast of Texas. A spokeswoman for Freeport LNG declined to comment.

Operations at the Corpus Christi plant of Cheniere Energy, the state’s largest LNG producer, were halted this week due to weather disruptions. A spokesperson declined to comment on the governor’s order.

Overall, daily natural gas production in the United States is down about 19% since the end of last week to 71.9 bcf a day on Wednesday, according to preliminary data from Eikon.

With more snow expected in key oil and gas production areas such as the Permian and northern Louisiana, production is expected to remain offline through Friday, said Anna Lenzmeier, energy analyst at BTU Analytics.

“The second half of this week is shaping up to be as tumultuous as the long weekend, and natural gas prices could continue to exceed triple digits before the weekend,” he said.

Several Texas ports, including Houston, Galveston and key LNG export sites at Freeport and Sabine Pass, were closed due to weather, according to US Coast Guard Petty Officer Jonathan Lally.

One bcf of gas can supply about 5 million American homes per day.

Producers in the Permian Basin, the largest oil field in the United States, said that power outages were the main problem and that until power was restored, restarting any frozen equipment would be a challenge.

About 1 million bpd of crude production has stopped, according to analysts at Wood Mackenzie, and it could be weeks before it is fully restored.

Supply disruptions fueled further increases in oil prices, which ended the session with a rise of more than 1.5%. US natural gas rose to a more than three-month high after rising more than 10% on Tuesday.

The freeze has also triggered Canadian natural gas exports to the United States to levels last seen in 2010, said Ian Archer, an analyst at IHS Markit.

Net Canadian exports have risen above 7.5 bcf a day in recent days and Archer estimated that they were close to 8 bcf a day on Wednesday.

“We are seeing absolutely huge withdrawals and exports to the United States,” Archer said.

Fall in natural gas production in the United States

Reporting by Devika Krishna Kumar in New York and Gary McWilliams in Houston; Additional reporting from Stephanie Kelly, Laila Kearney and Scott DiSavino in New York, Nia Williams in Calgary, and Arpan Varghese and Diptendu Lahiri in Bengaluru; Editing by Matthew Lewis, Leslie Adler and Kim Coghill


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