Texas Energy Freeze Stretches Into Sixth Day

By Jennifer Hiller and Arpan Varghese

HOUSTON, Feb 18 (Reuters) – Texas’s freeze entered a sixth day on Thursday, as the biggest energy-producing state in the United States grappled with massive refining outages and oil and gas shutins that rippled beyond its borders into neighboring Mexico.

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. The deep freeze has shut in about one-fifth of the nation’s refining capacity and closed oil and natural gas production across the state.

The outages in Texas also affected power generation in Mexico, with exports of natural gas via pipeline dropping off by about 75% over the last week, according to preliminary Refinitiv Eikon data.

Texas Governor Greg Abbott directed the state’s natural gas providers not to ship outside Texas, but state regulators said it is unlikely that they have the right to interfere with existing contracts to buyers.

“I’m not sure we have authority to mess with that, nor do I really want to,” said Jim Wright, one of three members of the Texas Railroad Commission, the state’s oil and gas regulator.

The ban prompted a response from officials in Mexico, as U.S. gas pipeline exports to Mexico fell to 4.3 billion cubic feet per day on Wednesday, down from an average over the past 30 days of 5.7 billion, according to data from Refinitiv.

The Mexican government called the top U.S. representative in Mexico on Wednesday to press for natural gas supplies as power cuts there have hit millions of residents. The White House said Thursday it was in discussions with Mexican authorities and Texas officials over Abbott’s directive.

MORE BLACKOUTS IN STORE

Texas exports gas via pipeline to Mexico and via ships carrying liquefied natural gas (LNG) from terminals in Freeport and Corpus Christi. It also supplies numerous regions of the country, including the U.S. Midwest and Northeast.

The state’s electrical grid operator, Electric Reliability Council of Texas (ERCOT), was trying to restore power as thermal generators – those powered by natural gas, coal and other fuels – lost the capability to provide power as valves and pipes froze.

ERCOT said that while there is no additional load shedding at this time, a little over 40,000 megawatts of generation remained offline, including 23,500 MW of thermal and the rest wind and solar.

“Energy emergency conditions remain as the grid operator and transmission owners work to restore the remaining customers that are without power,” it said.

Blackouts could continue through at least Friday, said Rebecca Miller, senior analyst at Wood Mackenzie.

“Uncertainty centers around when loads will be reconnected to provide relief to millions of Texans and depress energy prices to more modest levels,” she said.

About 4 million barrels of daily refining capacity has been shuttered and at least 1 million barrels per day of oil production is also out.

While the storm is moving out of Texas, freezing temperatures remain and refining operations in particular might take days, if not weeks, to resume.

“The oil and gas industry is finally getting some power into these fields. The Delaware Basin is getting back online and gas is starting to move out of it,” Christi Craddick, Texas railroad commissioner, said on Wednesday night during an emergency meeting.

Industrial facilities and manufacturing plants are unable to operate without power. Auto companies, including Ford Motor Co., have shut some plants because they do not have natural gas power.

U.S. West Texas Intermediate (WTI) crude futures were near their highest since Jan. 8, 2020. Natural gas futures hovered near a three-month peak. Next-day prices at Waha hub in the Permian basin in West Texas <NG-WAH-WTX-SNL> eased from all-time peak of $209.75 per mmBtu to $77 per mmBtu.

BIG OPERATIONS IN TEXAS

Texas is the nation’s biggest fossil fuel energy producer, but its operators, unlike those in North Dakota or Alaska, are not used to frigid temperatures.

Texas produces almost a quarter of U.S. natural gas production and consumes about 15%. Most of the gas it ships domestically goes to neighboring Oklahoma and Louisiana.

LNG plants in Texas – Cheniere Energy Inc’s Corpus Christi and Freeport LNG’s Freeport – were basically taking no gas from the Texas grid Thursday morning, according to preliminary data from Refinitiv.

The Houston Ship Channel, a key export waterway, had reopened on Thursday, but there was hardly any vessel traffic. With temperatures expected to drop overnight, the port may need to be shut again, said J.J. Plunkett, chief operating officer for Houston Pilots.

“The hydrocarbon water lines are frozen and the cargo cannot be loaded,” he said. “This time of the year, we generally have 60 ships in and out the channel; last night we had only 9.”

Next-day power for Thursday at the ERCOT North hub <EL-PK-ERTN-SNL>, which includes the cities of Dallas and Fort Worth, were mired near a record high of $8,800 per MWh hit the previous day. Prices were below $50 per MWh before the cold blast.

(Reporting by Jennifer Hiller and Gary McWilliams in Houston, Arpan Varghese in Bengaluru; additional reporting by Marianna Parraga and Diego Ore in Mexico City and Scott DiSavino in New York, Swati Verma and Diptenu Lahiri in Bengaluru; editing by Richard Pullin, Aurora Ellis and Jonathan Oatis)

(c) Copyright Thomson Reuters 2021.