As power returns, Texas energy firms slowly emerge from deep freeze
Texas energy companies on Friday began preparing to resume oil and gas production after days of frozen shutdowns as electric power and water service slowly resumed at darkened oilfields and refineries.
It will take several days for oilfield crews to de-ice valves, restart systems and begin oil and gas production. U.S. Gulf Coast refiners are assessing damage to facilities. They face up to three weeks to restore most production, analysts said, with low water pressure, gas and power losses hampering operations.
The restart of production as temperatures eased sent prices of oil and natural gas lower. The spot market price of natural gas at the main U.S. trading hub in Louisiana dropped to $8.56 per million British thermal units (mmBtu) for Friday delivery from a record high of $23.86 for Thursday.
U.S. crude oil futures settled down $1.28 per barrel at $59.24. Oil is still up 23% this year, boosted by the continuation of OPEC supply cuts and falling global inventories.
Grid operator Electric Reliability Council of Texas (ERCOT) said there is enough power generation in its system to return to normal operations as it ended energy emergency conditions.
Still, refiners along the U.S. Gulf Coast could take up to three weeks to restore most operations, said Andrew Lipow, president of refinery consultants Lipow Oil Associates. That could depress demand for oil.
Millions of people across Texas shivered in the dark this week after a severe winter storm laid siege to the state, with demand for natural gas spiking and supplies needed to power electric generators and heat homes shrinking.
U.S. President Joe Biden sought a major disaster declaration to speed up relief in Texas, and vowed to visit the state next week.
Finger-pointing continued on Friday as about 165,000 homes were without power and more than 1,000 public water systems remain affected. Texas Republican Governor Greg Abbott blamed the state’s grid operator and wind turbine shutdowns for the outages. Federal regulators should investigate if the governor’s policies “exacerbated the winter storm crisis,” Democratic U.S. Sen. Charles Schumer said.
Overall economic losses could reach $45 billion to $50 billion, estimated weather forecasting firm AccuWeather, nearly as much as U.S. damages suffered during the 2020 Atlantic hurricane season.
Nearly 13% of gasoline stations throughout Texas were without either fuel or power as of early Friday, estimated price tracking service GasBuddy. That was up from around 8.5% about a day ago.
The unusually cold weather curtailed up to 4 million barrels per day of crude oil production and 21 billion cubic feet (bcf) of natural gas, according to analysts. Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.
U.S. Gulf Coast refineries are potentially less prepared for extremely cold weather than for seasonal storms, creating risks of “more prolonged refining downtime,” analysts at Goldman Sachs said.
The freeze stymied natural gas production by turning water in the gas to ice. The resulting shortage led to calls for gas conservation measures from California to West Virginia.
Texas on Wednesday ordered gas producers to halt exports needed by state utilities through Sunday, prompting Mexican officials to call the U.S. envoy to press for natural supplies.
However, pipeline gas exports from the United States to Mexico rose to 5.1 bcf on Friday after dropping to a 13-month low of 3.8 bcf per day on Tuesday, Refinitiv Eikon data showed.
In the United States, the move did not appear to affect deliveries to other states. California’s power exchange and the MISO, an exchange that handles 15 U.S. states, both said they had not seen any impact. New Mexico suffered no losses, a public regulation commission official said.
More natural gas will soon be flowing. Chevron Corp and ConocoPhillips have begun restoring shale output, and Chevron will prioritize natural gas production. Texas oil and gas regulators and a DiamondBack Energy executive also reported that power was being restored to west Texas, where oil production was shut by record snowfall and power outages.
“The majority of our Permian and Eagle Ford volumes remain offline,” said Conoco spokeswoman April Andrews, referring to the two major Texas shale fields.
Conoco, the top U.S. independent oil producer, is ready to bring back full operations across its U.S. operations outside of Alaska once power and other infrastructure outages end, she said.