Texas governor orders freeze on natural gas exports amid cold snap
Oil producers and refiners are still shut and more than 4-million people have no power
Houston — Texas oil producers and refiners remained shut for a fifth day on Wednesday 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 the weekend.
Governor Greg Abbott directed Texas natural gas providers not to ship outside the state until Sunday 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 on Wednesday.
The ban prompted a response from officials in Mexico, which relies on imports via pipeline from Texas. More than 40% of US natural gas exports come from Texas.
Texas produces more natural gas and oil than any other US 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 US natural gas production, about 27.8-billion cubic feet a day, but it consumes only part of that, shipping the rest to other states or via pipeline to Mexico, according to the US Energy Information Administration.
The state’s energy sector has been hit hard by the cold, with about 4-million barrels per day (bpd) of daily refining capacity shuttered and at least 1-million bpd of oil production out as well.
Natural gas output also slumped. At this time a week ago, Texas was producing about 7.9-billion cubic feet a day, but that fell to 6.2-billion on Wednesday, according to preliminary data from Refinitiv Eikon. Natural gas accounts for half of Texas’s power generation.
Christi Craddick, chair of the Texas Railroad Commission, the state’s oil and gas regulator, said late on Wednesday 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.
US gas pipeline exports to Mexico dropped to 3.8-billion cubic feet a day on Wednesday, down from an average over the past 30 days of 5.7-billion cubic feet, according to data from Refinitiv, about three-quarters of which comes from Texas.
Mexico’s economy minister, Tatiana Clouthier, said on Wednesday she had contacted the US 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 liquefied natural gas (LNG) loaded at Freeport LNG in Texas on Wednesday had been slated to sail to Mexico, according to Refinitiv Eikon data. The tanker remained off the coast of Texas. A Freeport LNG spokesperson 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 spokesperson declined to comment on the governor’s order.
Overall, daily US natural gas production is down by about 19% from the end of last week to 6.2-billion cubic feet a day on Wednesday, according to preliminary Eikon data.
With more snow expected in key oil-and-gas production areas such as the Permian Basin and northern Louisiana, production is expected to stay offline through Friday, 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 US Coast Guard petty officer Jonathan Lally.
Producers in the Permian Basin, the largest US oilfield, said electrical outages were the main issue, and that until power was restored, restarting any frozen equipment would be challenging.
About 1-million bpd 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%. US natural gas climbed to a more than three-month high after rising more than 10% on Tuesday.
The freeze has also sent Canadian natural gas exports to the US soaring to levels last seen in 2010, said IHS Markit analyst Ian Archer.
Net Canadian exports have jumped above 7.5-billion cubic feet a day for the last couple of days and Archer estimated they were close to 8-billion cubic feet a day on Wednesday.
“We are seeing just absolutely huge withdrawals and exports to the US,” Archer said.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.