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    No Relief Yet for Vortex-Ravaged Southern US

Summary

LNG feed gas supplies down, commodity prices soaring

by: Dale Lunan

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No Relief Yet for Vortex-Ravaged Southern US

Winter Storm Uri continued to ravage the southern US, especially Texas, where more than 3.3mn people remained without power late morning February 17.

Overnight, the Electric Reliability Council of Texas (Ercot) restored about 3,500 MW of load, enough for 700,000 households, but some of that was lost when a power event in the Midwest removed 600 MW of import capacity, forcing Ercot to order utilities to shed 14,000 MW of load – impacting 2.8mn households.

“We know millions of people are suffering,” Ercot CEO Bill Magness said. “We have no other priority than getting them electricity. No other priority.”

As of Wednesday morning, Ercot said 46,000 MW of generation had been forced off its grid, including 28,000 MW of thermal (coal, natural gas and nuclear) and 18,000 MW of wind and solar capacity.

 Still in the dark

“Although we’ve reconnected more consumers back to the grid, the aggregate energy consumption of customers is actually lower this morning compared to yesterday because it’s less cold,” Dan Woodfin, Ercot’s senior director, system operations, said February 17. “However, we are anticipating another cold front this evening which could increase the demand.”

Since the winter storm began on February 15, about 185 generating units have tripped offline for one reason or another, Ercot said. Some factors include frozen wind turbines, limited gas supplies, low gas pressure and frozen instrumentation.

The weather event has led to a sharp spike in energy costs: cash prices for natural gas across trading hubs in the Midcontinent region reached or exceeded $1,000/mn Btu, according to trade media reports, while next-day power prices in Houston approached $1,500/MWh on February 16.

Texas governor Greg Abbott declared a state of emergency on February 12, ahead of Uri’s arrival, and on February 15 he ordered Freeport LNG to turn down operations to reduce strain on the Texas power grid. Train 1 was already offline; now, Trains 2 and 3 have been taken down, according to Houston-based RBN Energy.

At the same time, other Gulf Coast LNG operators have been impacted, RBN Energy gas analyst Sheetal Nasta wrote in a February 16 blog. Cheniere Energy’s Corpus Christi liquefaction terminal has cut feed gas intake to 400mn ft3/day, with expectations of further reductions, while a feed gas pipeline force majeure and marine traffic disruptions have cut feed gas to its Sabine Pass complex to 1.3bn ft3/day. 

And on Monday, Cameron LNG lost power due to an issue with the transmission grid, but by Wednesday, power had been restored.

All-in, Nasta told NGW on February 17, US LNG feed gas deliveries were down to just under 2bn ft3/day as of February 16, compared to an average of nearly 10bn ft3/day over the past 30 days. 

Cold realities

Those are just the latest measures of the impact Uri is having on natural gas and electricity markets in the US, although Texas is taking the brunt, Nasta told NGW in an email.

“Not only has record electric generation and heating demand been competing for gas supply, particularly in the Central US, but supply has taken a big hit, as freezing temperatures and widespread power outages have led to extensive freeze-offs at the wellhead as well as other types of upstream and pipeline outages that have crippled producers’ ability to get volumes to market,” she said.

US natural gas production averaged about 71.4bn ft3/day on February 16 compared to more than 90bn ft³/day on February 5; early estimates suggested production would fall below 70bn ft3/day on February 17, Nasta said, the first time that has happened since 2017.

“Based on past freeze-off events and the unprecedented magnitude of this particular event, it could be weeks before production volumes are restored even after temperatures climb, which means there’s likely to be continued pressure on storage withdrawals,” she told NGW.

In the week ended February 5, the US Energy Information Administration (EIA) reported 171bn ft3 of natural gas were withdrawn from storage. Current RBN models show withdrawals for the week ended February 12 could reach 262bn ft3 (the EIA will report those numbers on February 18), while it’s not inconceivable that withdrawals this week could be even higher.

“Based on temperatures alone, the draw for the current storage week could top 300bn ft3,” Nasta said. “However, with all the pipeline and power outages, it’s possible withdrawals will end up being suppressed. Storage was already at maximum withdrawal rates heading into Uri.”

Gas pipelines 'hit hard'

Natural gas pipelines are equally hard hit, she said. Most pipelines operate with electric or hydraulic actuators. When those freeze or when the power goes out, pipeline crews are forced to operate critical units manually – if they can even get to them through snow-choked roads.

System operators in the north plan for such extreme weather events by equipping critical units with heaters. But pipelines in more moderate climes like Texas aren’t equipped the same, and impacts from Uri have been widespread, Nasta said.

“More than 30 gas pipelines have declared force majeure or have instituted operational flow orders, which restrict the amount of fuel shippers can put on their systems,” she said, quoting a comment from East Daley Capital circulated on social media.