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Deep Freeze Wreaks Havoc on Texas Oil Producers, Refiners
Freeze Has Taken 22% of Natural Gas Production Offline in Southern Central Corridor
A massive winter storm that swept the U.S. over the weekend crippled oil and gas producers and the industrial plants that refine the raw commodities into everything from gasoline to plastics.
Refinery flares lit up the Houston Ship Channel late Jan. 25 and into the next morning as a cold front hit the Texas coast and plunged temperatures below freezing. Plants operated by INEOS, Pemex, Shell and LyondellBasell all reported flaring gases, a common safety measure when severe weather causes operational disruptions.
Several plants, including Exxon Mobil’s Baytown mega refinery and Goodyear’s Bayport chemicals facility, curtailed operations Jan. 24 ahead of the freeze. The waterway connecting Houston’s refineries to crude imports and global export markets for their products closed Jan. 24 as the cold front approached and partially reopened Jan. 26.
Weather-related refinery issues weren’t just contained to East Houston’s industrial corridor. One of INEOS’s plants on the Texas coast was struck by lightning as the winter storm approached the facility, tripping the site off line, according to a regulatory filing. Farther north in Illinois, where refineries are designed to operate in colder temperatures, Phillips 66’s Wood River plant reported a leak in a piping system due to the winter storm, the company said in a community alert.
Freezing temperatures also caused issues for the companies pulling oil and gas out of the ground in West Texas. Chevron reported hatches freezing open while Anadarko said severe weather made repairs to a leaking water tank challenging. Filing after filing with the state’s environmental regulator tied operational issues to the severe winter weather disaster declaration issued by Texas Gov. Greg Abbott headed into the storm.
The freeze has taken about 22% of natural gas production offline in the southern central U.S. corridor, suggesting crude production is likely down 1 million barrels a day, according to TP ICAP Group Plc energy specialist Scott Shelton. Before the freeze, the U.S. was producing just shy of 14 million barrels of oil daily.
READ MORE: US Natural Gas Jumps Almost 20% as Arctic Blast Takes Hold
In North Dakota, between 80,000 and 110,000 barrels a day of production was offline Jan. 26 due to the cold, unchanged from Jan. 23, according to ND Pipeline Authority.
Oil futures traded lower by as much as 0.9% Jan. 26 with gasoline futures leading the petroleum complex down as much as 1.8% on lower industrial and travel demand. Meanwhile, fuels used in heating and electricity generation such as diesel and natural gas surged with heating oil futures up as much as 4.9%.
