By Devika Krishna Kumar
(Reuters) - The Texas energy sector was in the dark for a fifth day on Wednesday, as oil producers remained without power, several ports closed, and at least a fifth of U.S. refining output was offline due to an arctic blast hitting most of the United States.
The cold snap, which has killed 21 people and knocked out power to millions of people in Texas is not expected to let up until this weekend.
Roughly 1 million barrels per day (bpd) of crude production has also been shut, according to Wood Mackenzie analysts, and it could be weeks before it is fully restored, industry analysts said.
Daily U.S. natural gas production has fallen by roughly 17% from the end of last week to 72.1 billion cubic feet per day on Wednesday, according to preliminary data from Refinitiv Eikon.
The state produces more oil and natural gas than any other U.S. state, and its operators, unlike those in North Dakota or Alaska, are not used to dealing with frigid temperatures.
Texas derives about half of its power from natural gas, with the rest coming from coal, nuclear facilities and renewables. Natural gas is crucial for refiners and power generators, but the surging demand due to the cold exceeded available production and storage capabilities in Texas.
Producers in the Permian basin, the largest U.S. oilfield, said electrical outages were currently the main issue, and that until power was restored, restarting any frozen equipment would be challenging.
"Midland (Texas) doesn't have power, so the producers that can produce can't get their barrels to market," one executive at a Permian producer said. "It's absolutely nuts."
One oilfield services worker in the Permian said "we weren't prepared."
The oilfield equipment used in Texas versus colder shale basins such as North Dakota or Colorado is generally not designed to withstand freezing temperatures and that has added to the headaches, he said.
Pipeline and infrastructure companies were also grappling with the freezing temperatures. More than 2 million bpd of pipeline capacity to the Gulf was shut on Monday, though some lines were starting to come back online, WoodMac said.
"The entire energy infrastructure industry in Texas has been affected by cold weather," spokesman Bruce Heine said in a statement, adding that the company currently has enough fuel in storage to meet supply contracts, Heine added.
Oryx Midstream, a crude pipeline and logistics company based in the Permian basin, said on Wednesday it issued a force majeure notice to customers as severe cold weather in Texas caused power outages and disrupted its ability to receive and pump barrels.
"The unprecedented cold weather has impacted Texas and New Mexico and the oil and gas industry in a number of ways, with the biggest impact being the rolling blackouts," said Brett Wiggs, chief executive of Oryx said.
REFINERIES, PORTS, LNG TERMINALS, NUCLEAR PLANTS
Nearly 4 million bpd of refining capacity has been knocked out, Reuters calculations found. That includes the nation's largest, Motiva's 600,000 bpd Port Arthur facility. Late Tuesday, Chevron Corp (NYSE:CVX) shut its Pasadena, Texas, refinery due to the cold. [REF/OUT]
Several Texas ports, including Houston, Galveston, and key liquefied natural gas (LNG) exporting sites at Freeport and Sabine Pass were closed due to weather, according to USCG Petty Officer Jonathan Lally.
The supply disruptions drove further gains in oil prices on Wednesday, although U.S. natural gas prices eased after rising more than 10% on Tuesday. [O/R] [NGA/]
At least one nuclear plant in the state was offline as of Wednesday morning, according to the U.S. Nuclear Regulatory Commission's web site.
The freeze has also sent Canadian natural gas exports to the U.S. soaring to levels last seen in 2010, said IHS Markit analyst Ian Archer. Net Canadian exports have risen to above 7.5 billion cubic feet a day for the last couple of days and estimated they were close to 8 bcfd on Wednesday.
"We are seeing just absolutely huge withdrawals and exports to the U.S.," Archer said.
One billion cubic feet of gas can supply about five million U.S. homes per day.
Graphic: U.S. natural gas production slumps - https://fingfx.thomsonreuters.com/gfx/ce/gjnvwzalmpw/Pasted%20image%201613575433245.png