Texas’ oil and gas industry has faltered under the pressure of an arctic weather blast that disrupted a major pillar of the global energy market and propelled crude prices to all-time highs in addition to a year.
U.S. oil prices topped $ 61 a barrel early Wednesday, the highest level since last January, after about half of the oil supply was phased out in Texas, the heart of the U.S. energy industry. .
S&P Global Platts estimated that up to 3 million barrels per day of oil production has been affected. The Permian Basin, one of the world’s largest oil fields which accounts for more than a quarter of the total US oil supply, is operating at well below half of its normal capacity.
Frigid weather continues to grips Texas, where temperatures are expected to drop again Wednesday night as authorities struggle to restore power to the system days after the blackouts began.
The Electric Reliability Council of Texas, the operator of the grid, said 46 GW of power generation – more than half of the state’s total – went offline as of Wednesday afternoon, which turned little improved compared to Tuesday. Ercot officials said the power outages would likely continue for a few more days.
Many Texans were without power and the heat for days in the midst of the freezing wave and forced to seek refuge with friends and neighbors or in their cars. Some have taken refuge in one of the state’s “warming centers” – large facilities like convention centers or mega-churches that still have power and are open to the public. Around 2.9 million homes remain without electricity.
Facing a political backlash, Greg Abbott, Governor of Texas, called for an investigation into Ercot’s handling of the power outages, describing the network operator as “anything but reliable”.
Texas is by far the country largest oil producer, and producers there have been crippled by a blackout, icy equipment, frozen pipelines and impassable roads that have delayed repairs, analysts and operators say.
While the oil industry operates reliably in cold climates from North Dakota to Siberia, most Texas producers have not invested in weatherproofing their equipment from sustained sub-freezing temperatures, said Parker Fawcett, analyst at S&P Global Platts.
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Gas production in the United States has also suffered a “historic” disruption: wells and pipelines froze and supply collapsed by 17 billion cubic feet per day, mostly due to problems in Texas, forcing about 20% of the country’s total gas supply offline, according to IHS Markit, a consulting firm.
The sharp drop natural gas The supply fueled a “negative feedback loop” that forced natural gas generators offline, resulting in further reduction in power supply and power generation, Fawcett said.
The loss of natural gas supply was a major contributor to power outages in Texas, according to Bill Magness, chief executive of Ercot. “Getting those resources back on the grid is the central solution to giving people back their power,” he said.
The main benchmark US gas price has jumped more than 15% since the winter storm started over the weekend to stand at around $ 3.25 per million U.K. thermal units on Wednesday afternoon .
Regional prices in Texas and Oklahoma, where supply has been severely disrupted, have seen much more extreme increases, which could be a boon to producers who have been able to keep operating.
The loss of supply threatens to spill over into global energy markets as the US Gulf Coast has emerged as an energy trade hub after the country’s shale boom fueled the surge in exports .
The limited supply of natural gas has been diverted from exports to critical electricity and heating needs in Texas. Freeport LNG, a natural gas facility on the Gulf Coast, said in a regulatory filing that it had received an order from the Abbot administration to restrict exports from its facility.
The supply of liquefied natural gas export plants in the United States, which are primarily located along the Gulf Coast, has fallen by almost half in recent days to 5.5 billion cubic feet per day, according to data from S&P Global Platts.
The United States is now the world’s third largest exporter of LNG, behind Australia and Qatar, so if the low supply persists the repercussions could be felt in gas markets around the world.
Officials in northern Mexico blamed the power outages on reduced natural gas supplies to pipelines that deliver gas to the country from the Permian Basin. At the same time, US customers have had to look to Canada for their imports, which have reached multi-year highs in recent days.
Relief could come as early as this weekend when the cold snap is expected to end and temperatures are expected to rise well above freezing. But supply outages could persist for a few more weeks “depending on the extent of the damage,” Fawcett said.
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