Amid the Texas frost, oil producers are still closing; the governor bans natural gas exports

HOUSTON (Reuters) – Texas oil producers and refineries remained closed on Wednesday for a fifth day after several days of cold, and the governor ordered a ban on natural gas exports from the state to try to restore power.

The cold story, which killed at least 21 people and destroyed the power of more than 4 million people in Texas, is not expected to give up until this weekend.

Gov. Greg Abbott ordered Texas natural gas suppliers not to ship out of state until Sunday and called on the state energy regulator to enforce its export ban.

“It will also increase the power that will be produced and sent to homes here in Texas,” Abbott said at a news conference Wednesday.

The ban prompted a response from Mexican officials, which is based on imports through pipelines from Texas. More than 40% of US natural gas exports come from Texas.

Texas produces more natural gas and oil than any other American state, and its operators, unlike those in North Dakota or Alaska, are not used to dealing with cold temperatures.

The state accounts for about a quarter of US natural gas production, about 27.8 billion cubic meters per day, but consumes only part of it, transporting the rest to other states or through pipelines to Mexico, according to the US Energy Information Administration.

Texas’ energy sector has been severely affected by the cold, with about 4 million barrels per day (bpd) of closed daily refining capacity and at least 1 million bpd of oil production.

Natural gas production has also declined. At the moment, a week ago, Texas was producing about 7.9 billion cubic meters a day, but it dropped to 1.9 billion on Wednesday, according to preliminary data from Refinitiv Eikon. Natural gas accounts for half of Texas’ energy production.

Christi Craddick, chairman of the Texas Railroad Commission, the state’s oil and gas regulator, said late Wednesday that the agency has received the governor’s request and is reviewing it.

The request established a political football game, according to a person familiar with the problem, between groups that do not have the authority to interfere with interstate trade.

U.S. gas pipeline exports to Mexico fell 3.8 billion cubic meters (bcf) a day on Wednesday, down from an average of 5.7 bcf in the last 30 days, according to Refinitiv data, about three-quarters of who come from Texas.

Mexico’s economic minister, Tatiana Clouthier, said on Wednesday that she had contacted the US government’s representative in Mexico, trying to guarantee Mexico’s natural gas supply during the cold.

“If we don’t act together, the results could be more complicated,” she said on Twitter.

A liquefied natural gas (LNG) cargo loaded Wednesday at Freeport LNG in Texas should have sailed to Mexico, according to Refinitiv Eikon data. The tanker remained off the coast of Texas. A Freeport LNG spokeswoman declined to comment.

Operations at the Corpus Christi plant at Cheniere Energy, the state’s largest LNG producer, were halted by weather outages this week. A spokesman declined to comment on the governor’s order.

Overall, daily US gas production fell about 19% from the end of last week to 71.9 bcf per day on Wednesday, according to preliminary Eikon data.

With more snow in key oil and gas production areas, such as the Permian and northern Louisiana, production will remain offline until Friday, said Anna Lenzmeier, an energy analyst at BTU Analytics.

“The second half of this week is shaping up to be as tumultuous as the long weekend, and gas prices could continue to exceed threefold before the weekend,” she said.

Several Texas ports, including Houston, Galveston and the main LNG export sites at Freeport and Sabine Pass have been closed due to the weather, according to US Coast Guard NCO Jonathan Lally.

A gas boiler can supply about 5 million American homes a day.

Manufacturers in the Permian Basin, the largest oil field in the United States, have said that power outages are the main problem and that until power is restored, restarting frozen equipment would be a challenge.

According to Wood Mackenzie analysts, crude production was cut by about 1 million barrels a day, and it could be weeks before it is fully restored.

Supply disruptions led to further increases in oil prices, which ended the session by more than 1.5%. US natural gas rose to a three-month high after rising by more than 10% on Tuesday.

The freeze also sent Canadian gas exports to the United States rising to levels last seen in 2010, said IHS analyst Markit Ian Archer.

Canadian net exports have risen more than 7.5 mcf a day in the past few days, and Archer estimated they approached 8 mcf a day on Wednesday.

“We see absolutely huge withdrawals and exports to the United States,” Archer said.

The graph of US natural gas production is declining