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ANALYSIS: Winter blast cripples production, processing capacity, refineries across Texas

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ANALYSIS: Winter blast cripples production, processing capacity, refineries across Texas


Nearly 9 Bcf/d of gas processing offline

1.2 million b/d of ethane demand chills

  • Author
  • Brandon Evans    Kent Berthoud    Austin Rial    Andrew Neal
  • Editor
  • Gary Gentile
  • Commodity
  • Natural Gas Oil Petrochemicals

Denver — The record-low temperatures sprawled across the Central and Southern US over the past week not only lead to large-scale production freeze-offs at wellheads, but also exposed the threat bitter cold has on natural gas processing plants and oil refineries.

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Unprecedented cold weather in the central United States has resulted in widespread natural gas shortages in Texas, a region that rarely sees sub-zero temperatures and is heavily reliant on gas production. At least 38 gas plants in Texas have shut down or reduced rates due to the cold weather, equivalent to 8.9 Bcf/d of gas processing plant capacity, according to data by the Texas Commission on Environmental Quality and S&P Global Platts Analytics.

PODCAST: Severe winter storms deal a blow to much of US oil, gas production

Sub-zero temperatures typically are outside the safe operating range for heating and cooling equipment in gas plants. It often results in inefficient plant operations as well as a high risk of hydrate formation, a complex ice crystallization phenomenon that occurs in natural gas and water mixtures at high pressure and low temperature. The latter is a significant risk to safe operation and process integrity. Pipes can burst, and expensive equipment like compressors can catastrophically fail if plugged by hydrates. As a result, dry gas is not making it to the pipeline networks that supply the state's utility infrastructure.

Statewide interstate pipeline nominations have fallen 75% since Feb. 13, while nominations in the usually prolific Permian basin fell by nearly 94%, according to Platts Analytics.

The cold blast significantly affected gas production due to wellhead freeze-offs. Since Feb. 13, Texas onshore production has averaged 18 Bcf/d, down a full 6 Bcf/d from the week prior, according to Platts Analytics cell data.

The perfect storm of lost production and processing capacity during a time of historically high demand. Cash prices at the Waha hub in West Texas spiked to more than $200/MMBtu on Feb. 15. It had declined to $8.50/MMBtu as of Feb. 19, which was still well above a hub that has averaged less than $2/MMBtu over the past several years, even hitting negative pricing territory in 2020. Houston Ship Channel catapulted to $400/MMBtu on Feb. 15 and was still trading at $55/MMBtu as of Feb. 19.

The record-breaking winter storm also disrupted oil refineries and steam crackers along the Texas Gulf Coast.

About 1.2 million b/d of ethane demand remained offline due to freezing temperatures and lack of third-party natural gasoline supply as of Feb. 19.

The outages stretch from Shell's Norco refinery complex in Louisiana to Occidental's joint-venture cracker at Ingleside, Texas, near Corpus Christi. Many of the reported outages are at crackers co-located with refineries, including ExxonMobil's Baytown and Beaumont sites; Chevron Phillips Chemical's plants at Baytown, Old Ocean and Port Arthur; Shell's Deer Park and Norco facilities; and Motiva's Port Arthur site. Dow also indicated rolling outages at its Freeport, Texas, complex, which includes three crackers with a total capacity of nearly 3.7 mt/yr of ethylene.

More than 3 million b/d of US refinery capacity went offline due to the unusually cold temperatures. Despite the fact these facilities consume a significant amount of natural gas, the demand losses related to the recent operational issues are unlikely to exceed 100-200 MMcf/d, according to Platts Analytics.

Curtailed natural gas production and petrochemical demand have left ethane prices flat through the week even as natural gas prices spiked.

Winter storm affects nearly 9 Bcf/d of Texas processing
Offline processing capacity, MMcf/d
East Texas
Ft. Worth/Barnett
Gulf Coast
Source: S&P Global Platts Analytics