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Power loss said to cause most Texas gas drilling, pipeline outages in winter storm

Highlights

Some have blamed equipment freeze-offs

Fallout has spurred market reforms

Power outages forced most of the US' upstream and midstream natural gas industry's curtailments and shutdowns during the February polar vortex, according to energy data company Enverus.

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In an April 22 report, Enverus said 65% of producer respondents and 80% of pipeline company respondents identified loss of power as one of the main factors that affected operations during the storm that left millions of Texas customers in the dark.

"Once power outages at power generation units began due to the extreme cold weather, natural gas production and transportation were impacted because surface facilities and infrastructure rely heavily on electricity for operations," Enverus said in the report, commissioned by the Texas Oil and Gas Association. "Then, power outages at natural gas facilities impaired the ability of power generators to receive natural gas supplies."

While an earlier Electric Reliability Council Of Texas study concluded that cold weather caused 54% of the outages or output reductions during the storm, only 13% of drillers and 20% of midstream providers told Enverus that equipment freeze-offs were one of the primary disruptions.

"The most immediate and direct action to ensure sufficient operations of natural gas producers, transporters and storage during future emergencies will be supply chain mapping to identify the infrastructure that is going into the natural gas generators and local distribution companies and, ultimately, ensure power remains to those natural gas production, distribution and storage facilities," Texas Oil and Gas Association President Todd Staples said in a statement.

The storm's repercussions have spurred market reform efforts in the state legislature and by the Public Utility Commission of Texas. In the private sector, billionaire Warren Buffett's Berkshire Hathaway Energy is pitching Texas lawmakers on an $8.3 billion proposal to build 10 new gas-fired power plants across the state to help avert another energy crisis.

Some midstream companies, however, are expected to reap significant financial windfalls from the prolonged power outages. On April 21, executives at Kinder Morgan told analysts and investors that the company saw a roughly $1 billion positive impact from the storm and anticipates longer-term gains.

"While we view the event and our financial results as nominally non-recurring, we are already pursuing more long-term firm capacity sales and some associated capital investments that will help our customers to be even better positioned for future extreme weather and create incremental value for Kinder Morgan," CEO Steven Kean said.