Wintry weather, forecast across West Texas over the next several days and this coming weekend, could bring wellhead freeze-offs and production cuts back to the Permian Basin as winterization efforts by the Texas legislature and the Texas Railroad Commission come increasingly into focus.
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From Dec. 6 to Dec. 7, temperatures in West Texas cities Midland and Odessa are forecast to drop into the low-30s Fahrenheit with even colder weather in the mid-20s expected over this coming weekend, data compiled by S&P Global Platts Analytics shows.
In previous winter seasons, West Texas temperatures ranging from the low-30s to mid-20s F have not correlated closely with production drops in the Permian Basin. The historical data potentially implies limited or even no impact from this week's upcoming cold weather.
Even slightly colder temperatures, though, could dramatically alter that outcome. At temperatures close to 20 degrees or below, production impacts in the Permian have sometimes been severe.
Last February, residents of Texas became acutely aware of the potentially destructive impact of extreme cold when the Polar Vortex bifurcated and descended south into the US Midcontinent. Over a five-day period, temperatures dipped into the single digits and briefly, even below zero, across much of the state.
At the time, temperatures in Midland, Texas dipped to 2 degrees below zero, causing freeze-offs at wells across the Permian Basin. While an estimated 2 Bcf/d was taken offline ahead of the Polar Vortex event, output in West Texas still dropped by another 3.5 Bcf/d, or about 30%, to just 7.8 Bcf/d – down from late January levels closer to 13 Bcf/d, Platts Analytics data shows.
With much of Texas' crude oil, coal and even wind production impacted by the cold weather, along with pipelines, processing plants and storage facilities, power generators were unable to keep the Lone Star state's isolated electric grid running, plunging millions of residents into darkness for days.
Following an extensive inquiry into the Polar Vortex event last February, Texas' oil and gas regulators are taking action ahead of this winter to guard against a repeat of last February's debacle.
On Nov. 30, the Texas Railroad Commission voted unanimously to adopt a process for designating certain natural gas entities as critical during an energy emergency. The new rule defines certain gas suppliers and customers as critical with associated requirements for each to winterize.
For critical suppliers and customers, the new rule also closes an earlier exemption loophole, which still allows certain eligible facilities to seek an exception to the TRRC's critical designation by filing the appropriate paperwork and paying a $150 fee.