Page 7 - NorthAmOil Annual Review 2021

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The production losses
were attributed to a
combination of well
shutdowns, flow-line
outages and disrupted
road transport, all
caused by the extreme
weather.

Harvey made landfall in Texas in 2017. restored relatively quickly, others will take more
While cold weather can affect instrumen- time. Energy Aspects’ chief oil analyst, Amrita
tation that monitors and operates refinery Sen, was quoted by Bloomberg as saying that
units, widespread power outages or instabil- Permian output may not return to pre-freeze
ity of external power supply can also force levels until February 22. Major infrastructure
shutdowns. will also take time to restart.
“The vast majority of their equipment will Analysts from analytics firm Enverus com-
be inoperable once the weather warms up, so mented that the crisis would also have lasting
while we don’t feel that we’re looking at a hur- impacts.
ricane-like scenario,” it would probably take “At this point it is not clear to what extent
about a couple weeks for the refineries to return gas-fired generators had infrastructure damage
to pre-freeze operations, Reuters quoted a preventing them from running versus a broader
Wood Mackenzie senior research analyst, Marc shortage of gas in the south-central US,” they
Amons, as saying. wrote on February 16. “If the former, ERCOT
The issues with gas supply and power gener- may face pressure to add a capacity market
ation also affected LNG terminals on the Gulf (as exists in PJM, ISONE and other markets),
Coast. Both Freeport LNG and Cheniere Energy which pays operators for availability rather than Given that the
were reported in mid-February to be taking just for generation, as the energy-only ERCOT
steps to minimise gas and power use in an effort market does. Solutions to the latter are more Gulf Coast is
to relieve some of the pressure on Texas’ grid. complicated and difficult, entailing broader an export hub,
And on February 17, Abbott ordered gas re-regulation of upstream activity and/or top-
producers to refrain from sales outside the down allocation of supplies on extreme days outages in Texas
state until February 21 in a further bid to alle- (such as cutting off LNG feedgas and/or indus-
viate supply pressure. However, it was unclear trial consumers).” could reverberate
immediately following the issuing of the order The Enverus analysts noted that a previous
whether he had the authority to order produc- spell of extreme cold in 2011 had also resulted in across global
ers to disregard contracts for shipments of both “issues around gas and electric market interde- markets if they
pipeline gas and LNG scheduled to be shipped pendence, including ERCOT rolling blackouts
out of Texas. and customers in Arizona losing gas service for persist.
days”. Meanwhile, the 2014 polar vortex in the
What next? US Northeast had “precipitated some changes
Given that the Gulf Coast is an export hub, out- in gas and electric nomination cycles and
ages in Texas could reverberate across global information-sharing”.
markets if they persist. Much depends on the Given the severity of the crisis in Texas cur-
weather – which is predicted to improve over rently, it seems likely ERCOT’s actions will be
the coming week, but further cold spells cannot closely scrutinised and that changes could fol-
be ruled out. low that may have an impact on the gas industry
And while some of the outages can be in the state as well.™

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