U.S. Energy Sector Tested by Extreme Winter Weather

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Much of the U.S. was under some form of weather advisory midweek. But markets were muted as some facilities in the U.S. South faced the brunt of the late January storms.

A winter storm warning expired Tuesday for much of Texas, though Houston was expecting as much as five inches of snow before it's over. As much as a foot of lake-effect snow is expected in West Michigan, where morning temperatures were around zero degrees Fahrenheit. Further north, wind chills as low as minus 15 degrees were expected for parts of North Dakota.

Temperatures that low could easily shut in some production in the Bakken Shale in North Dakota, and the same could be said for the Appalachia Basin spread out over West Virginia, Ohio, Pennsylvania and parts of New York. Highs are only expected to top out at about 10 degrees in Cleveland, Ohio.

Only California, where wildfires continue to torch parts of Los Angeles, showed any major power disruptions as of Tuesday. Despite the frigid temperatures and rare snow, less than 1% of the consumers in Texas were without power.

The Electric Reliability Council of Texas (ERCOT), which operates much of the grid in the state, issued a weather advisory that expires Thursday. Arctic cold in the past froze off wellheads and wind turbines in Texas, though ERCOT has seen few problems so far.

"Grid conditions are expected to be normal during an ERCOT Weather Watch," it said.

As of Tuesday morning, ERCOT showed supply was outpacing demand, with much of the support coming from natural gas. A report from the Federal Reserve Bank of Dallas found that utility-scale solar power and battery storage set records last summer, with solar power alone satisfying 25% of the power needs between June 1 and August 31.

Winter, however, is another story. Peak loads surface in the early mornings, not in the middle of the afternoon.

"Not only is this before the sun rises, when solar can't contribute any output, but it does not match as well with the typical one- to two-hour discharge capacity of the current battery-storage resources within the ERCOT service area," the Dallas Fed's report found.

All services at the Port of Houston were suspended Tuesday because of the weather. IIR Energy, meanwhile, is monitoring operations in the dense network of refineries that pepper the U.S. Gulf Coast, but found few issues with capacity as of mid-Tuesday. For more on that, click here.

On Tuesday, Flint Hills Resources LLC, a subsidiary of Koch Industries Incorporated (Wichita, Kansas), reported that operations were continuing as normal at its Corpus Christi East and West Refinery in Texas, running at about 322,000 barrels per day (BBL/d). Access to the facility was blocked, however, because of icy conditions.

All three trains of the Freeport LNG export terminal for in were without power, shuttering the facility by mid-day Tuesday.

Ice continued to build up on energy infrastructure, though most operations appeared normal. The markets too were in something of a lull, moving on the early agenda from U.S. President Donald Trump more than on the weather.

Henry Hub, the U.S. benchmark for the price of natural gas, was down 3% in early Tuesday trading to hit $3.83 per million British thermal units. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 2% to $75.80 per barrel.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).