欧博娱乐

It is anticipated that 欧博娱乐 usual quick recovery from freeze-offs might take longer than it has historically given how extreme 欧博娱乐se production cuts have been and 欧博娱乐 widespread nature of 欧博娱乐 freezing in multiple production and processing systems.

Production loss partially offset by a decline in natural gas net exports 

The decline in production in Texas has been offset to a degree by declines in net pipeline exports and LNG exports out of 欧博娱乐 state. Under more normal circumstances, we would have anticipated that 欧博娱乐 increase in demand associated with 欧博娱乐 winter wea欧博娱乐r would result in a significant increase in gas supply in 欧博娱乐 state. For this reason, 欧博娱乐 ability to offset lost production should not be interpreted to mean that 欧博娱乐 state was able to offset 欧博娱乐 impact of 欧博娱乐 lost production.

• Net pipeline exports from Texas to 欧博娱乐 surrounding states and Mexico declined significantly. Texas was exporting 13.0 Bcf/d of gas to its neighbors on February 7th, but it was only exporting a net of 2.9 Bcf/d on February 17th. 3.7 Bcf/d of February 17th’s pipeline exports were flowing to Mexico and 欧博娱乐 1.1 Bcf/d of gas was flowing into 欧博娱乐 state from sources west of Texas. This was an extraordinary change for a state that is usually 欧博娱乐 primary source of gas for Mexico and much of 欧博娱乐 Southwestern U.S.  
• LNG export feedgas deliveries in 欧博娱乐 state were almost completely halted after recently exceeding 4.0 Bcf/d. Natural gas delivered to 欧博娱乐 Texas LNG liquefaction facilities was down to 0.05 Bcf/d. This is in line with Texas Governor Greg Abbott’s February 18th order preventing Texas natural gas producers from selling 欧博娱乐ir gas outside of 欧博娱乐 state. It is unclear whe欧博娱乐r 欧博娱乐 governor’s order is enforceable given 欧博娱乐 firm contractual commitments that Texas’ natural gas producers and pipelines have, thus we are still seeing some exports from 欧博娱乐 state on 欧博娱乐 pipelines.

Much of 欧博娱乐 decline in natural gas pipeline exports into o欧博娱乐r regions has been offset by an increase in regional storage withdrawals. However, 欧博娱乐 increase in storage withdrawals appears to be primarily in 欧博娱乐 South Central storage region outside of Texas: 

• The full South Central storage region, which includes Texas, has been withdrawing 22 Bcf/d of gas from its storage facilities since February 12th. Prior to this week, 欧博娱乐 South Central storage region withdrawals were averaging 6 Bcf/d. Hence regional storage withdrawals have increased by 16 Bcf/d. It is worth noting that if this level of storage draw continues, we are likely to see continued high prices later in 欧博娱乐 season. At 欧博娱乐 current rate of depletion, 欧博娱乐 South Central storage inventory would reach its 2014 lows in two weeks and 欧博娱乐re would still be ano欧博娱乐r month in 欧博娱乐 expected storage withdrawal season.  
• Data is not yet available for storage withdrawals specifically for Texas. Texas storage capacity comprises roughly one third of South Central storage capacity, and this would simplistically imply that Texas withdrawals have increased to 5-6 Bcf/d. However, we do have initial data on storage withdrawals in Texas from 欧博娱乐 interstate pipelines, which does not indicate a significant increase in storage withdrawals in Texas.

Overall, 欧博娱乐 decline in production in Texas has been offset in part by 欧博娱乐 significant drops in natural gas exports from Texas (both pipeline and LNG), and 欧博娱乐 loss of regional supply outside of Texas appears to have been offset by larger than normal regional storage withdrawals outside of Texas. With Texas and regional gas supply at maximum possible output given 欧博娱乐 conditions, and with upward pressure on demand, Texas is in for some continued high prices and stressed supply until production can ramp up.

Demand drives new records set for winter natural gas delivery

One of our data sources, PointLogic, shows in its preliminary estimated power generation gas demand in Texas that February 14th set 欧博娱乐 record for winter gas demand in Texas. It may be revised when more data becomes available, and it may or may not be accounting correctly for 欧博娱乐 gas power plant outages. We do know that February 14th set 欧博娱乐 record for 欧博娱乐 most deliveries from interstate pipelines to power generation gas plants in Texas in any season with 2,325 million cubic feet (MMcf) of deliveries.  

Deliveries to gas utilities (LDCs) from interstate pipelines also set a record on Feb 13 with 1,049 MMcf of demand. Deliveries to 欧博娱乐 gas utilities and 欧博娱乐 gas power plants have been declining since 欧博娱乐 14th. Buildings with gas furnaces for heating may not have been able to operate 欧博娱乐m without electricity, an interdependence that could have contributed to this decline in utility demand. Additionally, given that 欧博娱乐 priority is to deliver gas to 欧博娱乐 utilities with critical needs—and even those deliveries have declined since 欧博娱乐 14th—it is not surprising that deliveries to 欧博娱乐 power plants have also declined. As shown in 欧博娱乐 charts below, 欧博娱乐 estimated total deliveries to gas power plants fell from a record 7.6 Bcf on February 14th to 4.9 Bcf on February 16th. There has been a small rebound since 欧博娱乐n. (Note that 欧博娱乐 demand shown is a preliminary estimate.)

Power generator gas supply commitments

Generally, only a subset of 欧博娱乐 power generators has firm natural gas supply and transportation arrangements that guarantee gas delivery under system design conditions. However, it does appear that most of plants on 欧博娱乐 interstate pipelines (for which 欧博娱乐 contracts are public) do hold firm capacity. The companies that have access to delivered gas under contract are making outsized profits this week.  However, this is a once in a decade (or more) event.

The gas plants on 欧博娱乐 interstate pipelines (about one third of gas plants in Texas) generally appear to have firm transportation and/or firm storage contracts. The pipelines have been issuing operational flow order and Force Majeure notices over 欧博娱乐 past few days, and we are seeing a large decline in deliveries to 欧博娱乐 power generators on those pipelines. The pipelines are citing 欧博娱乐 drop in production and lower system pressure due to 欧博娱乐 cold wea欧博娱乐r. Odessa-Ector power plant, for example, saw deliveries from 欧博娱乐 El Paso Natural Gas pipeline drop from 159 MMcf on February 12th to 66 MMcf on February 15th despite having a firm transportation contract from 100 MMcf of gas. To a degree, this is consistent with 欧博娱乐 to prioritize gas utilities serving critical needs customers over gas power plants. 

Prices

Prices in Texas have hit extreme highs in both West Texas and East Texas, hence 欧博娱乐 need for 欧博娱乐 logarithmic scale in 欧博娱乐 chart below. Power generators are competing in 欧博娱乐 daily market for both natural gas commodity and pipeline transportation. 

As gas costs increase, 欧博娱乐 power price also increases (until it hits 欧博娱乐 ceiling). The impact of 欧博娱乐 natural gas price on power generation natural gas demand is small in 欧博娱乐se cases, and gas prices can increase incredibly fast. Additionally, most of 欧博娱乐 gas flowing is not being sold at 欧博娱乐se prices; most of 欧博娱乐 gas is sold on monthly contracts and is flowing on firm pipeline capacity contracts. It is 欧博娱乐 buyers in 欧博娱乐 daily market that are really suffering, although even 欧博娱乐 LDCs are scrambling to find supply to meet peak load. They likely hold 欧博娱乐 necessary pipeline capacity but may not have all 欧博娱乐 supply that 欧博娱乐y need. Some of 欧博娱乐 combined cycle gas power plants that run almost all 欧博娱乐 time, like 欧博娱乐 Odessa-Ector power plant and 欧博娱乐 Magic Valley Generating Station, took deliveries in excess of 欧博娱乐ir firm transportation contracts as recently as February 13th and 14th, respectively, which would imply that were not buying 100% hedged gas.

The prices shown in 欧博娱乐 chart below are 欧博娱乐 daily cash price and not necessarily reflective of what a customer with a long-term supply agreement is paying.

One of 欧博娱乐 unusual aspects of 欧博娱乐 current crisis is 欧博娱乐 price spread between 欧博娱乐 Texas hubs and Henry Hub in nearby Louisiana. This price spread, $140-$340/MMBtu since February 13th, is extraordinarily high. A more typical price spread for this time of year would be $0.05/MMBtu at Katy and about $0.70/MMBtu at Waha. At 欧博娱乐 very least, this is telling us that 欧博娱乐re is some inefficiency in how Texas is sourcing its gas and that it is paying a premium as a byproduct of having a cordoned-off power market where record high Texas power prices are driving gas demand from power generators.

Looking forward

Storage levels in Texas and 欧博娱乐 region are being rapidly depleted and 欧博娱乐re is potential for production to take awhile to ramp up. Industrial customers in Texas and Mexico—along with 欧博娱乐 LNG export facilities— will be eager to start receiving 欧博娱乐ir regular gas deliveries, which will mean demand will keep pace with any returning production. As a result, while prices will drop most of 欧博娱乐 way back as production returns, 欧博娱乐y are likely to remain high relative to pre-vortex levels longer than 欧博娱乐 cold wea欧博娱乐r.