Amid the Texas freeze, oil producers remain closed; the governor bans natural gas exports

HOUSTON (Reuters) – Texas oil producers and refiners remained closed Wednesday for a fifth day after several cold days, and the governor ordered a ban on state natural gas exports to try to speed up the restoration of energy.

The cold snap, which has killed at least 21 people and wiped out more than 4 million people in Texas, is not expected until this weekend.

Gov. Greg Abbott ordered Texas natural gas suppliers not to ship out of state until Sunday and asked the state energy regulator to comply with its export ban.

“This will also increase the power that will be produced and sent to homes here in Texas,” Abbott said at a news conference Wednesday.

The ban sparked a response from Mexican officials, who depend on Texas pipeline imports. More than 40% of U.S. natural gas exports come from Texas.

Texas produces more natural gas and oil than any other state in the United States, and its operators, unlike those in North Dakota or Alaska, are not accustomed to dealing with refrigerated temperatures.

The state accounts for about a quarter of U.S. natural gas production, about 27.8 billion cubic feet per day, but consumes only a portion, sending the rest to other states or through pipelines to Mexico, according to the US Energy Information Administration.

Texas ’energy sector has been hit hard by the cold, with about 4 million barrels per day (bpd) of daily refining capacity closed and at least one million bpd of oil production.

Natural gas production also fell. A week ago, Texas produced about 7.9 billion cubic feet a day, but fell to 1.9 billion on Wednesday, according to preliminary data from Refinitiv Eikon. Natural gas accounts for half of Texas ’power generation.

Christi Craddick, chairman of the state Railroad Commission, the state’s oil and gas regulator, said Wednesday afternoon that the agency had received the governor’s request and was reviewing it.

According to a person familiar with the matter, the application established a game of political football between groups that have no authority to interfere in interstate trade.

U.S. gas pipeline exports to Mexico fell 3.8 billion cubic feet (bcf) per day on Wednesday on Wednesday, compared to the last 30-day average of 5.7 bcf, according to Refinitiv data, about three-quarters of the which comes from Texas.

Mexico’s economy minister, Tatiana Clouthier, said Wednesday that she had contacted the U.S. government’s representative in Mexico, seeking to ensure the supply of natural gas to Mexico during the cold.

“By not acting together, the results could be more complicated,” he said on Twitter.

According to data from Refinitiv Eikon, a load of liquefied natural gas (LNG) loaded Wednesday at Freeport LNG in Texas was due to go to Mexico. The tanker remained off the coast of Texas. A Freeport LNG spokeswoman declined to comment.

This week, operations at the Corpus Christi plant of Cheniere Energy, the state’s largest LNG producer, were halted due to weather disruptions. A spokesman declined to comment on the governor’s order.

Overall, daily U.S. natural gas production has fallen about 19 percent since late last week to 71.9 bcf per day on Wednesday, according to preliminary data from Eikon.

With more snow forecast in key oil and gas production areas such as the Permian and northern Louisiana, production is expected to remain offline until Friday, said Anna Lenzmeier, energy analyst at BTU Analytics.

“The second half of this week is set to be as tumultuous as the long weekend and natural gas prices could continue to exceed three digits before the weekend,” he said.

Several Texas ports, including Houston, Galveston and major LNG export sites in Freeport and Sabine Pass were closed due to the weather, according to U.S. Coast Guard NCO Jonathan Lally.

A gas bcf can supply about 5 million American homes a day.

Producers in the Permian Basin, the largest oil field in the United States, said electricity problems were the main problem and that until power was restored, restarting any frozen equipment would be a challenge.

According to Wood Mackenzie analysts, approximately one million barrels per day of crude oil production have stopped, and it could be weeks before it is fully restored.

Supply interruptions pushed for further increases in the price of oil, which ended the session with more than 1.5%. U.S. natural gas rose to a three-month high after rising more than 10 percent on Tuesday.

The freeze has also sent Canadian natural gas exports to the U.S. to levels last seen in 2010, said Ian Archer, an analyst at IHS Markit.

Canada’s net exports have jumped above 7.5 bcf a day over the past two days and Archer estimated they were close to 8 bcf per day on Wednesday.

“We’re seeing absolutely huge withdrawals and exports to the U.S.,” Archer said.

Graphic natural gas production in the United States is plummeting