Texas natural gas markets recovering following freeze
Texas natural gas markets headed closer to supply balance this week after frigid weather caused a cascade of delivery headaches and triggered government mandates to prioritize gas for power demand in the state.
The powerful burst of arctic air that dipped into the lower 48 states early last week brought frozen precipitation and temperatures below 10°F (-12°C) to parts of Texas. A staggering rise in electricity demand for heating was quickly followed by widespread power outages and gas production losses in a domino effect of energy supply failures that contributed to more than 20 deaths.
US gas production — which at the peak of the storm had fallen by as much as 20 Bcf/d (567mn m³/d), according to analyst estimates — is on the upswing as Texas thaws out. US output is now sitting at 85 Bcf/d, up from the lows of 70 Bcf/d but still about 5 Bcf/d below pre-storm levels, analysts with Tudor Pickering Holt said. Canadian imports are helping plug the supply gap, running about 1 Bcf/d higher than analysts' models.
Dry-gas production in the Haynesville shale in northeastern Texas showed signs of recovery following the storm, with production on 18 February jumping by 400mn cf/d from the day prior, according to analysts with Energy Aspects. That increase is about 3pc of the shale's total estimated January output, according to the US Energy Information Administration (EIA). Energy Aspects expected the Permian basin in west Texas to restore the 70pc of output — about 11.8 Bcf/d — that was lost during the storm by mid-week this week. Full production in the panhandle's Anadarko basin, which produced about 6.3 Bcf/d last month, "may take even longer to return," the firm said.
Texas rushed to secure gas for power generation as supplies evaporated last week, with oil and gas regulator The Texas Railroad Commission on 12 February issuing an order prioritizing gas use for "human needs" through yesterday, and Governor Greg Abbott (R) on 17 February mandating that all gas be made available for sale to Texas power generation before leaving the state through 21 February.
LNG feedgas is expected to take a hit from the weather and mandates, with Energy Aspects lowering its forecast for the month of February by 15pc to 9 Bcf/d.
Texas-sized prices diminishing
Spot gas prices at locations throughout the US are being cut back down to size this week, but some remain well above year-earlier values on continued supply tightness.
The Oneok, Oklahoma, spot price for delivery today was $2.63/mmBtu, down from $988.97/mmBtu a week ago but 68pc higher than its year-earlier value. SoCal Citygates prices for delivery today are $3.29/mmBtu, down from $113.64/mmBtu for delivery on 17 February but 53pc higher than the value for delivery on 25 February, 2020.
Price movements at the Henry Hub, the national benchmark, were far more subdued. Delivery there today is at $2.80/mmBtu, down from $23.91/mmBtu a week ago but 46pc higher than a year earlier.
Prices may get another boost tomorrow as the EIA reports US gas storage inventories, which were likely walloped by heating needs last week. Energy Aspects expects a 365 Bcf withdrawal, which would beat the all-time record of 359 Bcf in January 2018.
Gas reliance undercuts reliability
State and federal regulators are just beginning to pick apart what led to the crisis, with probes and hearings in the works. Amid the upheaval, five board members of electric grid operator Electric Reliability Council of Texas (ERCOT) resigned yesterday.
Beyond better plant winterization, regulators are likely to look into how power and gas in Texas are uniquely intertwined in a way that creates a vicious cycle during extreme cold.
As the mercury dropped last week, liquids and water that are naturally present in gas output froze off at the wellhead in Texas production regions. As gas-fired power plants — which produce the lion's share of electricity for the state — lost that supply, they shut down. The shut gas-fired plants led to power outages, compounding the gas supply issues even further as pipeline compressor stations, gas processing plants and even pumps at the wellhead lost power.
Further capacity losses resulted from inoperable equipment across all varieties of power generation, including malfunctioning nuclear reactor sensors, frozen coal stockpiles and iced-over wind turbines. But the gas issues took the largest toll, as 51pc of ERCOT's generating capacity for 2021 is gas-fired.
Fitch Ratings today said the event exposed significant risks to US power and utility sector creditworthiness as power generators, retail electricity providers and local gas distribution companies will absorb unexpected costs.
Similar gas supply issues caused fewer-widespread outages in Texas during a cold snap a decade ago. A federal report on that event recommended that the state prepare for the winter heating season as fervently as it does for the summer cooling season.
Related news posts
G7 countries put timeframe on 'unabated' coal phase-out
G7 countries put timeframe on 'unabated' coal phase-out
London, 30 April (Argus) — G7 countries today committed to phasing out "unabated coal power generation" by 2035 — putting a timeframe on a coal phase-out for the first time. The communique, from a meeting of G7 climate, energy and environment ministers in Turin, northern Italy, represents "an historic agreement" on coal, Canadian environment minister Steven Guilbeault said. Although most G7 nations have set a deadline for phasing out coal-fired power, the agreement marks a step forward for Japan in particular, which had previously not made the commitment, and is a "milestone moment", senior policy advisor at think-tank E3G Katrine Petersen said. The G7 countries are Italy — this year's host — Canada, France, Germany, Japan, the UK and the US. The EU is a non-enumerated member. But the pledge contains a caveat in its reference to "unabated" coal-fired power — suggesting that abatement technologies such as carbon capture and storage could justify its use, while some of the wording around a deadline is less clear. The communique sets a timeframe of "the first half of [the] 2030s or in a timeline consistent with keeping a limit of 1.5°C temperature rise within reach, in line with countries' net-zero pathways". OECD countries should end coal use by 2030 and the rest of the world by 2040, in order to align with the global warming limit of 1.5°C above pre-industrial levels set out in the Paris Agreement, according to research institute Climate Analytics. The countries welcomed the outcomes of the UN Cop 28 climate summit , pledging to "accelerate the phase out of unabated fossil fuels so as to achieve net zero in energy systems by 2050". It backed the Cop 28 goal to triple renewable energy capacity by 2030 and added support for a global target for energy storage in the power sector of 1.5TW by 2030. The group committed to submit climate plans — known as nationally determined contributions (NDCs) — with "the highest possible ambition" from late this year or in early 2025. And it also called on the IEA to "provide recommendations" next year on how to implement a transition away from fossil fuels. The G7 also reiterated its commitment to a "fully or predominantly decarbonised power sector by 2035" — first made in May 2022 and highlighted roles for carbon management, carbon markets, hydrogen and biofuels. Simon Stiell, head of UN climate body the UNFCCC, urged the G7 and G20 countries to lead on climate action, in a recent speech . The group noted in today's outcome that "further actions from all countries, especially major economies, are required". The communique broadly reaffirmed existing positions on climate finance, although any concrete steps are not likely to be taken ahead of Cop 29 in November. The group underlined its pledge to end "inefficient fossil fuel subsidies" by 2025 or earlier, but added a new promise to "promote a common definition" of the term, which is likely to increase countries' accountability. The group will report on its progress towards ending those subsidies next year, it added. Fostering energy security The communique placed a strong focus on the need for "diverse, resilient, and responsible energy technology supply chains, including manufacturing and critical minerals". It noted the important of "guarding against possible weaponisation of economic dependencies on critical minerals and critical raw materials" — many of which are mined and processed outside the G7 group. Energy security held sway on the group's take on natural gas. It reiterated its stance that gas investments "can be appropriate… if implemented in a manner consistent with our climate objectives" and noted that increased LNG deliveries could play a key role. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Japan’s Chugoku delays Shimane No.2 reactor restart
Japan’s Chugoku delays Shimane No.2 reactor restart
Tokyo, 30 April (Argus) — Japanese utility Chugoku Electric Power has postponed the restart of its 820MW Shimane No.2 nuclear reactor in western Japan's Shimane prefecture from August to December, as reinforcement works are taking longer than expected. The reinforcement works are taking longer, as the utility is also conducting facility inspections to prepare to reactivate the reactor after an extended closure since January 2012 for stricter nuclear safety inspections, said Chugoku on 30 April. Chugoku previously planned to complete the reinforcement works in May , but has now postponed this to October. The utility had aimed to begin normal operations at the reactor in September , but has now delayed it to January 2025. Chugoku had previously modified the restart schedule multiple times . The return of the Shimane No.2 reactor could have helped Chugoku reduce its reliance on thermal generation fuels including oil, LNG and coal, especially during the peak power demand season of summer. Chugoku is currently building the 1,373MW No.3 reactor at Shimane, aiming to complete its safety-enhanced construction sometime during April-September 2025. The company has filed an application with the Nuclear Regulation Authority for a safety screening of the No.3 reactor. Its 460MW Shimane No.1 reactor was scrapped in April 2015. By Nanami Oki Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Gas-fired units win Japan's clean power auction
Gas-fired units win Japan's clean power auction
Osaka, 30 April (Argus) — A planned 10 gas-fired generation units have won Japan's first long-term zero emissions power capacity auction, with the awarded capacity totalling nearly 6GW, or auction volumes sought for the first three years of the programme. Japan launched the clean power auction system from the April 2023-March 2024 fiscal year, aiming to spur investment in clean power sources by securing funding in advance to drive the country's decarbonisation towards 2050. The auction generally targets clean power sources — such as renewables, nuclear, storage battery, biomass, hydrogen and ammonia. But the scheme also applies to a new power plants burning regasified LNG as an immediate measure to ensure stable power supplies, subject to a gradual switch from gas to cleaner energy sources. The first auction held in January saw 10 new gas-fired units with a combined capacity of 5.76GW secure the funding of ¥176.6bn/yr ($1.12bn), the nationwide transmission system operator Organisation for Cross-regional Co-ordination of Transmission Operator (Occto), which manages the auction, said on 26 April. All winners can receive the money for 20 years through Occto, which collect money from the country's power retailers, although they need to refund 90pc of other revenue. Winners with a new gas-fired project should start commissioning their plants within six years and then begin refurbishment work to introduce clean fuels and technology within 10 years after commissioning. This means all the projects selected in the 2023-24 auction need to start operations by the end of 2030-31. Hokkaido Electric Power previously planned to begin operations of its Ishikariwan-Shinko No.2 gas-fired unit in December 2034 but it has advanced the start-up to 2030-31. Japan has secured a total of 9.77GW net zero capacity through the 2023-24 auction. Contract volumes include 1.3GW of nuclear, 1.1GW of storage batteries, 770MW for ammonia co-firing, 55.3MW hydrogen co-firing, 199MW biomass and 577MW of hydroelectric power projects, along with the 5.76GW of gas-fired projects. By Motoko Hasegawa Japan 2023-24 decarbonisation power capacity auction result Winner Power plant MW* Planned start-up Hokkaido Electric Power Ishikariwan-Shinko No.2 551 FY2030 Tohoku Electric Power Higashi Niigata No.6 616 FY2030 Kansai Electric Power Nanko No.1 592 FY2029 Kansai Electric Power Nanko No.2 592 FY2030 Kansai Electric Power Nanko No.3 592 FY2030 Chugoku Electric Power Yanai new No.2 464 Mar '2030 Tokyo Gas Chiba Sodegaura Power Station 605 FY2029 Osaka Gas Himeji No.3 566 FY2030 Jera Chita No.7 590 FY2029 Jera Chita No.8 590 FY2029 Total gas-fired capacity 5,756.3 Source: Occto, Argus * Sending end capacity Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
APLNG's Jan-Mar output higher: Origin
APLNG's Jan-Mar output higher: Origin
Sydney, 30 April (Argus) — The 9mn t/yr Australia Pacific LNG (APLNG) project in Queensland state produced and sold more LNG than the previous quarter and year earlier, Australian independent Origin Energy said in its January-March results. Output rose from the final quarter of 2023 because of the power failure of a vessel docked at APLNG's terminal in Gladstone harbour in late November , which prompted upstream operator Origin to cut flows to the liquefaction plant and APLNG to defer three cargoes to 2024. APLNG exported 134PJ (2.4mn t) of LNG through 34 cargoes for January-March, 8pc up from 124PJ and 32 cargoes the previous quarter and 4pc up on the 129PJ and 33 cargoes shipped in January-March 2023. Total APLNG production for July 2023-March 2024, the first three quarters of Origin's fiscal year to 30 June, was 519PJ, 4pc higher than 498PJ a year earlier, because of effective well and field optimisation activities, fewer maintenance disruptions and the continuing benefit of reducing workover backlog resulting in more wells being on line, Origin said. The terminal will take half a train of capacity off line for 12 days in June , following a two-day maintenance period in January. APLNG's domestic gas sales were 36PJ, steady on the previous quarter but higher by 24pc from the 29PJ sold a year earlier. Gas sales volumes for Origin's energy markets business fell by 5pc to 36PJ from 38PJ in January-March 2023. Origin said it continues to negotiate a deal with the government of New South Wales (NSW) regarding the 2,880MW Eraring coal-fired power station's future . The power plant had been due to close in 2025 but insufficient new generation capacity has been completed in NSW for this to occur. "We continue to progress large-scale batteries under development at Eraring and Mortlake power stations and recently announced our first storage offtake agreement from the Supernode battery in Queensland, taking Origin's storage portfolio to around 1GW of capacity once these batteries come on line," chief executive Frank Calabria said on 30 April. By Tom Major APLNG results Jan-Mar '24 Oct-Dec '23 Jan-Mar '23 y-o-y % ± q-o-q % ± Production (PJ) 176 167 165 7 5 Sales (PJ) 168 160 158 6 4 Commodity revenue (A$mn) 2,303 2,149 2,583 -11 7 Average realised LNG price ($/mn Btu) 12.17 11.88 14.50 -15 3 Average realised domestic gas price (A$/GJ) 6.90 6.39 6.17 12 8 Source: Origin Energy Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more