Natural gas producers, pipeline operators and electric utilities say they are taking steps to prepare for a major winter storm that forecasters say could knock out power and disrupt travel for days across large swaths of the eastern US.
The winter storm will bring snow, sleet and freezing rain to more than 170mn residents in the US, followed by days of "bitterly cold" temperatures that will prolong hazardous travel, the US National Weather Service said. Parts of the southern US and mid-Atlantic are likely to face "catastrophic" ice accumulation, resulting in long-term power outages, while more than one ft (30cm) of snow is expected further north, the agency said on Friday.
Gas industry officials say they have taken steps to avoid a repeat of February 2021, when a prolonged deep cold snap in Texas and other states known as winter storm Uri caused oilfield equipment to freeze at a time of high demand, sending local gas prices as high as $989/mmBtu.
Cold temperatures have already resulted in the freeze-off of nearly 3 Bcf/d of gas production as of Friday, consulting firm Wood Mackenzie said. Disruptions will peak on 26 January, when a minimum of 8.5 Bcf/d and a maximum of 20.4 Bc/f of gas production will be curtailed from freeze-offs, according to a forecast from the consulting firm.
Grid operators PJM Interconnection and the Midcontinent Independent System Operator, which serve many states expected to be affected by the storm, have already declared cold-weather alerts. The upcoming combination of low temperatures, snow and ice will be the "biggest test of the Texas power grid since February 2021", AccuWeather chief meteorologist Jonathan Porter said.
Federal officials say they are prepared to act if necessary. US energy secretary Chris Wright on Thursday told grid officials that with "merely a phone call" from them, he was ready to declare emergency conditions needed to run backup power generation. The US Federal Energy Regulatory Commission (FERC) is also monitoring conditions on the grid and energy pricing.
"Every utility that I have spoken to or grid operator, we are benefiting from our lessons learned from past extreme weather events," FERC chair Laura Swett said on Thursday. "Everyone combs over those to see what we can do better next time. So I think we are as best prepared as we possibly could be."
The cold temperatures and high demand for natural gas has created opportunities for companies with large amounts of storage. US midstream operator Energy Transfer attributed $2.4bn in earnings to the winter storm in 2021, while midstream operator Kinder Morgan reported as much as $1bn in income from the storm. Pipeline operators expect a smaller effect from this storm but say it will still present opportunities.
"This storm is not a Uri," Kinder Morgan chief executive Kimberly Allen Dang told investors on 21 January. "I mean, it's much shorter in duration and, you know, it's not going to be as significant."
Cold temperatures have already lifted natural gas prices at key trading hubs. At the Waha gas hub in the Permian basin, day-ahead prices climbed to an eight-month high of $2.38/mmBtu on 22 January, up from an average of -$0.58/mmBtu last week. At the Columbia Gas Appalachia hub, reflecting Marcellus shale production, day-ahead prices climbed to $8.38/mmBut on 22 January, up from an average of $2.73/mmBtu last week.
Higher spot natural gas prices, along with potential supply disruptions, could temporarily curtail US LNG exports, although the effects will depend on how long temperatures stay cold. Kinder Morgan's El Paso Natural Gas has already alerted customers of strained conditions on its pipeline system, which transports gas across the southwestern US.
