US midstream firms hit by freak cold weather in 1Q

The country's core LPG producers and exporters took a short-term hit from the polar vortex weather event amid strong demand, writes Marialuisa Rincon

The US midstream operators responsible for a large share of the country's LPG output and exports faced a difficult first quarter as a result of the polar vortex-induced winter storm in February.

The core midstream firms' operations on the US Gulf coast, the rest of Texas and the midcontinent ground to a halt for more than a week in mid-February, when freezing weather moved south across a large proportion of the country owing to a disrupted polar vortex. This sent temperatures in Houston as low as minus 18°C on 13 February — around 30°C below the norm. Midstream companies reported little lasting damage to their infrastructure but power cuts and production shut-ins impaired their output and exports of natural gas liquids (NGL).

Enterprise Products Partners, EnLink and Targa Resources suffered from short-term closures or minor damage to facilities. Energy Transfer, which has a larger proportion of its operations in northern and eastern US and whose infrastructure was better protected against such weather, was the least affected by the cold snap.

EnLink's peak production of all products dropped by 42-92pc depending on the region over a 10-day period, but it says levels have now returned to normal and the storm did not have a material impact on its first-quarter results. Energy Transfer attributed a 78,000 b/d, or 10pc, year-on-year drop in its fractionated NGL supplies to 726,000 b/d in the first quarter to upstream interruptions from the cold weather. EnLink also reported a 4pc fall in fractionated output.

Most of Enterprise's Texas facilities were heavily affected by the storms, either because of the rolling blackouts enacted by Texas electricity grid operator Ercot or by voluntarily reducing power consumption. The company reported a short-term drop in NGL deliveries to domestic customers following the worst of the weather as repairs were made. But it managed to mitigate the financial impact by surging natural gas sales for power generation and heating.

US Gulf coast exports were also adversely affected by the weather, with the Houston Ship Channel forced to cease operations for a number of days. Enterprise's 26mn t/yr Baytown terminal on the channel, the largest LPG export facility in the US, was shut for three days, resulting in a 95,000 b/d, or 13pc, decline on the year to 652,000 b/d in the first quarter, the company says. Targa, which owns the 16mn t/yr Galena Park terminal on the Houston Ship Channel, reported a 28,400 b/d, or 23pc, fall in exports to 94,400 b/d compared with the fourth quarter of 2020. This was higher than a year earlier, although this reflected the completion of the terminal's expansion in the third quarter of last year. Targa says it expects exports from Galena Park to rebound in the second quarter.

Steady interest

US LPG exports have remained strongand continue to risedespite the interruption in February, as residential and commercial demand abroad, especially in Asia-Pacific, remains resilient despite a second wave of Covid-19 running rampant in major LPG importer India. US domestic demand was also strong in the first quarter as heating demand spiked during the storm. Major propane retailer AmeriGas' sales rose by 5pc on the year to 8.47mn bl (683,000t) in the first quarter. A combination of lower-than-average inventories and steady export demand are expected to support prices over the rest of this year and into 2022.

Energy Transfer's recently completed 180,000 b/d Orbit ethane terminal in Nederland, Texas, and a 50,000 b/d expansion of its 340,000 b/d (11mn t/yr) Marcus Hook LPG terminal in Pennsylvania on the US east coast lifted the company's NGL export capacity above 1mn b/d in the first quarter. This, along with better winter-weather protection, shielded the company from the winter storm.