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Environment – Page 2 – Wall Street Observer

Wall Street Observer

Wall Street Observer

Citigroup lets Texas staff shelter in offices from cold snap

(Reuters) – Citigroup Inc’s employees in Texas can take shelter in the company’s offices, a company executive said on Friday, as the U.S. state battles a severe winter storm that caused blackouts and disrupted water services.

“For our colleagues in Texas without power for days, our buildings continue to be available for those who need support,” Sara Wechter, Citi’s head of human resources, said https://www.linkedin.com/feed/update/urn:li:activity:6768277240653352960 in a LinkedIn post.

The lender said it has 8,500 employees in Texas.

The historic winter storm in Texas caused five days of blackouts before the state’s embattled power grid finally sprang back to life.

Nearly two dozen deaths have been attributed to the severe weather, with health officials also saying COVID-19 vaccine shipments around Texas could be delayed.

(This story corrects paragraph 3 to say 8,500 employees, not more than 10,000, after company clarifies)

(Reporting by Niket Nishant in Bengaluru; Editing by Ramakrishnan M.)


Oil extends losses as Texas prepares to ramp up output after freeze

By Devika Krishna Kumar

NEW YORK (Reuters) – Oil prices fell for a second day on Friday, retreating further from recent highs, as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather and power outages.

Brent crude futures ended the session down $1.02, or 1.6%, at $62.91 a barrel while U.S. West Texas Intermediate (WTI) crude fell $1.28, or 2.1%, to settle at $59.24.

For the week, Brent gained about 0.5% while WTI fell about 0.7%.

This week, both benchmarks had climbed to the highest in more than a year.

“Price pullback thus far appears corrective and is slight within the context of this month’s major upside price acceleration,” said Jim Ritterbusch, president of Ritterbusch and Associates.

Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude production and 21 billion cubic feet of natural gas, analysts estimated.

U.S. energy firms this week cut the number of oil rigs operating for the first time since November, according to Baker Hughes data.

Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.

Companies were expected to prepare for production restarts on Friday as electric power and water services slowly resume, sources said.

“While much of the selling relates to a gradual resumption of power in the Gulf coast region ahead of a significant temperature warmup, the magnitude of this week’s loss of supply may require further discounting given much uncertainty regarding the extent and possible duration of lost output,” Ritterbusch said.

Oil prices fell despite a surprise drop in U.S. crude stockpiles last week, before the big freeze hit. Inventories fell 7.3 million barrels to 461.8 million barrels, their lowest since March, the Energy Information Administration reported on Thursday. [EIA/S]

“Vaccines and the impressive rollouts we’ve seen have delivered strong gains, as have the efforts of OPEC+ – Saudi Arabia, in particular – and the big freeze in Texas, which gave oil prices one final kick this week,” Craig Erlam, senior market analyst at OANDA, said.

“With so many bullish factors now priced in, it seems we’re seeing some of these positions being unwound.”

The United States on Thursday said it was ready to talk to Iran about returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons. Still, analysts did not expect near-term reversal of sanctions on Iran that were imposed by the previous U.S. administration.

“This breakthrough increases the probability that we may see Iran returning to the oil market soon, although there is much to be discussed and a new deal will not be a carbon-copy of the 2015 nuclear deal,” said StoneX analyst Kevin Solomon.

(Additional reporting by Ahmad Ghaddar in London and Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; Editing by Marguerita Choy, David Gregorio and Nick Macfie)


Texas oil refiners will take weeks to recover, boosting U.S. gasoline prices

By Laila Kearney

(Reuters) – Texas oil refineries shut by cold-weather disruptions may take several weeks to resume normal operations, industry experts said on Friday, helping to push up fuel prices.

About a fifth of oil processing was halted by power outages, shortages of natural gas and water this week.

Average retail gasoline prices rose 6 cents on the week and are up 9 cents in the last month, to $2.33 a gallon, the American Automobile Association said. It forecast inventories would fall, keeping prices higher through month’s end.

“We are 2-1/2 to three weeks away from restoring most operations” at affected refineries, said Andrew Lipow, president of Houston-based consultancy Lipow Oil Associates.

The refinery shutdowns will depress prices for U.S. crude oil and widen the spread between U.S. and Brent crude, Paul Sankey of independent energy researcher Sankey Research said in a note. He forecast “heavy pressure on US crude prices from returning supply into no demand from a major refining outage that will last 2-3 weeks.”

U.S. crude futures fell 1.5% on Friday, to $59.60 a barrel, as producers signaled plans to restart production. U.S. crude is up 22% year to date. U.S. gasoline futures on the New York exchange rose to $1.805 per gallon.

“The spreads tell me that crude oil will come back quicker” than refining margins, said Robert Yawger, director of energy futures at Mizuho Securities USA.

Refinery operators are assessing facilities and may need to repair any damage to pipelines, cooling towers and other equipment before slowly and carefully restarting, Lipow said.

Shortages and high prices for natural gas have also affected refiners. Texas officials this week asked natural gas suppliers to prioritize deliveries to electric utilities and residential customers, leaving less of the fuel to supply refinery operations, Lipow said.

Slowly resuming electricity and water needed to power the plants also is likely to cause delays at Texas Gulf Coast refineries beyond what is normal after business-pausing natural disasters such as hurricanes, he said.

(Reporting by Laila Kearney and Devika Krishna Kumar; editing by Jonathan Oatis)


Italy’s Eni vows to become carbon neutral by 2050 in latest green push

By Stephen Jewkes and Agnieszka Flak

MILAN (Reuters) – Italy’s Eni on Friday became the latest energy group to increase its climate ambition with a promise to be carbon neutral by 2050, as it seeks to keep pace in an industry under mounting investor pressure to curb emissions.

Eni shares, which rose more than 3% after the plan, were up 1.2% by 1615 GMT versus a 0.5% rise in European oil and gas index.

“We commit to the full decarbonisation of all our products and processes by 2050,” Chief Executive Claudio Descalzi said. “Our plan is concrete, detailed, economically sustainable and technologically proven.”

Graphic: ENI Strategic Presentation 2021-2024 – https://fingfx.thomsonreuters.com/gfx/mkt/dgkvlzjxmvb/Strategy%20Presentation%202021-2024-1.png

In an update to a clean-up drive announced last year, Eni said it would cut absolute emissions by 25% by 2030, from 2018 levels, and by 65% by 2040.

Eni announced its plans after newly-appointed Prime Minister Mario Draghi at the weekend put climate change at the heart of his plans for Italy and said his government intends to boost renewable energy and green hydrogen production.

Its ambitions also follow other announcements from other energy companies, which have set varying targets to reduce greenhouse gas emissions from their operations and the use of the products they sell.

Eni, which makes most of its earnings from oil and gas, said the 2050 decarbonisation goal would be reached by growing output from bio-refineries, raising renewable capacity, forestry initiatives, carbon capture and other green projects.

“This is a target, not an aspiration,” Descalzi told analysts during a presentation, adding management salaries would be tied to it.

Eni will also pursue acquisitions to speed the green transformation and it raised the bar on renewable capacity to 60 gigawatts in 2050 from 300 megawatts now.

More than 2 billion euros ($2.43 billion) of asset sales are planned to help develop clean businesses including two possible new biorefineries in Italy and the United States and carbon capture and storage units in the United Arab Emirates and Libya.

Eni also said it would merge its renewable and retail businesses to grow its customer base in synergy with its green ambitions.

“This business combination makes Eni one of the main green retail operators in the European market,” Descalzi said.

The group plans to spend 7 billion euros per year over the next four years, with over 20% of that earmarked for green projects and the merged renewable and retail business.

Oil and gas production will rise 4% per year with oil production peaking in 2025 and gas expected to be some 90% of the portfolio in 2050.

The group, which expects operating cash flow of about 44 billion euros, will offer a dividend floor of 0.36 euros per share that will rise as cash flow increases from higher oil prices.

Earlier on Friday, Eni posted a better-than-expected adjusted net profit for the fourth quarter on firmer oil prices after “a year like no other in the history of the energy industry” sent full-year profits tumbling.

“We will never forget this exceptional year marked by the most unexpected and disruptive crisis we have ever seen,” Descalzi said.

Graphic: Eni vs European Oil & Gas Sector – https://fingfx.thomsonreuters.com/gfx/mkt/qzjpqgnxxpx/eni_sxep.png

(Additional reporting by Stefano Bernabei; Editing by Edmund Blair, David Evans and Barbara Lewis)


Moscow goes green: Russian capital eyes fully electric bus fleet by 2030

MOSCOW (Reuters) – Moscow plans to nearly quadruple the number of electric buses it operates in coming years and replace all petrol or diesel-powered public transport vehicles with greener alternatives by 2030, a senior city transport official has said.

Mosgortrans, which runs Moscow’s vast bus and tram network, said its fleet of around 600 electric buses would be expanded by 400 vehicles by the year-end, by another 420 the following year, and then by 855, bringing the fleet to more than 2,000 e-buses.

“Every year the plan will be to replace all wheeled public transport vehicles with electric buses,” said Artyom Burlakov, deputy head of the innovative projects department at Mosgortrans.

Environmental activists have welcomed the initiative.

“They are also buying new, more power-efficient trams, which is a good thing,” said Mikhail Babenko, head of the green economy programme at World Wildlife Fund (WWF) Russia.

Babenko said there was still a long way to go, however, when it came to Muscovites changing their own behaviour and turning their backs on cars in favour of greener alternatives.

The Russian capital remains infamous for its traffic jams.

(Reporting by Dmitry Madorsky, Lev Sergeev, Mikhail Antonov and Tatiana Gomozova; Writing by Gabrielle Tétrault-Farber; Editing by Andrew Osborn and Alex Richardson)


Investors seed indoor farms as pandemic disrupts food supplies

By Rod Nickel

(Reuters) – Investors used to brush off Amin Jadavji’s pitch to buy Elevate Farms’ vertical growing technology and produce stacks of leafy greens indoors with artificial light.

“They would say, ‘This is great, but it sounds like a science experiment,'” said Jadavji, CEO of Toronto-based Elevate.

Now, indoor farms are positioning themselves as one of the solutions to pandemic-induced disruptions to the harvesting, shipping, and sale of food.

“It’s helped us change the narrative,” said Jadavji, whose company runs a vertical farm in Ontario, and is building others in New York and New Zealand.

Proponents, including the U.S. Department of Agriculture (USDA), say urban farming increases food security at a time of rising inflation and limited global supplies. North American produce output is concentrated in Mexico and the U.S. Southwest, including California, which is prone to wildfires and other severe weather.

Climate-change concerns are also accelerating investments, including by agribusiness giant Bayer AG, into multi-storey vertical farms or greenhouses the size of 50 football fields.

They are enabling small North American companies like Elevate to bolster indoor production and compete with established players BrightFarms, AeroFarms and Plenty, backed by Amazon.com Inc founder Jeff Bezos.

But critics question the environmental cost of indoor farms’ high power requirements.

Vertical farms grow leafy greens indoors in stacked layers or on walls of foliage inside of warehouses or shipping containers. They rely on artificial light, temperature control and growing systems with minimal soil that involve water or mist, instead of the vast tracts of land in traditional agriculture.

Greenhouses can harness the sun’s rays and have lower power requirements. Well-established in Asia and Europe, greenhouses are expanding in North America, using greater automation.

Investments in global indoor farms totaled a record-high $500 million in 2020, AgFunder research head Louisa Burwood-Taylor said.

The average investment last year rose sharply, as large players including BrightFarms and Plenty raised fresh capital, she said.

A big funding acceleration lies ahead, after pandemic food disruptions – such as infections among migrant workers that harvest North American produce – raised concerns about supply disruptions, said Joe Crotty, director of corporate finance at accounting firm KPMG, which advises vertical farms and provides investment banking services.

“The real ramp-up is the next three to five years,” Crotty said.

Vegetables grown in vertical farms or greenhouses are still just a fraction of overall production. U.S. sales of food crops grown under cover, including tomatoes, cucumbers and lettuce, amounted to 790 million pounds in 2019, up 50% from 2014, according to the USDA.

California’s outdoor head lettuce production alone was nearly four times larger, at 2.9 billion pounds.

USDA is seeking members for a new urban agriculture advisory committee to encourage indoor and other emerging farm practices.


Bayer, one of the world’s biggest seed developers, aims to provide the plant technology to expand vertical agriculture. In August, it teamed with Singapore sovereign fund Temasek to create Unfold, a California-based company, with $30 million in seed money.

Unfold says it is the first company focused on designing seeds for indoor lettuce, tomatoes, peppers, spinach and cucumbers, using Bayer germplasm, a plant’s genetic material, said Chief Executive John Purcell.

Their advances may include, for example, more compact plants and an increased breeding focus on quality, Purcell said.

Unfold hopes to make its first sales by early 2022, targeting existing farms, and start-ups in Singapore and the United Kingdom.

Greenhouses are also expanding, touting higher yields than open-field farming.

AppHarvest, which grows tomatoes in a 60-acre greenhouse in Morehead, Kentucky, broke ground on two more in the state last year. The company aims to operate 12 facilities by 2025.

Its greenhouses are positioned to reach 70% of the U.S. population within a day’s drive, giving them a transportation edge over the southwest produce industry, said Chief Executive Jonathan Webb.

“We’re looking to rip the produce industry out of California and Mexico and bring it over here,” Webb said.

Projected global population growth will require a large increase in food production, a tough proposition outdoors given frequent disasters and severe weather, he said.

New York-based BrightFarms, which runs four greenhouses, positions them near major U.S. cities, said Chief Executive Steve Platt. The company, whose customers include grocers Kroger and Walmart, plans to open its two largest farms this year, in North Carolina and Massachusetts.

Platt expects that within a decade, half of all leafy greens in the United States will come from indoor farms, up from less than 10% currently.

“It’s a whole wave moving in this direction because the system we have today isn’t set up to feed people across the country,” he said.


But Stan Cox, research scholar for non-profit The Land Institute, is skeptical of vertical farms. They depend on grocery store premiums to offset higher electricity costs for lighting and temperature control, he said.

“The whole reason we have agriculture is to harvest sunlight that’s hitting the earth every day,” he said. “We can get it for free.”

Bruce Bugbee, a professor of environmental plant physiology at Utah State University, has studied space farming for NASA. But he finds power-intensive vertical farming on Earth far-fetched.

“Venture capital goes into all kinds of crazy, crazy things and this is another thing on the list.”

Bugbee estimates that vertical farms use 10 times the energy to produce food as outdoor farms, even factoring in the fuel to truck conventional produce across country from California.

AeroFarms, operator of one of the world’s largest vertical farms, a former New Jersey steel mill, says comparing energy use with outdoor agriculture is not straightforward. Produce that ships long distances has a higher spoilage rate and many outdoor produce farms use irrigated water and pesticides, said Chief Executive Officer David Rosenberg.

Vertical farms tout other environmental benefits.

Elevate uses a closed loop system to water plants automatically, collect moisture plants emit and then re-water them with it. Such a system requires 2% of the water used on an outdoor romaine lettuce operation, Jadavji said. The company uses no pesticides.

“I think we’re solving a problem,” he said.

(Reporting by Rod Nickel in Winnipeg, Manitoba; additional reporting by Karl Plume in Chicago; Editing by Caroline Stauffer and Lisa Shumaker)






Traders rush to supply fuel to the U.S. as Texas freeze bites

By Ahmad Ghaddar, Stephanie Kelly and Laura Sanicola

LONDON (Reuters) – Massive refining outages in the U.S. state of Texas due to freezing weather has led to a flurry of fuel tanker bookings from Europe, while several carriers were diverting away from the U.S. Gulf Coast, traders and analysts said.

The cold snap has halted about one-fifth of the United States’ refining capacity and nearly all oil and natural gas production in west Texas.

Traders were looking to fill the gap in refinery supplies with bookings from elsewhere.

U.S. Atlantic coast imports of diesel and gasoil from other countries was seen at 380,000 barrels per day (bpd) in February, at the same level of a multi-year high reached in November, according to oil analytics firm Vortexa.

The rise is led largely by higher intake from northwest Europe, with 140,000 bpd of imports, a multi-year high, Vortexa said.

Imports on the route are also on track to remain firm in March, with around 2.5 million barrels currently forecast to arrive, Vortexa said. 

Gasoline exports from Europe to North America have also spiked.

Loadings of gasoline and blending components along the route were pegged at 417,000 bpd Feb. 1-18, according to Vortexa, the highest level since July 2020, and 27% higher than average for the prior three months.

At the same time, clean products exports from the U.S. Gulf Coast have fallen sharply.

Loadings are holding at 1.3 million bpd on a 10-day moving average basis, nearing levels last seen in May 2020, when coronavirus lockdowns greatly hampered demand, according to Reid l’Anson, senior commodity economist at Kpler. That compares with 2.5 million bpd last year, he added.

The disruptions are having a big impact on prices.

The U.S. crack spread, a key measure of refining margins, settled at $15.43 a barrel on Thursday, the highest since April 2020, Refinitiv Eikon data showed.

“The cargoes are going to follow the margins and with prices improving here in the U.S. that would signal more cargoes to the U.S.” said Phil Flynn, a senior analyst at Price Futures Group in Chicago.

Gasoline and diesel profit margins in Europe have also risen, with the northwest Eurpan barge crack spread hitting its highest since October around $4.50 a barrel on Thursday.

The disruptions also led to tankers that were due to load in the U.S. Gulf to divert away from the energy hub. Vortexa data shows four tankers, including the very large gas carrier (VLGC) Captain John NP.

“Everything is getting delayed or moving out of the Houston area and not coming back,” a shipbroker told Reuters.

(Reporting by Ahmad Ghaddar in London, Stephanie Kelly and Laura Sanicola in New York; Editing by Emelia Sithole-Matarise)


Airlines, renewables companies push Biden to make air travel greener

By Stephanie Kelly

NEW YORK (Reuters) – U.S airlines and renewables companies are lobbying the Biden administration to back a big increase in subsidies for lower-carbon aviation fuel, arguing new incentives are needed to help fight climate change and will also make their recovery from the pandemic much greener, industry trade groups told Reuters.

The push reflects the hefty price that U.S. taxpayers may be asked to pay as President Joe Biden seeks to follow through on his plan to both decarbonize the U.S. economy by 2050 and to help battered industries recover from the economic meltdown.

Air travel contributes around 2% of global greenhouse gas emissions, the Air Transport Action Group said. It is projected to grow rapidly in coming decades if airlines do not quickly switch to “sustainable aviation fuel.”

This is made from biologically-sourced wastes like old cooking oil, animal fat and plant oils and is a much more expensive product than traditional jet fuel.

The sustainable aviation fuel industry senses a political opening with the Biden administration after four years during which former President Donald Trump downplayed the threats from global warming and backed regulations that maximized fossil fuels development.

“The difference is we’ve got an ear now that’s much more sympathetic to figuring out near-term solutions to policy, research and development,” said Bryan Sherbacow, chief commercial officer for low-carbon fuels provider World Energy.

The National Air Transportation Association, which represents more than 3,000 companies across the aviation industry, said it was due to meet with the Federal Aviation Administration this month to sell an incentive for sustainable aviation fuel of up to $2 a gallon, which industry analysts estimate would be one of the priciest fuel incentives in the country.

With a Democratic majority in the House of Representative and an evenly split Senate, White House support for legislation on incentives is pivotal.

The FAA said in a statement to Reuters that it could not verify information about specific meetings, though it said it was a “strong proponent” of sustainable aviation fuels.

NATA said it is also trying to meet with the Department of Transportation.

Airlines for America (A4A), which represents U.S. airline companies, including United, American Airlines and Southwest, said it has also been in contact with the Biden administration’s climate change officials to discuss expanding the sustainable aviation fuel market.

Currently, A4A members use only about 1.5 million gallons of green plane fuel in the United States a year, out of a total commercial jet fuel market that exceeds 620 million barrels annually, based on data from A4A and the Energy Information Administration.

The price of sustainable aviation fuel can be three or four times higher than traditional jet fuel, making it uneconomical without government support, said Nancy Young, A4A’s vice president of environmental affairs.

Currently, sustainable aviation fuel producers are eligible for a $1 per gallon subsidy under an existing federal biodiesel tax credit. The fuel is also eligible for incentives under the U.S. Renewable Fuel Standard and California’s Low Carbon Fuel Standard, which both encourage clean fuel production by generating tradable credits.

U.S. Representative Julia Brownley, a Democrat from California, introduced new legislation in early February that would boost those incentives by authorizing $1 billion in federal funding and by creating a blender’s tax credit specific to sustainable aviation fuel.

Analysts said a well-thought out incentive structure – even if expensive – could help to decarbonize an industry that will have to rely on some form of liquid fuels for decades.

“Aviation is likely to be a source of carbon emissions for a very long time,” said Robert Campbell, head of oil products research at Energy Aspects. “The decarbonization options for aviation are challenging, to say the least.”


Several other countries have already proposed sustainable aviation fuel mandates or are exploring them as a means of addressing increasing carbon output from air travel. A mandate in Norway came into force in January 2020, while the Netherlands is set to have one in place by 2023.

Globally, more than 250,000 flights have run on sustainable aviation fuel since 2016, while an estimated 10.6 million gallons were produced in 2020, the International Air Transport Association said.

Several companies are betting on future growth.

Chicago-based Boeing, a leading manufacturer of commercial jetliners, for example, has committed to fly with 100% sustainable aviation fuels by 2030, it said in January.

Meanwhile, Neste, a Finnish oil refiner and renewable fuels producer, said it plans to expand its sustainable aviation fuel global production capability by early 2023 to 510 million gallons per year from 34 million gallons currently.

While several U.S. petroleum refiners have made capital investments in retrofitting their plants to produce renewable diesel, they are agnostic about legislation regarding tax credits for sustainable aviation fuel, several U.S. refining industry sources told Reuters.

So far, only Phillips 66 has announced its intent to produce the fuel at its planned renewable fuels facility in Rodeo, California. Valero, meanwhile, has said it could produce sustainable aviation fuel in the future “when we need to pivot there.”

(Reporting by Stephanie Kelly; additional reporting by Laura Sanicola. Editing by Jane Merriman)



Automakers pause North American production on U.S. winter weather

By Sharay Angulo

MEXICO CITY (Reuters) – Freezing weather that interrupted gas supplies in the southern United States and Mexico was wreaking havoc on Thursday on car manufacturing plants on both sides of the border, with Ford Motor Co, Nissan Motor Co Ltd and Toyota Motor Corp reporting disruptions to their assembly lines.

The cold snap has overwhelmed Texas’ power grid, while natural gas supplies to Mexico from Texas were interrupted, leaving millions without power in Mexico’s industrial northern states earlier in the week.

In Texas, freezing temperatures are expected to last through Saturday.

Mexico generates most of its power from natural gas, largely imported from the United States. The two countries also require intricate supply chains to be functional to supply auto and other industrial operations on both sides of the border.

In six Mexican states, significant power cuts contributed to the suspension of operations at auto assembly plants, according to Mexican auto association AMIA.

Some car factories also use natural gas on their production lines. Fewer supplies have meant at least five plants reported cutting their consumption of the fuel by between 20% and 30% since Tuesday, the association added.

Ford on Thursday said adverse weather had led to the temporary closure of plants in Kansas City, Michigan and Kentucky, as well as a plant in Hermosillo in the northern Mexican border state of Sonora.

Late on Wednesday, Volkswagen said it would suspend some production in Mexico on Thursday and Friday due to limited natural gas supply. The cut in supply also affected Audi as well as General Motors Co’s plant in the central city of Silao, where work stopped on Tuesday night and Wednesday.

GM said on Thursday that first-shift operations were canceled at plants in Arlington, Texas; Spring Hill, Tennessee; and Bowling Green, Kentucky. The first two factories also would likely be closed for the second shift.

Other automakers affected by the winter weather include Toyota and Nissan.

Toyota said its Texas plant would be idled through Friday, while first shifts would not operate on Thursday at plants in Mississippi and Alabama. In Mexico, the automaker said it would reduce shifts and suspend work in the coming days at its plants in Baja California and Guanajuato.

Nissan said production at plants in Smyrna, Tennessee, and Canton, Mississippi, remain suspended, and that in Mexico it was halting some production in Aguascalientes while seeking to quickly switch to liquefied petroleum gas at other plants.

Ford’s Kansas City plant’s operations have been canceled from Feb. 13-22, the company said.

Mexico, Latin America’s second-largest economy, has reeled as gas imports via pipeline from Texas dropped by about 75% over the last week, causing billions of dollars of losses on power outages and factory closures.

(Reporting by Sharay Angulo in Mexico City; Additional reporting by Ben Klayman in Detroit,; Writing by Drazen Jorgic and Daina Beth Solomon; Editing by Frank Jack Daniel, Diane Craft and Matthew Lewis)


Texas energy crisis extends to sixth day, spills over to Mexico

By Jennifer Hiller and Arpan Varghese

HOUSTON (Reuters) – Texas’s energy outages caused by a deep freeze extended to a sixth day on Thursday, with the impact of reduced supplies from the biggest energy-producing state in the United States spilling over to Mexico.

The cold snap, which has killed at least 21 people and knocked out power to more than 4 million people in Texas, is not expected to let up until this weekend. It has halted about one-fifth of the nation’s refining capacity and halted nearly all oil and natural gas production in west Texas.

Oil production could fall more than 4 million barrels per day, representing almost 40% of U.S. production, and U.S. crude exports could average 1.1 million bpd on the week, according to estimates from researcher Kpler, compared with current levels of about 3.8 million bpd.

Texas’s outages also affected power generation in Mexico, with exports of natural gas via pipeline dropping off by about 75% over the last week, according to preliminary Refinitiv Eikon data.

Governor Greg Abbott directed the state’s natural gas providers not to ship outside Texas, but a regulator said it is unlikely that they have the right to interfere with existing contracts to buyers.

“I’m not sure we have authority to mess with that, nor do I really want to,” said Jim Wright, one of three members of the Texas Railroad Commission, the state’s oil and gas regulator.

The ban prompted a response from officials in Mexico, as U.S. gas pipeline exports to Mexico fell to 4.3 billion cubic feet (bcf) per day on Wednesday, down from a 30-day average of 5.7 bcf, according to data from Refinitiv.

The Mexican government called the top U.S. representative in Mexico on Wednesday to press for natural gas supplies as power cuts there have hit millions of residents. The White House said on Thursday it was in discussions with Mexican authorities and Texas officials over Abbott’s directive.

However, Mexican President Andres Manuel Lopez Obrador on Thursday said he understands the Texas governor’s request for natural gas export ban has not yet been approved and that Mexico is making diplomatic efforts so it is not carried out.

Lingering power outages are due to downed lines and not because of a lack of power generation, Abbott said during a press conference on Thursday.


Texas exports natural gas via pipeline to Mexico and via ships carrying liquefied natural gas (LNG) from terminals in Freeport and Corpus Christi. It also supplies numerous regions of the country, including the U.S. Midwest and Northeast.

The state’s electrical grid operator, Electric Reliability Council of Texas (ERCOT), was trying to restore power as thermal generators – those powered by natural gas, coal and other fuels – lost the capability to provide power as valves and pipes froze.

ERCOT said that while there is no additional power cutoffs at this time, a little over 40,000 megawatts of generation remained offline, including 23,500 MW of thermal and the rest wind and solar.

“Energy emergency conditions remain as the grid operator and transmission owners work to restore the remaining customers that are without power,” it said.

Abbott said he has asked the legislature to mandate the winterization of generators in the power system and has called for funding needed to ensure winterization and modernization occurs.

Blackouts could continue through at least Friday, said Rebecca Miller, senior analyst at consultants Wood Mackenzie.

While the storm has moved away, freezing temperatures remain and oil refining might take days, if not weeks, to full resume operations.

“The oil and gas industry is finally getting some power into these fields,” Christi Craddick, chair of the Texas Railroad Commission, said Wednesday night.

Industrial facilities and manufacturing plants are unable to operate without power. Auto companies, including Ford Motor Co, have shut some plants because of a lack of natural gas and power.

U.S. crude futures fell about 1% on profit-taking following days of buying spurred by fears of supply disruptions that sent prices to the highest since Jan. 8, 2020.

Natural gas futures also eased from near a three-month peak as warmer weather was forecast. Next-day prices at Waha hub in the Permian basin in West Texas eased from all-time peak of $209.75 per mmBtu to $77 per mmBtu.


Texas is the nation’s biggest fossil fuel energy producer, but its operators, unlike those in North Dakota or Alaska, are not used to frigid temperatures.

The state produces almost a quarter of U.S. natural gas production and consumes about 15%. Most of the gas it ships domestically goes to neighboring Oklahoma and Louisiana.

LNG plants in Texas – Cheniere Energy Inc’s Corpus Christi and Freeport LNG’s Freeport – were basically taking no gas from the Texas grid Thursday morning, according to preliminary data from Refinitiv.

The Houston Ship Channel, a key export waterway, had reopened on Thursday, but there was hardly any vessel traffic. With temperatures expected to drop overnight, the port may need to be shut again, said J.J. Plunkett, chief operating officer for Houston Pilots.

“The hydrocarbon water lines are frozen and the cargo cannot be loaded,” he said. “This time of the year, we generally have 60 ships in and out the channel; last night we had only nine.”

Next-day power for Thursday at the ERCOT North hub, which includes the cities of Dallas and Fort Worth, were near a record high of $8,800 per MWh hit the previous day. Prices were below $50 per MWh before the cold blast.

Graphic-U.S. natural gas production slumps – https://fingfx.thomsonreuters.com/gfx/ce/gjnvwzalmpw/Pasted%20image%201613575433245.png

(Reporting by Jennifer Hiller and Gary McWilliams in Houston, Arpan Varghese in Bengaluru; additional reporting by Marianna Parraga and Diego Ore in Mexico City and Devika Krishna Kumar, Stephanie Kelly and Scott DiSavino in New York, Swati Verma and Diptenu Lahiri in Bengaluru; Editing by Marguerita Choy and Jonathan Oatis)