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As power returns, Texas energy firms slowly emerge from deep freeze

By Jennifer Hiller and Erwin Seba

HOUSTON (Reuters) – Texas energy companies on Friday began preparing to resume oil and gas production after days of frozen shutdowns as electric power and water service slowly resumed at darkened oilfields and refineries.

It will take several days for oilfield crews to de-ice valves, restart systems and begin oil and gas production. U.S. Gulf Coast refiners are assessing damage to facilities. They face up to three weeks to restore most production, analysts said, with low water pressure, gas and power losses hampering operations.

The restart of production as temperatures eased sent prices of oil and natural gas lower. The spot market price of natural gas at the main U.S. trading hub in Louisiana dropped to $8.56 per million British thermal units (mmBtu) for Friday delivery from a record high of $23.86 for Thursday.

U.S. crude oil futures settled down $1.28 per barrel at $59.24. Oil is still up 23% this year, boosted by the continuation of OPEC supply cuts and falling global inventories.

Grid operator Electric Reliability Council of Texas (ERCOT) said there is enough power generation in its system to return to normal operations as it ended energy emergency conditions.

Still, refiners along the U.S. Gulf Coast could take up to three weeks to restore most operations, said Andrew Lipow, president of refinery consultants Lipow Oil Associates. That could depress demand for oil.

Millions of people across Texas shivered in the dark this week after a severe winter storm laid siege to the state, with demand for natural gas spiking and supplies needed to power electric generators and heat homes shrinking.

U.S. President Joe Biden sought a major disaster declaration to speed up relief in Texas, and vowed to visit the state next week.

Finger-pointing continued on Friday as about 165,000 homes were without power and more than 1,000 public water systems remain affected. Texas Republican Governor Greg Abbott blamed the state’s grid operator and wind turbine shutdowns for the outages. Federal regulators should investigate if the governor’s policies “exacerbated the winter storm crisis,” Democratic U.S. Sen. Charles Schumer said.

Overall economic losses could reach $45 billion to $50 billion, estimated weather forecasting firm AccuWeather, nearly as much as U.S. damages suffered during the 2020 Atlantic hurricane season.

Nearly 13% of gasoline stations throughout Texas were without either fuel or power as of early Friday, estimated price tracking service GasBuddy. That was up from around 8.5% about a day ago.

The unusually cold weather curtailed up to 4 million barrels per day of crude oil production and 21 billion cubic feet (bcf) of natural gas, according to analysts. Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.

U.S. Gulf Coast refineries are potentially less prepared for extremely cold weather than for seasonal storms, creating risks of “more prolonged refining downtime,” analysts at Goldman Sachs said.

The freeze stymied natural gas production by turning water in the gas to ice. The resulting shortage led to calls for gas conservation measures from California to West Virginia.

Texas on Wednesday ordered gas producers to halt exports needed by state utilities through Sunday, prompting Mexican officials to call the U.S. envoy to press for natural supplies.

However, pipeline gas exports from the United States to Mexico rose to 5.1 bcf on Friday after dropping to a 13-month low of 3.8 bcf per day on Tuesday, Refinitiv Eikon data showed.

In the United States, the move did not appear to affect deliveries to other states. California’s power exchange and the MISO, an exchange that handles 15 U.S. states, both said they had not seen any impact. New Mexico suffered no losses, a public regulation commission official said.

More natural gas will soon be flowing. Chevron Corp and ConocoPhillips have begun restoring shale output, and Chevron will prioritize natural gas production. Texas oil and gas regulators and a DiamondBack Energy executive also reported that power was being restored to west Texas, where oil production was shut by record snowfall and power outages.

“The majority of our Permian and Eagle Ford volumes remain offline,” said Conoco spokeswoman April Andrews, referring to the two major Texas shale fields.

Conoco, the top U.S. independent oil producer, is ready to bring back full operations across its U.S. operations outside of Alaska once power and other infrastructure outages end, she said.

(Reporting by Jennifer Hiller, Erwin Seba in Houston and Stephanie Kelly in New York, Swati Verma in Bengaluru; writing by Gary McWilliams; Editing by Leslie Adler, Aurora Ellis, Jonathan Oatis and Dan Grebler)



Volkswagen in Mexico to suspend Jetta production on Monday and Tuesday

MEXICO CITY (Reuters) – Volkswagen’s Mexico unit said on Friday that a work stoppage on its Jetta model will continue on Monday and Tuesday, due to an ongoing shortage of natural gas.

“At this time we do not have an official notice to provide certainty that there will be a supply of natural gas at regular levels,” the company said in a statement.

(Reporting by Sharay Angulo, Writing by Daina Beth Solomon)


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)


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)


Exclusive: Mexico’s government readying roughly $5 billion Pemex lifeline, source says

By Ana Isabel Martinez

MEXICO CITY (Reuters) – Mexico’s government will inject between $1.3 billion and $1.6 billion into state oil company Petroleos Mexicanos (Pemex) this year and offer a tax break of 75 billion Mexican pesos ($3.68 billion), a senior official told Reuters on Thursday.

The world’s most indebted oil company, Pemex had more than $110 billion in financial debt at the end of the third quarter last year, while its liabilities far exceeded its assets.

In the past two years, the government of President Andres Manuel Lopez Obrador has injected billions of dollars in capital in the loss-making company and reduced its tax burden.

The source, who has direct knowledge of the matter but declined to be identified, said the tax reduction will be applied on a monthly basis and be separate from the already reduced profit sharing rate (DUC) from 58% to 54% for this year.

Neither Pemex nor the finance ministry immediately responded to a request for comment. Earlier on Thursday, Lopez Obrador said a new agreement will come into force to further reduce the tax burden on Pemex, but he gave no details.

Last year, the government reduced the DUC, the largest payment Pemex makes to state coffers, from 65% to 58%.

The source also said the first of several capital injections, scheduled within the next two weeks, will be used to pay down debt, and that it is unlikely Pemex will issue bonds on the international market this year.

Pemex has carried out liability management of different types, including bond refinancing and bank line extensions, totaling more than $30 billion between 2019 and 2020.

Luis Gonzali, co-director of investments at Franklin Templeton Investments in Mexico, said the $5 billion will “enter and leave, without any major impact” on the company’s long-term prospects.

“Lowering taxes and capitalizing in small amounts does not solve the underlying problem: lack of infrastructure, capital supporting unprofitable projects, lack of exploration,” he said. “But it will help it survive more comfortably throughout the year.”

($1 = 20.3594 Mexican pesos)

(Reporting by Ana Isabel Martinez in Mexico City; Writing and additional reporting by Stefanie Eschenbacher; Editing by Frank Jack Daniel, Matthew Lewis and Lincoln Feast.)


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)


Mexico’s president says new agreement to help Pemex lower tax burden

MEXICO CITY (Reuters) – Mexican President Andres Manuel Lopez Obrador said on Thursday that a new agreement will come into force to once again reduce the tax burden on state oil company Pemex.

The loss-making oil giant has received vast financial support from Lopez Obrador’s government, which has made it a priority to clean up Pemex’s finances and turn around the company’s fortunes.

“The (state power utility) CFE and Pemex will continue to be supported with public financing, with the budget, for the two companies. In the case of Pemex, another agreement will come into force, a decree to reduce its tax payments to the finance ministry,” Lopez Obrador said in his daily news conference.

(Reporting by Ana Isabel Martínez; Writing by Drazen Jorgic; editing by Cassandra Garrison)


General Motors, Volkswagen halt some Mexican operations on gas shortage

MEXICO CITY (Reuters) – General Motors Co and Volkswagen AG are suspending some of their operations in Mexico due to a natural gas shortage, while Audi AG will adjust production in line with supply, the automakers said in separate statements on Wednesday.

General Motors said it was forced to halt operations at its plant in the central city of Silao on both Tuesday night and on Wednesday, and would resume once the gas supply returned to an adequate level.

The gas shortfall also prompted Volkswagen to announce it will suspend production on its Jetta model on Thursday and Friday, and on its Taos and Golf models just on Friday, the company’s Mexico unit said.

Audi said it will adjust its production levels depending on the availability of natural gas, which it uses to produce the Audi Q5 vehicle at its plant in Puebla state.

(Reporting by Sharay Angulo, Writing by Daina Beth Solomon; Editing by Rashmi Aich)