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More Natural Gas Well Freeze-Offs Expected As E&Ps Hunker Down

Natural gas well freeze-offs in the Rocky Mountains and San Juan Basin on Thursday were estimated at about 0.5 Bcf/d, and pipeline operators continued to issue critical notices as Winter Storm Cleon delivered a deadly punch of snow and ice that eventually could stretch more than 1,000 miles from the Plains into Central Texas and east to the Ohio River Valley.

The storm also was threatening crops as far west as California.

"This is going to be overwhelming in terms of power outages," said The Weather Channel's storm tracker Jim Cantore. "I would be surprised if there aren’t a million-plus" outages. "Plan and prepare to hunker down," said Wunderground.com winter weather expert Tom Niziol.

Thursday morning about 500 MMcf/d was being affected by freeze-offs in the Rockies and San Juan Basin, according to Genscape Inc. analyst Wei Chien. Gas production in the Rockies had dropped by 0.2 Bcf/d on Wednesday, she said. "Rockies demand increased by 0.8 Bcf/d in the past four days with the new cold front. Demand increase will spread eastward as the cold weather starts affecting other regions."

Genscape analyst Rick Margolin told NGI that “market participants are also speculating freeze offs will hit West Texas/Permian and stretch up into the Anadarko [basin] with temps in those regions falling to 10-15 degrees below average for this time of year...Daytime highs are forecast to remain sub-freezing through the weekend."

There also may be problems if pipeline compressors run on electricity and there is a power outage. Some have backup generators.

At El Paso Permian in West Texas, the decreased pipeline flows have had a strong response in the price of gas with NGI's Daily GPI El Paso Permian Index rocketing 45 cents over the past four days. That is quite a change for a producing region, where prices tend to be less volatile than consumption areas like the Northeast, where winter prices are often a roller-coaster ride.

In anticipation of "extreme weather conditions and possible reduced operational flexibility," Panhandle Eastern Pipe Line Co. LP said Thursday it was requiring all delivery point operators to minimize overtakes and all receipt point operators to minimize under-deliveries into the pipeline's system.

Intraday scheduling reductions were to be implemented to ensure that nominations match flowing quantities, Panhandle said. "Similarly, all storage customers are requested to stay at or below their maximum daily withdrawal quantity," the pipeline told customers in a notice. "Storage customers should adjust flowing volumes to remain at or below these limits." Panhandle said it might limit "auto-unpark" nominations on the pipeline for the duration of the extreme weather. Limits would be evaluated daily, it said. Panhandle operates a 6,500-mile system and can deliver 2.8 Bcf/d of gas to Midwest and East Coast markets.

Southern Star Central Gas Pipeline Inc. said with "colder-than normal weather forecasted across the system this weekend and into next week," it was issuing a system advisory effective for gas day Friday. Customers with storage agreements should "ensure that their flowing gas to storage gas withdrawal relationship is per their contractual agreements, imbalance makeup for gas due others (Southern Star off-system) will be available on a limited basis, and IT services may be at risk."

Transwestern Pipeline Co. LLC on Thursday declared a low line pack same day alert day for “at least” all day west of Thoreau, NM, in the San Juan Basin where it has a compressor station -- an area that reportedly had freeze-offs.

Because of the impending cold weather and anticipated high demand, Algonquin Gas Transmission (AGT), which runs up the Northeast and supplies gas to New England, is requiring all shippers and point operators to carefully review demands for gas and schedule gas consistent with daily needs and to tender and receive gas consistent with confirmed nominations until further notice. AGT requires all delivery point operators to keep actual daily takes out of the system equal to or less than scheduled quantities regardless of their cumulative imbalance position until further notice, and it is requiring all receipt point operators to keep actual daily receipts into the system greater than or equal to scheduled quantities regardless of their cumulative imbalance position until further notice.

In addition, AGT is requiring all power plant operators to provide information mandated by Federal Energy Regulatory Commission Order No. 698. Information required includes the hourly consumption profile of directly connected power generation facilities.

Northern Natural Gas extended a system overrun limitation through Monday.

For energy operators, the storm could impact operations from the Bakken Shale through the Permian Basin and Barnett Shale of Texas, as well as into the Anadarko Basin and points East.

An ice storm warning in Texas was in place until 6 p.m. Friday in the southeastern and south-central parts of the state, where up to three-quarters of an inch of ice was possible. Gov. Rick Perry activated the Texas National Guard, which deployed equipment and emergency resources to North Texas. Across all of the Plains states, as well as all of the counties in Oklahoma, storm warnings or advisories were in effect.

The Arctic storm, which began to blow into the United States on Tuesday, already had dumped record amounts of snow throughout the West and Northern Plains.

In North Dakota on Thursday morning, 10 inches of snow was reported in Rhame, with nine inches near Carrington and eight inches at Buffalo, near Fargo. Wyoming already had 30 inches of snow Thursday at the Blind Bull Summit and 26 inches at the Kendall Ranger Station, both in the western part of the state. Eighteen inches of snow had accumulated in Utah's Deer Valley.

In Colorado, 30 inches of snow had fallen in the northwestern part of the state at Douglas Pass along Highway 139, and 25 inches had accumulated in west-central Colorado near Gothic. Santa Fe, NM, reported five inches of snow.

A spat of warm weather in the Northeast, where in the Appalachian region temperatures have reached above 50 degrees for much of this week, had operators relaxed compared to their counterparts in North Dakota and the Midcontinent.

Executives attending the Ohio Oil and Gas Association’s Oilfield Expo and Safety Conference in Cleveland said they know a thing or two about freeze-offs and aren’t overly concerned at this point about winter weather affecting their operations.

One executive, who runs a junior exploration and production company in Ohio, said equipment used in the region is better rated to handle cold weather, and any freeze-offs that might occur in a dry gas well, for instance, have no effect on production guidance because operators have already factored cold weather into the mix.

“I don’t think winter weather has a fundamental impact on these guys up here. This is very sophisticated equipment and these are very sophisticated techniques,” said Ohio Oil and Gas Association Executive Vice President Thomas Stewart.

The National Weather Service has predicted an equal chance for precipitation at above, near or below averages in the Northeast this winter, while temperatures are expected to be in line with the norm at this time of year. The wintry storm last week dumped up to 10 inches of snow on parts of western Pennsylvania and eastern Ohio, where drillers are active in the basin, but did little to phase operations here, Stewart said.

The main challenge remains moving dry gas through pipelines at this time of year, he added. “Moving gas in cold weather always has its challenges, but we’re still prepared for it. When demand picks up, that’s an issue because it changes the hydraulics of the pipeline system. All you can really do is keep an eye on it.”

Temperatures in the Northeast are expected to drop into the mid-30s heading into the weekend.

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