Most if not all of the big Houston-area energy trading shops are setting up satellite offices in other locations in order to try to maintain business operations Thursday and Friday in the event that Hurricane Rita draws a bead on their city. With maximum sustained winds of 165 mph, Rita was classified as a Category Five storm Wednesday afternoon, the most dangerous hurricane category.
Meanwhile, spot prices ignored the screen’s downturn Tuesday and instead paid attention to growing supply shortfalls from the Gulf Coast and pipeline capacity constraints in continuing to shoot higher Wednesday between about 35 cents and $2.70 in what a Northeast marketer called “very thin trading.” Florida Gas Zone 3 again was the cash market’s hot spot, hitting a peak quote of $19.50 and averaging a little less than $18. Nearly all Louisiana points averaged around $14 or more.
The marketer expects most people will try to maintain regular trading practices Thursday and Friday, but said there will be a lot of ambiguity in the market. “Liquidity will be at a premium for the next two days,” he predicted.
With Mayor Bill White having urged as many Houston businesses as possible to close voluntarily starting Thursday to allow employees to evacuate (see related story), there are likely to be some energy trading adjustments. But because Nymex will conduct futures business as usual through Friday, many cash traders will try to do the same on their part, one source said.
However, a Calgary-based producer disagreed to some extent, saying he looks for “quite a lot of deals” Thursday to be for four-day flows. He said several online services have told customers they will post trades for a four-day strip on Thursday, although it will be possible to do a “custom instrument” deal for one day at a time if desired on at least one of the services.
Even with Nymex still active, Friday “is going to seem something like a holiday” in cash gas trading, the producer continued. Sure, there will be some new deals done Friday but not as many as usual, he said. Because of the hurricane confusion, some people did balance-of-month transactions Wednesday, he added.
NGPL doesn’t have very much gas coming to the Midwest from the Gulf Coast in the summer, so its force majeure notice (see Transportation Notes) isn’t as serious for the Chicago market as it would be in winter, the producer said. October Chicago basis strengthened a bit Wednesday to minus 8-10 cents., he said.
A Gulf Coast producer had already raised the prospect that some counterparties might agree to have Thursday’s deals be for flows through the weekend (see Daily GPI, Sept. 21).
A Houston-based marketer said he didn’t do any himself, but he knew of some traders who did indexed deals Wednesday that would be effective through Monday. However, what he saw on an online trading service was for Thursday-only flow, he said. The marketer called it “a distinct possibility” that near-normal cash trading will be done Friday, but he noted that he would already be in a different location by Thursday. He added that a weather consultant had told his company that the atmospheric high-pressure ridge holding Rita far to the south as it continues its traversal of the Gulf of Mexico is stronger than expected, so it may move the hurricane’s landfall farther south of Houston than previously believed.
New York City-based Weather 2000 agreed that the ridge, which spreads from Texas across Gulf Coast states, is “formidable,” but added that it can be breached by a powerful storm such as Rita. The company expects Rita, which had become a Category Four hurricane by Wednesday morning, to reach Category Five later today. Most computer models were pointing to a Texas coast landfall somewhere between Port Lavaca and Galveston, a Weather 2000 meteorologist said, “but that could change at any time.”
As of 4 p.m. CDT, the National Hurricane Center’s projected track had Rita coming ashore slightly northwest in the Matagorda Bay area of Texas. The eye of the storm was about 600 miles east-southeast of Galveston, TX and about 700 miles east-southeast of Corpus Christi, TX. Rita was expected to keep moving toward the west at nearly 13 mph over the next 24 hours. A hurricane watch was issued from Port Mansfield, TX to Cameron, LA.
With shut-in statistics being combined now for Hurricanes Katrina and Rita, offshore production outages were mounting rapidly. Minerals Management Service said a total of 4,713.33 MMcf/d in shut-ins were reported to it Wednesday (see related story) — a jump of 1,231.62 MMcf/d from the previous day.
The gas industry, already having major problems with Hurricane Katrina having paralyzed three big processing plants in southeastern Louisiana for what may be a protracted length of time, isn’t likely to see too much processing woe added by Rita, according to Doug Gill, editor of Hart Energy Publishing’s Gas Processors Report. West and north of Corpus Christi, Enterprise Products Partners operates a big system of seven linked natural gas liquids (NGL) fractionation plants that it received in the GulfTerra merger. Duke Energy Field Services also has three plants in that area, Gill said.
ExxonMobil’s King Ranch Plant is a major processor south of Corpus Christi, he said. ExxonMobil also used to have a major facility in the Katy Plant west of Houston, but it was closed down for economic reasons a couple of years ago. He mentioned a large plant operated by Copano on the Kinder Morgan Texas pipeline west of Houston as another possible target of the storm’s wrath.
However, “all of the ones I’ve just named are a fair distance inland” and thus are not likely to be as susceptible to flooding as the southeast Louisiana facilities, Gill said. The biggest threat to Texas processing is probably at Williams’ Markham Plant (300 MMcf/d), which is on the coast in the Matagorda Bay area and takes gas from several offshore platforms, he said.
Other major gas processing plants in the coastal area along the projected route of the hurricane include the Matagorda plant (250 MMcf/d) in Matagorda County and Hilcorp’s Old Ocean plant (175 MMcf/d) in Brazoria County, according to data from the Energy Information Administration.
Significant air conditioning demand will largely remain confined to the southern tier of states Thursday. A cold front will be ending a late summer heat wave in the Midwest and is due to arrive in the Northeast Friday, according to The Weather Channel. Temperatures will be moderately seasonal in most of the West, although highs would only be in the 40s in the vicinity of Yellowstone National Park, it said.
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