Natural Gas Prices Hit Historic $999/MMBtu High as Unrivaled Cold Strains Supply, Fuels Record Deman

[thackney]

Natural Gas Prices Hit Historic $999/MMBtu High as Unrivaled Cold Strains Supply, Fuels Record Demand
https://www.naturalgasintel.com/natural-gas-prices-hit-historic-999-mmbtu-high-as-unrivaled-cold-strains-supply-fuels-record-demand/

Natural gas futures soared Tuesday following a historic Arctic freeze that crippled much of the nation’s natural gas infrastructure as demand soared to unprecedented levels. The March Nymex gas futures contract settled at $3.129/MMBtu, up 21.7 cents from Friday. April prices lagged a bit, climbing 10.7 cents to $2.98



Cash prices remained volatile after the weekend, with next-day gas in Oklahoma surging as high as $999.00 amid the unparalleled winter blast that slammed the region. NGI’s Spot Gas National Avg. rose $18.800 from Friday’s levels to $80.760.

The American Gas Association said 151.7 Bcf of natural gas was delivered in the United States on Sunday and 149.8 Bcf was delivered on Monday, setting a record for demand over the two-day period. Monday was the second highest delivery day ever.

However, the record demand was not without its challenges. Operational issues on more than 30 natural gas pipelines, as well as numerous storage facilities and gas plants, were reported amid the multi-day stretch of bitter weather, reducing supplies as extreme cold blanketed the country’s midsection....

[thackney]

Oklahoma Natural Gas Prices Hit Fresh $1,250/MMBtu High as Industry Struggles Continue Amid Record Cold
https://www.naturalgasintel.com/oklahoma-natural-gas-prices-hit-fresh-1250-mmbtu-high-as-industry-struggles-continue-amid-record-cold/
February 17, 2021

...Next-day gas prices soared into the thousands in the Sooner State, according to NGI MidDay Price Data. Prices in some areas of the country started to retreat from the triple-digit highs experienced in recent days, but remain far above the sub-$3.000/MMBtu levels recorded earlier this month. NGI’s MidDay National Avg. was down $37.670 to $34.570.

OGT, otherwise known as Oneok Gas Transmission, next-day gas traded as high as $1,250.000/MMBtu on Wednesday, according to NGI MidDay data. It was averaging at $1,192.855, up $274.230 day/day. Prices at Enable East, also in the Midcontinent, traded as high as $500.000 but averaged at $434.270, up $134.270.

Prices in part of Texas remained north of $100.000 midweek, while Waha in the Permian Basin had topped out at $90.000 and averaged $64.215, down $140.465 from Tuesday’s levels....

[thackney]

Natural Gas Prices Slashed as Lights Mostly Back on in Texas, Though Long-Term Impacts Still Unclear
https://www.naturalgasintel.com/natural-gas-prices-slashed-as-lights-mostly-back-on-in-texas-though-long-term-impacts-still-unclear/



...A huge bearish miss in the latest government storage data sealed the drop, with the March Nymex futures contract tumbling 13.7 cents to settle the day at $3.082.

A dramatic fall also occurred in the spot gas markets, where Oklahoma next-day gas plunged back to the single-digits after surging well into the thousands on Wednesday. Texas prices also fell hard, helping to send NGI’s Spot Gas National Avg. tumbling $31.765 to $8.860.

With temperatures slowly starting to climb from the unprecedented lows experienced earlier this week, gas prices too began to normalize on Thursday. Futures action was still volatile, though, with large decreases seen early in the trading session as the latest weather models teased at a more variable, rather than downright bitter, pattern beginning next week....

[HoustonSam]

Natural Gas Prices Slashed as Lights Mostly Back on in Texas, Though Long-Term Impacts Still Unclear
https://www.naturalgasintel.com/natural-gas-prices-slashed-as-lights-mostly-back-on-in-texas-though-long-term-impacts-still-unclear/



...A huge bearish miss in the latest government storage data sealed the drop, with the March Nymex futures contract tumbling 13.7 cents to settle the day at $3.082.

A dramatic fall also occurred in the spot gas markets, where Oklahoma next-day gas plunged back to the single-digits after surging well into the thousands on Wednesday. Texas prices also fell hard, helping to send NGI’s Spot Gas National Avg. tumbling $31.765 to $8.860.

With temperatures slowly starting to climb from the unprecedented lows experienced earlier this week, gas prices too began to normalize on Thursday. Futures action was still volatile, though, with large decreases seen early in the trading session as the latest weather models teased at a more variable, rather than downright bitter, pattern beginning next week....

@thackney I'm trying to sort out my economics education here.  These incredibly high spot prices, hundreds of USD and even > 1,000 USD, compared to long term average futures prices in the 3 USD range, reflect the sudden shortage in NG availability, which in turn was due to NG production crashing when wells and pipelines froze while NG was in much-higher-than-normal demand for power generation; is that correct?

And of course a NG-fired power plant can't make power if it can't get NG.

To the extent TX NG-fired plants were not adequately winterized for the polar vortex this week, one can understand how they were suddenly shut down.  To the extent that NG was simply not available then even had they been winterized they could not have made juice for the ERCOT grid.

Why would the latter effect not have driven spot NG spikes and power shortages in other parts of the country as well?  Perhaps it did, but those events are less dramatic and hence less newsworthy.

[thackney]

I'm trying to sort out my economics education here.  These incredibly high spot prices, hundreds of USD and even > 1,000 USD, compared to long term average futures prices in the 3 USD range, reflect the sudden shortage in NG availability, which in turn was due to NG production crashing when wells and pipelines froze while NG was in much-higher-than-normal demand for power generation; is that correct?

And of course a NG-fired power plant can't make power if it can't get NG.

@HoustonSam

That is correct, there were problems with this weather from the wells, gathering lines, gas producing plants, gas pipeline, gas power plants, and other sources of power as well.  Even lost a Nuke unit and some coal production in addition to the wind turbines.

To the extent TX NG-fired plants were not adequately winterized for the polar vortex this week, one can understand how they were suddenly shut down.  To the extent that NG was simply not available then even had they been winterized they could not have made juice for the ERCOT grid.

Correct.  If we had no wind generators and all their capacity was built a Nat Gas, we would have been in a worse situation with even more lost power.  Maybe half the wind did not run but half did.

Why would the latter effect not have driven spot NG spikes and power shortages in other parts of the country as well?  Perhaps it did, but those events are less dramatic and hence less newsworthy.

Some small rise around other areas, mostly from a loss of gas coming from Texas, some faster draw down from storage, but basically the northern hubs had little problem getting the gas they needed.

The problem with Nat Gas, you cannot put much onto a truck or train and haul it to where it is needed.  Pipeline cannot reverse unless significant dollars spent and it typically would take a couple years to build it that way.  Seaway pipeline was reversed from Cushing, OK to the Texas Coast near me.  Major project just to make it happen.  It only happened because of the growth of Texas and other areas oil production made it more economical to make that import terminal into an export terminal.

[Joe Wooten]

Build more pipelines with gas turbine driven compressors

[thackney]

Build more pipelines with gas turbine driven compressors

Does not help when the wells are shut in and the gas plants froze up.

[Joe Wooten]

Does not help when the wells are shut in and the gas plants froze up.

Maybe I should also have also added in more storage facilities to the statement. There are plenty of salt domes all over the country you can turn into gas storage caverns.

[thackney]

Maybe I should also have also added in more storage facilities to the statement. There are plenty of salt domes all over the country you can turn into gas storage caverns.

They need to be here, not upstream on the pipeline.  We have plenty of places if the economics work.  We have some already but not as much as the North Midwest.

more info:
https://www.eia.gov/naturalgas/storagecapacity/

And the systems need to be rated for the cold of course.  I worked expansions on a decent sized storage facility Southeast of Houston, depleted reservoir.  I don't think we had freeze protection on anything and it could bring out over a billion CF/D.

[IsailedawayfromFR]

@thackney I'm trying to sort out my economics education here.  These incredibly high spot prices, hundreds of USD and even > 1,000 USD, compared to long term average futures prices in the 3 USD range, reflect the sudden shortage in NG availability, which in turn was due to NG production crashing when wells and pipelines froze while NG was in much-higher-than-normal demand for power generation; is that correct?

And of course a NG-fired power plant can't make power if it can't get NG.

To the extent TX NG-fired plants were not adequately winterized for the polar vortex this week, one can understand how they were suddenly shut down.  To the extent that NG was simply not available then even had they been winterized they could not have made juice for the ERCOT grid.

Why would the latter effect not have driven spot NG spikes and power shortages in other parts of the country as well?  Perhaps it did, but those events are less dramatic and hence less newsworthy.

One of the biggest problem on gas supply disruption is not the gas wells froze but that oil wells were shut in as trucks could not haul the oil off due to road conditions so wells were shut in.  We get most gas nowadays as a byproduct of oil production so if no oil, no gas.  Quite different than years ago.

[IsailedawayfromFR]

Maybe I should also have also added in more storage facilities to the statement. There are plenty of salt domes all over the country you can turn into gas storage caverns.

I used to work gas storage  systems.  You do not need salt domes.  Have used acquifers for gas storage quite well.  And they are everywhere.

[HoustonSam]

One of the biggest problem on gas supply disruption is not the gas wells froze but that oil wells were shut in as trucks could not haul the oil off due to road conditions so wells were shut in.  We get most gas nowadays as a byproduct of oil production so if no oil, no gas.  Quite different than years ago.

Thanks for the additional insight @IsailedawayfromFR; makes sense.

Personally I'm in the chemical end of things, and we have a related problem when we use a by-product or bottom stream as feedstock - cheap but not always reliable.

[catfish1957]

Maybe I should also have also added in more storage facilities to the statement. There are plenty of salt domes all over the country you can turn into gas storage caverns.

I remember huge salt domes for NG near Mt. Belivieu and Dayton.  I guess they still are in use.

[thackney]

I used to work gas storage  systems.  You do not need salt domes.  Have used acquirers for gas storage quite well.  And they are everywhere.

Those need dehy units for withdraws.  And subject to the same freezing problems.  More commonly used are depleted reservoirs.  Which also have the same need.

Underground Natural Gas Storage Capacity
https://www.eia.gov/dnav/ng/ng_stor_cap_dcu_NUS_a.htm

But it would take a lot to compensate for most of the lost production.  Would they have an economic play down here in the volume that would make a difference?

[thackney]

I remember huge salt domes for NG near Mt. Belivieu and Dayton.  I guess they still are in use.

Most of that is storing Natural Gas Liquids:  Ethane, Propane, etc.  That is where I work.

[IsailedawayfromFR]

Thanks for the additional insight @IsailedawayfromFR; makes sense.

Personally I'm in the chemical end of things, and we have a related problem when we use a by-product or bottom stream as feedstock - cheap but not always reliable.

That is similar.

[IsailedawayfromFR]

Those need dehy units for withdraws.  And subject to the same freezing problems.  More commonly used are depleted reservoirs.  Which also have the same need.

Underground Natural Gas Storage Capacity
https://www.eia.gov/dnav/ng/ng_stor_cap_dcu_NUS_a.htm

But it would take a lot to compensate for most of the lost production.  Would they have an economic play down here in the volume that would make a difference?

Aquifers would not be used by gas and electric companies if they were not reliable.  Some of the ones I knew about have been in usage in Michigan for over 50 years. 

[IsailedawayfromFR]

Thanks for the additional insight @IsailedawayfromFR; makes sense.

Personally I'm in the chemical end of things, and we have a related problem when we use a by-product or bottom stream as feedstock - cheap but not always reliable.

You might find this interesting as well. @HoustonSam

http://www.gopbriefingroom.com/index.php/topic,429049.msg2384088.html#msg2384088

[Fishrrman]

thackney wrote:
"Does not help when the wells are shut in and the gas plants froze up"

That's easily solved.

Time to bring back these:


And these:


... in large enough numbers and capacities to ensure that a good reserve is kept on-hand for the winter season.

[thackney]

thackney wrote:
"Does not help when the wells are shut in and the gas plants froze up"

That's easily solved.

Time to bring back these:


And these:


... in large enough numbers and capacities to ensure that a good reserve is kept on-hand for the winter season.

Those are not used to store large volumes of natural gas.  They won't withstand the pressure required for useful volumes. 

Mostly it is stored in salt cavern, depleted reservoirs or aquifers.  Texas has more gas storage than most states, but no where near enough withdraw rate to meet the need of this past week.

https://www.rrc.state.tx.us/media/h2oos2lw/gsd-gas-storage-report-112020.pdf

Typically, they also take Dehydration units to get the Nat Gas dry enough to meet the required specification to go into the pipeline.  Those are subject to freezing up, same type of problem that happen at gather sites and gas plants feeding the same pipelines.

And it has to be profitable to operate year after year, not just build it and hope for another heavy freeze that only comes every few decades or so.

Texas has a decent amount of Natural Gas Storage, in underground salt caverns, depleted reservoirs and aquifers.  But the flow rate to bring gas out of them can be restrictive.  Typically they need something like a Dehydration unit to dry the Gas down to the proper specification to go into the same pipelines that move gas from the gathering systems and Nat Gas Plants.  And those dehy units have to handle water and are subject to freeze up, just like all the other places that should and did not move gas.

This storm shut down 16 BILLION Cubic Feet per Day of Nat Gas production, most of that in Texas.

https://www.naturalgasintel.com/natural-gas-played-starring-role-in-texas-energy-crisis-analysts-find/

It is not easily solved.  There is no simple and easy fix to a storm that is so far below normal temperatures for such a large area for so many days.

It can be prevented.  Much of it likely will get prevented in the next decade.  But the entire system in not going to be bullet proof against such a storm.  For us it was like a hurricane that covered the entire state and stayed for most of a week.