WINTER HITS U.S. INDUSTRY, STRAINS GAS SUPPLY

Jan. 1, 1990
A record breaking cold front before and during the weekend of Dec. 23 shut down several major refineries and petrochemical plants in the U.S. Gulf Coast region and sent demand for natural gas and propane soaring in many regions. A prolonged blast of arctic air shattered low temperature records in more than 125 cities from the Rocky Mountains to the East Coast. Weather related problems, combined with higher demand for heating oil and an explosion and fire at Exxon Co. U.S.A.'s Baton Rouge,
Rick Hagar
Gulf Coast News Editor

A record breaking cold front before and during the weekend of Dec. 23 shut down several major refineries and petrochemical plants in the U.S. Gulf Coast region and sent demand for natural gas and propane soaring in many regions.

A prolonged blast of arctic air shattered low temperature records in more than 125 cities from the Rocky Mountains to the East Coast.

Weather related problems, combined with higher demand for heating oil and an explosion and fire at Exxon Co. U.S.A.'s Baton Rouge, La., refinery, caused product spot prices to jump.

The problems were expected to be short term, however, with prices returning to normal in February.

Most of the plants are expected to be back on stream this week.

Total Gulf Coast crude charge capacity is 5.93 million b/cd.

Freezing weather also curtailed some oil and gas production in areas that included the Gulf Coast.

At least one major gas pipeline curtailed deliveries to firm customers because of lost supply from the Gulf of Mexico.

Producers, meanwhile, said massive withdrawals from natural gas storage during the cold snap may result in higher than expected natural gas prices during the months this year when storage is refilled.

DOWNSTREAM FREEZE

Several refiners reported plants shut down by the weather.

Shell Refining & Marketing Co.'s 220,000 b/d Norco, La., and 225,000 b/d Deer Park, Tex., refineries were shut down Dec. 22, and throughput at its 286,000 b/d Wood River, Ill., refinery was curtailed.

All three refineries had broken water and steam lines and instrument controls damaged by the cold temperatures.

As of Dec. 27, the Texas and Louisiana refineries were still shut down and the Illinois refinery curtailed.

A spokesman said Shell had no idea how much longer the units would be shut down and curtailed.

The company was meeting customer product demand as of midweek last week but would be forced to consider allocations if the plants remained shut down.

Mobil Oil Corp.'s 145,000 b/d Chalmette, La., refinery shut down Dec. 22 because of operating problems. It was expected back on stream this week.

Star Enterprise's 225,000 b/d Convent, La., refinery had some small units shut down during the weekend, but that did not affect crude runs.

Star Enterprise's 220,000 b/d Port Arthur, Tex., refinery was running at about 90% of rated crude throughput capacity.

Elsewhere in the Houston area, the cold weather either curtailed or shut down Amoco Oil Co.'s 415,000 b/d refinery, Lyondell Petrochemical Co.'s 270,000 b/d refinery, and Hill Petroleum Co.'s 100,000 b/d refinery.

In Louisiana, Marathon Petroleum Co.'s 255,000 b/d Garyville refinery was shut down by the weather.

Several petrochemical plants also were shut down.

PREPARATIONS WORKED

Some refiners avoided major damage to their plants.

Dennis Huckaby, operations manager at Mobil's 275,000 b/d Beaumont, Tex., refinery, said damage at his plant was minimized by lessons learned during a similar freeze in 1983.

"We had water pipes and instruments freeze," he said, "but we were able to weather all that."

The biggest problem this time, he said, was the hundreds of 6-8 in. valves that were damaged, similar to what happened in 1983.

"We anticipated this and got an order coming in before the storm," he said. "I bet some are having a tough time getting parts now."

Another lesson learned was the importance of people resources.

In 1983, said Huckaby, a skeleton crew was working when the storm hit. This time the plant had scheduled more people to work despite the Christmas holiday season.

"We were much better prepared having critical instrumentation insulated," he said. "We knew we were going to lose such things as firewater spray systems and safety washers, so we drained them before the storm hit.

"They're now all back in operation. In 1983 it took 3 weeks to get them up."

HEATING OIL SUPPLIES

The futures price of January deliveries of heating oil jumped a 1 day record 10.74/gal Dec. 26 on the New York Mercantile Exchange. Heating oil supplies had been curtailed by Exxon and Mobil.

Mobil put its heating oil customers on allocation Dec. 21. Until that time, the company had been supplying more than 200% of its historic volumes for December.

A spokesman said Mobil's customers were allocated 48% of their 1988 supply for the last 10 days of 1989.

The problems at Shell's refineries had no direct effect on heating oil supplies because Shell is not a direct supplier of heating oil.

The refineries, however, do manufacture components that others use to process heating oil.

John Cochener, a senior consultant at Pace Consultants Inc., Houston, said the effect on the supply/demand balance will be normalized by February because the damage caused by the weather was not catastrophic.

In addition, winter temperatures in Europe have been warmer than normal. Heating oil prices in Europe are much less than in the U.S.

"I think you're going to see a lot of product imports heading this way," he said.

GAS SUPPLY PROBLEMS

Gas demand for firm delivery customers, for the most part, was met during the cold snap.

Texas Eastern Transmission Corp., however, reduced deliveries by 500 MMcfd Dec. 23 when frozen wells in the Gulf of Mexico cut off supplies. All interruptible deliveries were suspended, as well as some firm deliveries due to lack of supply.

As of Dec. 27, an additional 200 MMcfd of Texas Eastern supply had gone back on stream in the gulf.

Panhandle Eastern Pipe Line Co. had no operational problems during the cold snap. But Trunkline Gas Co., which like Texas Eastern transports gulf gas, had to cut back 500 MMcfd on deliveries Dec. 22.

Only Trunkline's interruptible customers were affected.

Natural Gas Pipeline Co. of America had to curtail interruptible withdrawals from storage Dec. 21 and interruptible transportation Dec. 22.

Some firm transportation was suspended when NGPL could not confirm gas entering its system on the supply end.

Tenneco Gas suspended interruptible deliveries Dec. 21.

In addition to drawdown of storage and increased demand, said a spokesman, the cold weather had frozen off some supply.

As of Dec. 27, interruptible deliveries were still suspended, except for isolated back-hauls and short hauls that did not affect the company's ability to meet its firm obligation..

In Boston, the New England Gas Association said extreme cold weather put a strain on gas supplies throughout its service area. Propane was in short supply. The association, whose members serve 473 communities, asked customers to turn down furnace thermostats and reduce their use of hot water.

In Charlotte, N.C., Piedmont Natural Gas Co. also asked its 390,000 customers to conserve fuel in anticipation of record demand.

"In my 30 years in the natural gas industry I have never experienced a prolonged December arctic cold wave of this magnitude," said Piedmont Chairman and Pres. John H. Maxheim.

"It's not a matter of available supply but one of limited interstate pipeline transportation capability."

In Clarksburg, W.Va., CNG Transmission Corp. was meeting all customer demands even though deliveries of 5.682 bcf for the 24 hr ending at 8 a.m. Dec. 22 set a record. The company's deliveries had topped the 5 bcfd mark several times since Dec. 15.

Consumer Power Co.'s Marysville, Mich., underground storage terminal shipped propane to Maine, Kentucky, New York, and Midwest locations in record volumes. The site stores propane for seven major distributors.

By Dec. 26 outbound truck shipments averaged 26/day for the month. Shipments hit a 24 hr record of 46 truckloads Dec. 16.

PRODUCTION PROBLEMS

The cold snap cut some production capacity in the Gulf Coast region.

Texaco U.S.A. said the cold weather had no significant effect on its Gulf of Mexico production. However, it did shut down much of the company's inland waters production.

Ken Wisdom, manager of Texaco U.S.A.'s eastern region onshore producing division, said inland waters froze over.

The only way to get to wellheads and tank batteries was by air boat. There were not enough air boats available to service the wells.

He said 915 MMcf of gas and 95,000 bbl of liquids production was deferred by the freeze.

In some areas of South Louisiana, there was ice as far as 12 miles offshore.

Some of the company's personnel got trapped at operations by the ice and had to be rescued by air boat and helicopter.

When the ice broke up last week, said Wisdom, the ice pushed wellheads over and took out piling and flow lines.

He expected to have most of the wells back on stream this week.

"I've been working here 32 years, and I've never had anything close to this before," he said.

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