Icy Weather Threatens Oil Output From Texas To Canada

by
Reuters
Severe cold weather sweeping across the mid United States is threatening to curtail booming oil production, if only briefly, as it disrupts traffic, strands wells and interrupts drilling and fracking operations.

Icy Weather Threatens Oil Output From Texas To Canada

Severe cold weather sweeping across the mid United States is threatening to curtail booming oil production, if only briefly, as it disrupts traffic, strands wells and interrupts drilling and fracking operations.

Weather stations across the U.S. Midwest recorded some of the coldest temperatures in two decades this past weekend, with many schools closed and flights delayed. Arctic cold air was also spreading across Texas on Monday with temperatures in the oil country near Midland approaching a record low that was set more than 40 years ago.

But forecasts from weather site AccuWeather say temperatures will swing back to normal levels in Texas and North Dakota by Wednesday, limiting the cold front's impact on oil and gas production.

Output in North Dakota, the second-largest oil producing state, usually ebbs in winter as producers scale back on drilling and well completion services such as fracking, which pumps a slurry of water, sand and chemicals into wells.

"It is so cold that they cannot produce at full capacity, if at all. That should support prices," said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.

Some operators say they do not expect lasting problems from the spate of cold weather. Hess Corp, among the major producers in the Bakken oil patch, said it doesn't foresee a "significant impact" on production although oil trucking services have slowed because of icy road conditions.

Other producers, such as Continental Resources and Marathon Oil, have yet to disclose the weather's impact on their operations.

U.S. crude oil prices gave up early gains on Monday, and fell 54 cents to $93.42 a barrel.

Across the border, temperatures in northern Alberta, home to Canada's vast oil sands, dropped as low as minus 36.4 degrees Fahrenheit (minus 38 degree Celsius) last week, pushing Canadian heavy crude prices to five-month highs.

WINTER IN THE BADLANDS

Winters are especially brutal in North Dakota. Although temperatures average about 13F (minus 11C) between December and February, winter storms can send that number well below 0F (minus 18C). Oil wells and feeder roads are usually shut as storms deposit snow.

The National Weather Service has issued warnings for life-threatening wind chills in western and central North Dakota, the heartland of the oil boom, on Monday, with temperatures as low as minus 60F (minus 51C) expected.

Aside from its impact on fracking operations, the Arctic cold can also curb oil-trucking traffic in a state where producers rely on trucks to move oil from wells to gathering locations. And although crews are used to working through the biting cold of North Dakota's winters, they are unlikely to operate in conditions that may endanger their lives.

In December, a drop to minus 40F (minus 40C) in North Dakota slowed some production, officials said. A year ago, a winter storm dubbed "Gandolph" cut that month's oil production by 4.2 percent, according to the North Dakota Industrial Commission.

Still, AccuWeather's forecasts show temperatures swinging back to normal levels later this week as westerly winds bring a warmer air mass from the Pacific Ocean to the plains in the U.S. Midwest.

"We're going to see a turnaround and temperatures will recover across the upper and lower plains by January standards," said Paul Pastelok, senior meteorologist at AccuWeather.

Still, concerns lingered in Texas where the power grid operator issued an emergency alert early Monday as consumers cranked up their heaters to escape the cold weather blanketing the state.

Freezing temperatures affected production in the Permian Basin in west Texas in December, with Pioneer Natural Resources and other companies reporting cuts in their oil and gas output.

Gas production in the Marcellus Shale in Pennsylvania may emerge unscathed this week even as frigid temperatures bear down on eastern states. Range Resources Corp, the second-largest producer of natural gas in Pennsylvania's Marcellus, said on Monday it does not expect the weather to affect production.