Bloomberg News

Arctic Cold Cuts Fuel Supplies as Refineries to Pipelines Freeze

January 07, 2014

U.S. Weather

A woman bundles up against the cold on the morning of January 7, 2014 in New York, United States. Photographer: Andrew Burton/Getty Images

Record cold weather pummeled energy infrastructure across the U.S., prompting gas pipeline operators to reduce flows, fuel terminals to shut loading racks and refineries to scale back production.

The cold snap pushed oil prices higher for a second straight day and boosted natural gas on the spot market yesterday to a 17-month high. Temperatures in several cities across the eastern half of the U.S. dropped to record lows, with New York’s Central Park hitting 4 degrees Fahrenheit (minus 16 Celsius) yesterday, breaking a mark for the date set in 1896, according to AccuWeather Inc. in State College, Pennsylvania.

Flows on all natural gas pipelines into New England from further west and south were constrained yesterday, as were flows into New York, the Energy Information Administration, the Energy Department’s statistical arm, said in a report.

“The very cold temperatures widespread from Chicago east are driving up demand for natural gas,” as well as prices for the fuel, said Tyson Brown, a statistician with the EIA in Washington. “Temperatures look to get a little bit more normal and ease off through the rest of the week.”

Kinder Morgan Inc., based in Houston, declared forces majeures in Alabama after a power failure and Georgia after a compressor outage, the company told shippers in notices. Other gas pipeline operators also declared forces majeures due to outages in Pennsylvania, Illinois and Utah.

Production of natural gas dropped at wells in the U.S. Rockies, the Midcontinent, the Gulf Coast and the Northeast, Luke Larsen, an analyst at LCI Energy Insight, an energy analysis and consulting company in El Paso, Texas, said by e-mail yesterday.

Force Majeure

Kinder Morgan also reported a force majeure yesterday at the Argo, Illinois, ethanol terminal, a Midwest hub for the fuel, as ethanol futures advanced.

“At some point you have to have the gasoline blend with the ethanol, and that line from the ethanol tank to the rack is where you see a lot of those issues where it gets frozen,” said Eric Rosen, vice president of sales, supply and trading for petroleum marketer Papco Inc., based in Virginia Beach, Virginia.

Instruments that control flow have failed and products and additives have thickened and jelled in the lines at fuel terminals, said Mark Anderle, a trader at Truman Arnold Cos., a wholesaler based in Dallas. Anderle said his company has had to source some fuel from Tennessee and Mississippi.

Terminals Jammed

Midwest fuel terminals are jammed from greater demand for heating oil and gasoline as drivers keep tanks filled and run engines longer to warm up or during shopping trips, said Jeff Lykins, chief executive officer and president of Lykins Cos., a Milford, Ohio-based integrated downstream petroleum marketer that operates in 15 states.

Lykins said that in Ohio, his company was so busy he received waivers from the state to extend hours-of-service rules for drivers through Jan. 17.

“There’s just so much usage that it’s just taking longer to get trucks loaded and turn trucks around,” Lykins said.

Shutdowns were reported at refineries with at least 800,000 barrels a day of capacity.

PBF Energy Inc. (PBF:US)’s 185,000-barrel-a-day Paulsboro refinery in New Jersey shut most production units yesterday after a loss of steam, Michael Karlovich, a spokesman for the company in Parsippany, New Jersey, said by telephone yesterday. The company wasn’t sure whether the loss was related to weather, he said.

Marathon, Valero

Valero Energy Corp. (VLO:US)’s plant in Memphis, Tennessee, had instruments freeze and units trip offline, a person familiar with operations said. The 195,000-barrel-a-day plant was running most units yesterday after a system shutdown due to low temperatures, said the person, who asked not to be identified because the information isn’t public.

Marathon Petroleum Corp. (MPC:US)’s 114,000-barrel-a-day Detroit refinery restarted several units yesterday after shutting them when low temperatures caused a loss of instrument air, Jamal Kheiry, a Findlay, Ohio-based company spokesman, said by e-mail.

Exxon Mobil Corp. (XOM:US)’s 238,000-barrel-a-day Joliet, Illinois, refinery was operating normally after having unidentified problems with process units because of extreme cold, Tricia Simpson, a spokeswoman at the plant, said by e-mail yesterday. Alon USA Energy Inc.’s Big Spring, Texas, refinery similarly restored operations after equipment froze up, a filing with state regulators showed.

Korea National Oil Corp.’s 115,000-barrel-a-day plant in Come-by-Chance, Newfoundland, was trying to restart after an island-wide power failure in the deep cold, Gloria Slade, a spokeswoman at the plant, told CBC News.

Colonial Pipeline Co.’s system was operating normally yesterday after experiencing limited power failures because of the weather, Steve Baker, an Alpharetta, Georgia-based spokesman for the company, said by e-mail. The Colonial system transports 2.4 million barrels a day of refined fuel on its 5,500-mile (8,900-kilometer) system that connects the Gulf Coast to the East Coast.

To contact the reporters on this story: Eliot Caroom in New York at ecaroom@bloomberg.net; Dan Murtaugh in Houston at dmurtaugh@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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Companies Mentioned

  • PBF
    (PBF Energy Inc)
    • $25.99 USD
    • 0.15
    • 0.58%
  • VLO
    (Valero Energy Corp)
    • $49.79 USD
    • 0.43
    • 0.86%
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