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Arctic cold snap cuts US fuel supply as processing operations freeze

01.08.2014  | 

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

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By ELIOT CAROOM & DAN MURTAUGH

(Bloomberg) -- Record cold weather pummeled energy infrastructure across United States, prompting gas pipeline operators to reduce flows, fuel terminals to shut loading racks and refineries to scale back production.

Temperatures in several cities like New York’s Central Park hit 4 degrees Fahrenheit (minus 16 Celsius),  according to AccuWeather Inc. in State College, Pennsylvania.

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

Kinder Morgan, 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 United States Rockies, the Midcontinent, the Gulf Coast and the Northeast, Luke Larsen, an analyst at LCI Energy Insight, said by e-mail.

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, vP of sales, supply and trading for petroleum marketer Papco, 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, 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, CEO and President of Lykins.

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 January 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 bpd of capacity.

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

Marathon Petroleum’s 114,000 bpd Detroit refinery restarted several units after shutting them when low temperatures caused a loss of instrument air, Jamal Kheiry, company spokesman, said by e-mail.

Colonial Pipeline’s system was operating normally yesterday after experiencing limited power failures because of the weather, Steve Baker, a spokesman for the company, said by e-mail. The Colonial system transports 2.4 MMbpd of refined fuel on its 8,900 km system that connects the Gulf Coast to the East Coast.



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