EIA Data Suggests 5% Decline in Texas Natural Gas Production – Not 25% As Some Outlets Reported

January 7, 2022

Bloomberg Corrects Gross Exaggeration of Emissions Related to Cold Weather (Corrects 1 Billion cubic feet to 1 Million cubic feet)

AUSTIN – Being quick to blame and slow to listen might get headlines, but it doesn’t deliver facts that are needed to make thoughtful decisions to protect the lives of Texans.

Recent media reports and industry hacks have been exaggerating data about the natural gas system related to the recent cold weather. There are no official daily reports of actual flows of natural gas – they are delivered monthly. However, analysts can offer estimates based on market activity, the same type of activity sellers and buyers of natural gas use to make their daily decisions.

Recent estimates of natural gas production vary, as should be expected because of the assumptions that go into every estimate. They also vary because not every analyst is analyzing the exact same data, areas or timeframes.

Based on just-released data from the U.S. Energy Information Agency (EIA), IHS Markit estimates weekly average natural gas production in the Permian Basin in West Texas and Southeast New Mexico fell by 0.8 Bcf/d (5%) week-over-week. The week-over-week time period analyzed is December 22-29 and December 29-January 5.

RBN Energy issued comments on the storm this past Monday. RBN looked at Permian data that includes both Texas and New Mexico and stated the previous week production levels were near 14 Bcf/d and over the weekend declined to 10.89 Bcf/d, a decline of 3.11 Bcf, representing a reduction of 22%. RBN data attributed the decline to both cold conditions and high winds, which are often a factor of declined production in the Permian, not just during cold days.

Whatever the actual number is for all of Texas when all producing basins are included, the drop in natural gas production is not unique to Texas nor was the Texas production decline anywhere near a major issue for overall gas availability for those who plan ahead and utilize the vast amount of natural gas storage (544 Bcf of working capacity). Otherwise, the market would have reflected a shortage in the spot-pricing, the real test of availability. Important to this conversation and the system is something we have consistently stated since the Uri discussions: some variation in production occurs with sudden temperature changes – these are field operations, not controlled factory settings.

Texas usually produces about 25 Bcf/d of natural gas. Natural gas used for electricity generation is typically only about 4 Bcf/d, meaning 75% of the natural gas produced in Texas goes toward purposes other than electricity generation. This other 75% can be called on by generators if they want to purchase it. For speculation purposes, let’s assume Texas experienced a total reduction during the 3-day cold weather of 20% (much higher than EIA estimates of 5%), that leaves 20 Bcf/d, five times as much gas as is used for electricity generation, plus hundreds of billions of cubic feet of natural gas in storage for those who choose to contract for it and purchase it.

To further confuse what happened during the recent cold weather event, Bloomberg initially reported 1 billion cubic feet (Bcf) of natural gas was emitted during this period, which created even more media hyperbole about the impact of the cold weather. Bloomberg rightly issued a correction that the 1 billion cubic feet was actually 1 million cubic feet – this is a significant error. TCEQ can and will investigate this fully but initial reports confirm this should be within normal operating expectations and the impact is minimal.

Even Bloomberg, with all of its catastrophizing, shows a similar amount of natural gas available as was available a year ago. Thus, no crisis.

In conclusion, the data confirms the following important points that provides a more complete picture of Texas natural gas production:

  1. Texas’ drop in natural gas production during the January 2022 cold weather is not abnormal and did not lead to emergency conditions. As those who are familiar with upstream production understand, some variation in production occurs with sudden temperature changes – these are field operations, not controlled factory settings. Because of the complexities of the system, these drops in natural gas production when fields experience extreme weather are within expected operating ranges.
  2. The drop in natural gas production was not unique to Texas – other states and regions similarly experienced natural gas production drops.
  3. The drop in natural gas production was not unique when looking at historically similar temperature drops and its impact on natural gas production. Across the U.S., over the years, typical fluctuations are normal and expected.
  4. Even with the recent drop associated with the January 2022 cold weather, Texas produced comparable natural gas to a year ago.
  5. Even with the recent drop associated with the January 2022 cold weather, Texas produced more natural gas than is needed for electricity generation in the state.
  6. Ultimately power generators are responsible for producing electricity. Multiple options exist to ensure the fuel that is needed for electricity generation is available. When it comes to natural gas, those options include the 544 Bcf of working natural gas storage capacity in Texas. They also include pre-purchasing agreements and on-site storage.

According to EIA:

  • A cold front across the Midwest this report week resulted in significantly higher natural gas consumption and rising prices throughout the region.
    As in the South, production in the Midcontinent also fell, by approximately 0.5 Bcf/d, or 5%, with most of the losses coming from Oklahoma, where average weekly production declined by more than 0.3 Bcf/d as a result of well freeze-offs.
  • Prices in the Appalachia production region rise in response to higher demand in the Midwest and Northeast, and a slight fall in production.
    Natural gas production in the Appalachia region is down 0.6 Bcf/d this report week at 34.6 Bcf/d from 35.2 Bcf/d last week.
  • The price discount in the Permian Basin production region relative to the Henry Hub price declines this report week as a result of lower production in the region.
    Low temperatures in West Texas and Southeast New Mexico resulted in well freeze-offs, reducing production in the region by approximately 5% week over week.
  • U.S. total natural gas supply falls week-over-week with a decrease in dry natural gas production.
    According to data from IHS Markit, the average total supply of natural gas fell by 1.5% (1.5 Bcf/d) from a week ago. Dry natural gas production decreased by 2.7% (2.6 Bcf/d), but the decline in total supply was partially offset by average net imports from Canada increasing by 28.5% (1.1 Bcf/d) across the same time period.

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Founded in 1919, TXOGA is the oldest and largest oil and gas trade association in Texas representing every facet of the industry.

 

For more information on industry preparations for weather visit www.txoga.org/winter-ready.

You can view TXOGA’s past posts on recent cold weather and its impact on natural gas here.