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Texas and Rockies natural gas mitigate disruption

Hydrocarbon Engineering,

On 23 April 2014 one of five units at the Opal gas processing plant in Southwest Wyoming exploded. Williams Company, Opal’s operator is now preparing to restart plant operations at the four remaining units which have a processing capacity of 1.1 billion ft3/d, the equivalent of 1.7% of total US dry natural gas production, according to 2013 figures. Total processing capacity at the plant is 1.5 billion ft3/d. While the plant has been offline, natural gas pipeline flows into California and the Southwest from the Permian Basin in West Texas and New Mexico, as well as production from the Rockies has helped offset the lost Opal production. This has helped to limit natural gas price increases in the region that could result from temporary supply shortages.

Impact on natural gas flows

Pre explosion, William’s Opal plant sent 50% of its gas to the Kern River pipeline system, and 40% to the Ruby Pipeline. Kern River delivers gas from the Rockies to Bakersfield and Ruby from the Rockies to Malin and the edge of Ohio. However, these pipelines can also receive gas at the Opal Hub from other production areas. On the day of the explosion, flows to the West from Kern River dropped by 7%, and flows from Ruby dropped 8%. Flows on both lines rebounded within the following three days, as producers rerouted natural gas through other processing plants. In particular, flows on Enterprise Products Partners’ Pioneer plant have averaged between 0.45 and 0.50 billion ft3/d since the explosion, more than double the previous 30 day average.

Flows from Texas also increased after the explosion. Flows to the Southwest on the El Paso Natural Gas pipeline system, increased 10% on 23 April and by another 25% on the two days following. Mild temperatures in Texas likely helped free supplies to flow west on the pipeline to consumers in Nevada and Southern California. Flow of Canadian gas from the Pacific Northwest on the Gas Transmission Northwest pipeline system stayed relatively constant.

Natural gas prices

As the natural gas spot price increased at Opal Hub in response to a tighter supply/demand balance for Rockies natural gas production flowing west, the availability of Permian production in El Paso relieved some of the upward pressure on spot prices at Opal and other trading points, which remained below the national benchmark spot price at the Henry Hub in Erath, La. For the past month, the Opal spot price and most Rockies prices have generally traded at a discount to the national benchmark spot price at Henry Hub. While prices increased somewhat in the few days following the explosion, most prices in the Rockies remained several cents /Btu below Henry Hub.

Total US production

The explosion as well as plant maintenance in the Northeast led to declines in total US dry production last week. Between 22 - 24 April, daily dry production ranged between 66.4 and 66.8 billion ft3/d, which represents a decline of 1 – 1.5% from the previous 30 day average. The effect of the processing plant explosion on total production has been much less than cold weather related disruptions to Rockies production that occurred over the winter.

Adapted from press release by Claira Lloyd

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