FocusFreezing temperatures, possible snow threaten US Gulf chems

01 February 2011 22:39  [Source: ICIS news]

By Ben DuBose

HOUSTON (ICIS)--A strong cold front will bring sub-freezing temperatures and possible snow to parts of the US Gulf coast in the coming days, threatening chemical operations and raising heating oil prices, sources said on Tuesday.

In Houston, considered the hub of the US petrochemical industry, temperatures are projected to fall to 19-25° Fahrenheit (-7 to -4° Celsius) for each of the next four nights, representing the coldest air of the season.

Moreover, accumulating snow is considered likely around Houston on Thursday night and Friday morning, according to the US National Weather Service. Meteorologists placed the entire region under a hard freeze warning.

LyondellBasell spokesman David Harpole said his company had already taken steps to "winterise" its Houston-area facilities and to ensure that they are prepared to weather the storm as designed.

"The most important thing we can do is to keep equipment running and keep liquids in circulation to try and ensure that we don't have freezing issues," Harpole said.

Harpole added that LyondellBasell plans to use electric trace heating in vulnerable areas of pipes, as well as steam traps to keep condensation drained from lines before it can freeze.

On the snow threat, Harpole said his company would continue to monitor forecasts and would be able to make a better assessment in coming days.

During similar temperatures in January 2010, numerous Texas facilities including ExxonMobil’s Baytown olefins plant, DuPont’s Beaumont aniline site and Huntsman’s Port Neches complex had to be shut down, even as no snow fell.

One US Gulf cracker operator expressed more optimism this time around, saying the weather “should not be an issue for crackers” unless temperatures fall below 20°.

But in addition to a projected low of 19° on Wednesday morning, local meteorologists noted that such a temperature drop could also be possible Friday night with a regional snowpack, which acts as a surface cooling agent.

The same cold front was responsible on Tuesday for up to 24 inches (61 cm) of snow and blizzard conditions over a wide swath of the US midwest from Oklahoma City, Oklahoma, to Chicago, Illinois.

But since those areas are more used to such conditions, it was unclear what the energy market impact would be.

Valero spokesman Bill Day said that operations at his company’s 87,400 bbl/day Ardmore refinery in Oklahoma had not been impacted, despite significant snowfall already on the ground.

Harpole said LyondellBasell's Morris petrochemical complex in Illinois was forecast to receive up to 20 inches of snow, but added that emergency crews were stationed on site to keep the facility running, in the event that employees are unable to show up for work.

US Air Transport Association (ATA) vice president and chief economist John Heimlich downplayed the potential impact on jet fuel prices, saying that global macroeconomic factors have a “much greater impact” in driving up crude prices and jet crack spreads than flight cancellations because of winter storms.

On the other hand, some traders on Tuesday said the premium for spot jet fuel had begun to drop based on reduced demand as more flights were cancelled.

But the cancellation of about 10,000 flights the first week of January did little to change spot market pricing, so traders were generally in a wait-and-see mode.

Traders also doubted that spot heating oil prices in the New York Harbor (NYH) and midwest markets would increase significantly, with sources saying there was more than enough supply to cover increased demand.

The exception, however, could be the US Gulf, the primary production region for heating oil. The north central and north east regions of the US could pull demand from Gulf coast product, therefore causing an increase in Gulf coast spot prices.

A Gulf coast products trader said the differential for heating oil compared with NYMEX heating oil futures could increase by 0.5-1.0 cent/gal this week as a result of the cold blast.

The average temperature range for early February in Houston is a high of 64° and a low of 42°.

Temperatures are expected to return to near seasonal norms by Sunday.

Additional reporting by Sheena Martin and William Lemos

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By: Ben DuBose
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