NASA/NOAA GOES Project
This article has been updated with reports from Reuters.
A 7% jump in gasoline futures was attributed to Hurricane Harvey as markets opened in Asia on Aug. 28. Energy industry observers, however, said it is too soon to determine the extent of damage from the storm that struck at the heart of the U.S. oil and gas industry.
“This is not like anything we have ever seen before,” Bruce Jefferis, CEO of Aon Energy, a risk consulting practice, told Reuters. “It is too soon to gauge the full extent of Harvey’s damage to the region’s energy infrastructure.”
Massive flooding knocked out 11% of U.S. refining capacity and complete damage assessments may take weeks.
“We just simply don’t know yet the damage all this rain will have on Houston’s energy infrastructure,” said Andrew Lipow, president of energy consultancy Lipow Oil Associates LLC.
Texas refineries could be offline for up to a month if their storm-drainage pumps become submerged, he said.
The storm was the first major hurricane to make landfall since 2005.
Federal agencies reported Aug. 25 that about 10% of Gulf of Mexico (GoM) production has been shut in—about 377,000 barrels per day (bbl/d) as well as about 23% of natural gas production—as Hurricane Harvey bears down on the U.S. Gulf Coast.
Operators in the Eagle Ford Shale are also making preparations ahead of Harvey, which has maximum sustained winds of 110 mph and continues to strengthen, the National Oceanic and Atmospheric Administration’s (NOAA) National Hurricane Center reported.
Most of the Texas coast is under storm surge warnings and watches, meaning either potential life-threatening inundation of inland areas. Harvey is also expected to produce massive amounts of rain with accumulations of roughly 1 ft to 2 ft and in some isolated areas up to 35 inches of rain.
If NOAA’s current expectations are realized, Hurricane Harvey will be the first major hurricane—those rated Category 3 or higher—to make landfall in the United States since four major hurricanes (Dennis, Katrina, Rita and Wilma) made landfall in 2005, the U.S. Energy Information Administration (EIA) said.
“Because of the slow speed of the storm and the forecast for it to stall over Texas, NOAA expects prolonged periods of torrential rainfall, leading to the potential for severe flooding in the region,” the agency said.
Oil prices fell on Aug. 24 but even with oil weakness, E&Ps saw a 0.2% gain, Raymond James analyst J. Marshall Adkins said Aug. 25.
Ahead of the market’s open on Aug. 25, oil futures “are up amid the production shutdowns from Hurricane Harvey,” Adkins said.
The Port of Corpus Christi, the top U.S. crude oil export port, locked down most of the port in preparation for the storm, effectively locking it down and closing it to ship traffic.
GoM federal offshore oil production accounts for 17% of total U.S. crude oil production and federal offshore natural gas production in the Gulf accounts for 5% of total U.S. dry production. Over 45% of total U.S. petroleum refining capacity is located along the Gulf coast, as well as 51% of total U.S. natural gas processing plant capacity.
In the Eagle Ford, operators including Marathon Oil Corp. (NYSE: MRO), EOG Resources Inc. (NYSE: EOG) and ConocoPhillips Co. (NYSE: COP), have begun evacuating non-essential personnel and suspending some production. Noble Energy Inc. (NYSE: NBL) said it had stopped completing wells in the Eagle Ford due to the storm and had sent nonessential personnel home.
Texas Gov. Greg Abbott preemptively declared a state of disaster for 30 counties. They are: Aransas, Austin, Bee, Calhoun, Chambers, Colorado, Brazoria, DeWitt, Fayette, Fort Bend, Galveston, Goliad, Gonzales, Harris, Jackson, Jefferson, Jim Wells, Karnes, Kleberg, Lavaca, Liberty, Live Oak, Matagorda, Nueces, Refugio, San Patricio, Victoria, Waller, Wharton and Wilson counties.
Darren Barbee can be reached at email@example.com.