Eye On Hurricane Harvey

Article provided by the Great People at Gulf Coast Plants! Please visit them at: www.chemplants.com.

Millions of eyes are following Harvey as the storm meanders around the Texas Coast. It’s too early to assess any real damages from the storm, but we can look at where it’s heading and what happened from other storms. Forecasters show that Harvey covered nearly the whole Gulf of Mexico and has made landfall north of Corpus Christi. How much it affects Houston remains to be seen. There are expectations that Harvey will deposit record amounts of rain. Katrina and Rita hit in 2005, and Ike hit in 2008. That’s a long time ago and things were different. A few things are the same.

Katrina hit near the mouth of the Mississippi River in August of 2005 with wind stronger than Harvey. One big difference is that as it headed up the river, it overtopped some levees in New Orleans. This flooded 80% of the city, and made Katrina the “single most catastrophic natural disaster in US history.” More than a million people were displaced by the storm - many died. People lined up to buy gasoline that jumped 40 cents a gallon overnight. Twenty offshore oil platforms were missing, sunk, or had gone adrift. Almost all of the river process units shut down as a safety precaution. Any shutdown is a major event. Most shutdowns (turnarounds) are planned years in advance for inspection and maintenance work. Inventories of raw materials and product are juggled in advance. Replacement parts and labor supply (including from contractors) are staged to be available when needed. To shutdown and restart (without doing any maintenance) might take days if everything goes right. A few restarted right away; others restarted as soon as power was restored. Many lost power or operated at partial rates because of low feedstock supply or logistics problems. They declared force majeure as their product deliveries fell behind. Some like Air Products (New Orleans), ConocoPhillips (Alliance), Domino Sugar (Chalmette), and Murphy Oil (Meraux) suffered severe damage. Restarting a plant from a planned shutdown (or a flood situation) is not easy; especially when employees’ homes are flooded. 

Rita hit landfall in September of 2005 Southeast of the Sabine Pass on the Texas / Louisiana border. A fifteen foot storm surge (and the experience gained from Katrina) caused a large evacuation. Oil & Gas facilities escaped essentially unscathed. Wind damage to homes and the power grid extended north for 150 miles. 

Hurricane Ike hit Galveston, Texas in September of 2008 with 110 mph winds. Power outages and a large Storm Surge extended to East of Houston. A total of 49 offshore oil platforms were heavily damaged including BP’s Mad Dog Platform. Prices of crude oil and gasoline increased in the expectation of refinery damage along the South Texas Coast. There were empty grocery store shelves and more than three million people without power. The Red Cross and government agencies jumped in to help people and small businesses. ExxonMobil jumped in to help neighbors and employees at its Baytown Refinery. Other large employers did the same. 

These three storms all took place when crude oil was in short supply. That was around a decade ago. Today, we have a surplus (a glut) of crude oil. We’re still a net importer of crude, but few people are worried that we will run out of Oil. It will take some time, but imports and exports will return to their normal patterns. It’s not clear weather lower crude inventories (from lower production in Texas) or higher crude inventories (from shut down refineries) will lead to higher (or lower) Crude Oil prices. Maybe a wash, but the storm is causing a big change. Nonetheless, this change is a small part of the world supply. Not so with gasoline in Texas. With a dangerous storm in place, (and near 1/3 of the US refining capacity) it’s reasonable for people to fill up their cars. In all these storms, people waited in lines for gasoline. As you may remember, prices went up quickly, but took time to go back down. 

Harvey has probably done less damage to offshore oil facilities than the earlier storms. Remember that Harvey’s wind speeds were relatively low until the last few hours when it made landfall. Newer rigs in deep water are better equipped to deal with storms. In addition, rain has little or no real impact on offshore platforms…Only wind and big waves. Under present operating procedures, any “named storm” in the Gulf calls for the evacuation of all non-essential personnel. Most rigs will usually have maintenance (like painting) or construction in progress that has no immediate effect on production. These people can leave while people handling production can stay. 

Anadarko, ExxonMobil, and Shell have shut in or evacuated some offshore production platforms. It’s not offshore, but Cheniere at Sabine Pass is about as close to it as you want to be. They have activated a “Severe Weather Team” to handle operations there. 

Onshore production follows many of the same common-sense and safety rules. Production from the Permian and Eagle Ford basins may be reduced, but the facilities are not likely to suffer much from Harvey. Pioneer, ConocoPhillips, Marathon, and EOG have all put drilling on hold until storms have moved out of the area. 

In a few weeks, we’ll be able to look back and see how wrong we were….at the same time, it’s fair to say how lucky we are….. 

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