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Strengthening Tropical Storm Forces Coastal Refinery Closure, Cuts U.S. Gulf Coast Oil Output

Reuters, July 11, 2019
Reuters

An intensifying tropical storm in the U.S. Gulf of Mexico on Thursday cut more than half the region’s oil output, with energy companies evacuating staff from nearly 200 offshore facilities and a coastal refinery.

Oil firms shut more than 1 million barrels per day of oil production, 53% of Gulf of Mexico’s output, and 1.2 billion cubic feet per day of natural gas production, according to a U.S. regulator.

Tropical Storm Barry, which was forecast to bring flooding and potentially become a hurricane this week, intensified on Thursday on a path through the north central Gulf of Mexico, a major oil-producing region.

Despite the production cutbacks, U.S. crude, natural gas and gasoline futures slipped Thursday after the Organization of the Petroleum Exporting Countries forecast weaker demand for its output next year.

Dozens of oil and gas producers have removed staff from 191 production platforms, according to offshore regulator U.S. Bureau of Safety and Environmental Enforcement. It said seven rigs and 11 drill ships were evacuated or moved out of the path of Tropical Storm Barry.

Phillips 66 evacuated staff and halted operations at its 253,600-barrel-per-day (bpd) Alliance, Louisiana, refinery and pipeline operator Enbridge Inc evacuated staff from offshore platforms and halted some deepwater Gulf of Mexico natural gas pipelines.

The storm prompted Anadarko Petroleum Corp , Chevron Corp , Royal Dutch Shell Plc and others to move staff out of the path of the storm and many halted production, according to company reports.

Crude futures, which rose more than 4% on Wednesday, were trading at $60.23 a barrel, down from Wednesday’s settle but near a six-week high. Gasoline futures also slipped a fraction.

The storm’s path puts a weekend landfall near two of the nation’s four operating liquefied natural gas (LNG) export terminals, Cheniere Energy Inc’s Sabine Pass and Sempra Energy’s Cameron plants.

Data provider Refinitiv said natural gas output in the Lower 48 states could drop to a seven-week low of 87.2 billion cubic feet per day (bcfd) on Thursday due to the closings, from a record high of 91.1 bcfd on July 5.

On Thursday afternoon, the storm was about 90 miles (145 km) south of the mouth of the Mississippi River, moving west at about 5 miles per hour (7 km per hour). It could make landfall on Saturday on the Louisiana coast and bring up to 15 inches (38 cm) of rain to the central Gulf Coast, forecasters said.

Barry could become a Category 1 hurricane with winds of at least 74 mph (119 kph) and drive ocean water up the Mississippi, forecasters said. The storm surge is projected to bring 3 feet to 6 feet (0.9 meter to 1.8 meters) to shore, worsening flooding from heavy rains, according to the National Weather Service.

Phillips 66’s Alliance refinery sits next to the river 39 miles (63 km) south of New Orleans. The last hurricane to flood the refinery was 2012’s Hurricane Isaac. The refinery was also shut by Hurricane Gustav in 2008 and Hurricane Katrina in 2005.

In 2017, Hurricane Nate led Phillips 66 to shut the refinery, which was restarted within days as the storm turned away from the area.


(Reporting by Erwin Seba and Scott DiSavino; Editing by David Gregorio and Lisa Shumaker)

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Copyright 2019 Thomson Reuters. Click for restrictions.

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