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US energy industry braces for Hurricane Laura's fury

US Energy Industry Braces for Hurricane Laura’s Fury

LOUISIANA – America’s energy industry braces for storm surges and catastrophic winds as Hurricane Laura makes its way dangerous to the coasts of Texas and Louisiana.
Oil and gas producers have evacuated rigs and rigs in the Gulf of Mexico, and companies are closing refineries in the storm’s path.
Many had already done this while preparing for Tropical Storm Marco. Utilities are bracing for downed power lines and blackouts.
“These hurricanes, they can attack any energy infrastructure,” said Jim Burkhard, IHS Markit research manager for crude oil markets.
“And it’s not just a refinery that’s closed, but if a pipeline is closed or the power grid is damaged, it shows how integrated all of these systems are: pipelines, refineries, power. And it is this aggregate damage that can be so difficult to overcome.”
The oil industry had already been hammered since the start of the year, grappling with low prices after the coronavirus decimated demand. At the same time, OPEC was flooding the market with crude.
Oil prices have recovered somewhat but remain well below what most producers need to stay in business. This year, 60 oil and gas companies filed for bankruptcy, according to law firm Haynes and Boone.
Experts say the United States is unlikely to suffer from significant oil or oil shortages due to the hurricane, as other regions fill the gaps or turn to stored oil. But with higher demand that usually comes with summer, there could be some disruption.
“Stocks have tightened throughout the summer,” said Peter McNally, global business manager at Third Bridge, an investment research firm. ”
“There is a buffer, but we still have a few weeks left in the summer of higher demand, so we could see the surplus dissipate quite quickly.”
Nearly half of the oil and gas platforms in the Gulf of Mexico – nearly 300 – were evacuated on Wednesday, along with most offshore platforms. Producers have shut down 84 percent of the oil produced in the region, removing about 1.6 million barrels per day from the market.
The Gulf region typically produces about 15 percent of the oil in the United States. Producers also shut down about 61% of the natural gas produced in the Gulf.
“The level of risk is high,” said Stewart Glickman, energy equity analyst at CFRA, in an email. “Platforms in the Gulf can be damaged, refineries (mainly in the lowlands) can be flooded, especially if a storm persists for days as Hurricane Harvey did in 2017.”
While part of oil production is temporarily on hold, experts believe it is unlikely to cause supply problems in the United States. There has been excess oil production this year, and demand for fuel is still well below pre-pandemic levels. Producers outside the region can take over.
More than half of America’s refining capacity is built along the Gulf Coast, where the storm is heading.
Six refineries (which together have a refining capacity of around 2.2 million barrels per day) have been closed, including refineries operated by Valero, Total and Citgo.
Refineries built-in hurricane regions may have hardened their assets after previous hurricanes to withstand the storm, but some large refineries will likely be disrupted, Burkhard said.
In 2017, Hurricane Harvey stalled over Houston, dumping so much rain that flooding destroyed nearly a quarter of the nation’s refining capacity. This has led to gasoline shortages, panic buying and long lines at gas stations in Texas.
“For the area that is affected, for sure, it’s going to disrupt all businesses, including gasoline sales,” Burkhard said. “Will it be as disruptive as Harvey? I don’t think we know it yet, but Harvey has been so damaging just because he’s persisted for so long, so let’s hope this one doesn’t linger as long with severe flooding. ”
(Sahar News Monitoring Desk)

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