US Gulf of Mexico producers prepare as two Caribbean storms head north

Houston — US Gulf of Mexico producers are in the initial stages of securing their operations in advance of two storms that are expected to move into that region next week.

BP has begun shutting in production from its four operated US Gulf platforms in advance of both Tropical Storm Laura, which is projected to head for offshore eastern Louisiana/Mississippi and areas further east, and Tropical Depression 14, which currently appears on a path to strike southeast Texas or western Louisiana, the company said Aug. 21.

BP, whose four large operated platforms include Thunder Horse, Mad Dog, Atlantis and Na Kika, also said it has begun evacuating crews from platforms and drilling rigs as well as securing offshore facilities.

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Shell has also started to evacuate non-essential personnel at some of its offshore assets "as work activities and conditions allow," the company said.

"Currently [there are] no impacts to production, and work is underway to secure drilling operations," Shell said.

BP and Shell are two of the US Gulf's largest and most active producers.

The US Gulf of Mexico produced 1.69 million b/d of oil in the second quarter, according to the latest US Energy Information Administration's Short-Term Energy Outlook monthly report. Those volumes are projected to rise to 1.82 million b/d in Q3 and 1.97 million b/d in Q4.

The Gulf also produced about 2.3 Bcf/d of natural gas in Q2, EIA said.

Much of the US Gulf's production is offshore Louisiana in the central Gulf, so Laura could affect that output. But most of it is not in the immediate path of Depression 14, although any hurricane-force winds could extend to offshore Louisiana and even Mississippi, according to the National Hurricane Center, a division of the National Oceanic and Atmospheric Administration.

Equinor to start evacuations

Norwegian integrated Equinor also plans to begin crew evacuations starting over the weekend.

"We are monitoring the situation closely and plan to evacuate non-essential personnel tomorrow," that is, Aug. 22, Hasting Stewart, a company spokesman, said. "We will continue to evaluate the situation to determine if further evacuation and shut-in of production will be necessary."

Others said they were monitoring the storm's path and would make further decisions as the situation becomes clearer.

ExxonMobil is "closely monitoring the storm(s)," company spokesman Todd Spitler said. "[Our] operations are normal."

A spokesman for W&T Offshore, a small pure-play US Gulf producer, also said the company is monitoring the storms.

By midday Aug. 21, Depression 14 was off the coast of Honduras and was expected to strengthen over the northwest Caribbean through Aug. 22. It is targeted to be near or at hurricane strength when it reaches the east coast of Mexico's Yucatan Peninsula late Aug. 22, the NHC said.

The system should move into the south-central Gulf of Mexico as a tropical storm starting Aug. 23 and strengthen while moving northwest over the central Gulf, NHC said.

Laura still has not reached the Greater Antilles, but should move near or over portions of that area through Aug. 24, the Center said.

By then, Gulf of Mexico production shut-in announcements could become "widespread," Wells Fargo analyst Roger Read said in an Aug. 21 investor note.

"Refining shutdowns are unlikely until any landfalls, but a lot of the US Gulf Coast refining sector falls within the broader 'danger zone'," Read said.

Read noted that the so-called "cone of uncertainty" for Tropical Storm Laura includes eastern Louisiana and Mississippi refining units, he said.

Still, "in a broadly oversupplied oil market, temporarily shut-in production should be a positive event for the macro," he said. "We see this as a negative event for the directly affected producers as we do not anticipate an accompanying oil price response."

Power sector on alert

Electric utilities and power generators that have significant assets up and down the Gulf Coast, including five nuclear reactors, were also monitoring the storms.

Entergy said late on Aug. 21 its affiliates are "monitoring and planning" for the potential impacts of two tropical systems, and encouraged customers "to do the same."

It said that crews from Entergy Louisiana and Entergy New Orleans are on alert.

Chris Rimel, spokesman for NRG in Houston, said that "each power plant has a site-specific hurricane procedure; that will begin this weekend."

NRG owns a 44% stake of the South Texas nuclear plant located southwest of Houston near Matagorda Bay.

"We are starting plant walk-downs and securing anything that would become a flying object in high winds. We are looking at staffing for the event, of which now we have to look closely at where we set up sleeping arrangements for the employees due to the COVID," Rimel said.

Duke Energy Florida said Aug. 21 that it was prepared to respond to any power outages or impacts that may occur.