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'Mind-blowing' Harvey Bears Down Again on Limping Coastal Energy Industry

Tropical Storm Harvey is headed for another hotbed of energy infrastructure along the Gulf Coast, and the National Weather Service's Houston office now expects the storm will be the costliest weather event in U.S. history.

With at least 11 crude oil refineries closed, export terminals shuttered and natural gas pipelines and production wells throttled back, the giant Houston oil, gas, and petrochemical complex was crippled by rain as the region braced for Harvey to turn north on the evening of Aug. 29 and make landfall again near the Texas-Louisiana border in the early morning of Aug. 30. The current forecast calls for Harvey to track toward Port Arthur, Texas, and Lake Charles, La., home to the biggest refinery in the country and megaprojects including the $10 billion Cameron LNG export project currently under construction.

"We are not completely out of the woods but we can see the light of coming out on the other side of this unprecedented rainfall/flooding tropical event," the National Weather Service's Houston office said in its early morning reports, which called for four to six inches of rain in the Houston area, a sharp contrast to the seven to 20 inches of rain anticipated in its Aug. 28 forecasts.

Nonetheless, "the 3 to 4 day rainfall totals of greater than 40 inches (possible 50 inches in locations surrounding Santa Fe and Dickinson) are simply mind-blowing that has [led] to the largest flood in Houston-Galveston history," the Houston office said. "From its rapid intensification from a wave to a Category 4 landfall in less than 60 hours to producing the most extreme tropical storm flooding the Houston region has ever gone through ... this beast will be making landfall as a tropical storm along the Texas-Louisiana coast tomorrow morning."

Motiva Enterprises LLC, a Saudi Aramco unit, operates the largest refinery in the country, with 603,000 barrels per day of capacity, in Port Arthur. Exxon Mobil Corp.'s Baytown complex near Houston, the nation's second largest refinery, shut down over the weekend as Harvey first battered the region.

"This historic flooding that has taken lives and will likely be the largest economic U.S. natural disaster (certainly the costliest hurricane) will transition from being an extreme flash flooding event to a longer-lived (record level) river and bayou flooding episode," the weather service said.

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Production destined for export markets is particularly hard hit as Gulf Coast ports from Corpus Christi north to Louisiana's Lake Charles have been closed by the Coast Guard, with most expected to reopen in 48 hours. The exception is Corpus Christi, Texas, where the entrance channel is blocked by a drill ship that broke loose form its escort tugs, sinking one, and running aground at the mouth of Corpus Christi Bay.

The U.S. Pipeline and Hazardous Materials Safety Administration said Aug. 29 that it has been in contact with all the pipeline operators in the region and continues to communicate with them. The agency said it is confident that the area's pipeline operators have contracted staff capable of inspecting critical infrastructure after the storm, and they are preparing for aerial inspection of pipeline paths.

PHMSA said it has also coordinated with the U.S. Department of Energy, U.S. Department of Homeland Security, Federal Emergency Management Agency and other regulators. PHMSA's parent agency, the U.S. Department of Transportation, has been in contact with Texas Gov. Greg Abbott, as well.

"I have mobilized the men and women of the Department of Transportation to provide whatever assistance Texas requires to restore the state's transportation system," Transportation Secretary Elaine Chao said in an emailed statement.

Local distribution company Texas Gas Service Co. experienced minimal impact from the storm, according to company spokeswoman Jennifer Rector. Operations at the ONE Gas Inc. subsidiary mostly returned to normal Aug. 28, although the company is still monitoring the ongoing rain and the threat of flooding in several areas, she added.

A spokeswoman for the Federal Energy Regulatory Commission said Aug. 29 that the agency has detected "only minor impacts on prices for natural gas," but "our market monitors are also vigilantly watching out for market manipulation or gaming from the potential effect of supply and demand changes on the Houston Ship Channel and Gulf Coast trading locations."

Cost estimates of the damage varied widely Aug. 29 as full surveys are difficult given the horrendous weather. S&P Global Ratings analyst Taoufik Gharib said Aug. 28 that insurers will probably need to pick up the tab for $6 billion worth of repairs. "It's too early to accurately quantify the insured losses related to Hurricane Harvey. However, based on early estimates from catastrophe-modeling firms, they could total up to $6 billion. At this loss level, primary insurance carriers ― as opposed to reinsurers ― would retain the majority of losses," Gharib said.

But a 2010 study of vulnerabilities to the entire Gulf Coast's nearly $800 billion in estimated oil, gas and power infrastructure conducted by Entergy Corp. and cited by the U.S. Department of Energy's 2013 examination of storm losses in the region predicted annual losses ranging from $14 billion to $18 billion by 2030 after a major hurricane hit.