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FACTBOX: Producers shut in close to 90% of volumes; refiners close plants ahead of Hurricane Ida

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FACTBOX: Producers shut in close to 90% of volumes; refiners close plants ahead of Hurricane Ida

Close to 90% of total US oil and gas production came offline in the Gulf of Mexico ahead of Hurricane Ida by Aug. 28, and Louisiana's refining and petrochemical operators began closing some plants ahead of the heavy winds and storm surge of a major hurricane. Ida is expected to become the first major hurricane of 2021 to significantly impact oil, gas, power and refining operations.

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Ida was upgraded from a tropical storm to a Category 2 hurricane with maximum sustained winds of 100 mph early on the afternoon of Aug. 28, with the US National Hurricane Center projecting that it would strengthen to a major Category 4 storm before making landfall late Aug. 29 along the Louisiana coastline -- and likely just west of New Orleans.

The US Bureau of Safety and Environmental Enforcement said Aug. 28 that 90.84% of the US Gulf's crude oil, or 1.653 million b/d, already was shut in, as well as 84.87% of the region's approximately 2.2 Bcf/d of natural gas production, or about 1.893 Bcf/d. An estimated 279 offshore platforms were evacuated -- 50% of the US Gulf's total.

Close to 4.4 million b/d of operating refinery capacity is in the path of Ida as well, primarily in Louisiana. Ida's wind speed will play a major role in how hard it strikes at the heart of USGC refining centers, according to S&P Global Platts Analytics.

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If the hurricane comes in with the 120 mph winds forecast earlier, it could be "a major factor" in disrupting refining and petrochemical operations, Platts Analytics said. Category 4 hurricanes have winds of at least 130 mph.

"Hurricane Ida is expected to come ashore along the same path as other storms, which did extensive damage to USGC refining and petrochemical facilities. Many plants have been hardened against hurricanes, but disruptions in operations are still very likely due to flooding, power outages and personnel dislocations," Platts Analytics said.

Louisiana and other Gulf Coast utility crews also were adding extra personnel in preparation for widespread power outages across the region.

A hurricane typically causes power demand destruction, as it severs transmission and distribution lines to loads. With weaker demand, lower prices would be expected, but much of the nation's natural gas flows through Louisiana, and Ida could disrupt that infrastructure and increase pressure on gas prices.

PRICES

Oil

**Oil markets likely to open higher on the evening of Aug. 29 ahead of weekly trading, analysts said.

**NYMEX September RBOB settled up 1.88 cents at $2.2742/gal Aug. 27.

**NYMEX September ULSD climbed 2.60 cents to settle at $2.1092/gal.

**ULSD assessed at a 4.55 cent/gal discount to front-month NYMEX ULSD, the highest level since March 26.

**NYMEX October WTI settled $1.32 higher at $68.74/b.

Natural gas

**Henry Hub prices gained 14 cents to settle at $4.34/MMBtu for the weekend, the strongest spot price since the severe winter storm in mid-February.

**Henry Hub forwards saw strong support during Aug. 27 trading, with the prompt contract gaining 15 cents to $4.33/MMBtu.

**Winter strip pricing increased by 10-13 cents as the January 2022 contract broke above $4.50/MMBtu.

Power

**Day-ahead on-peak power for delivery Aug. 30 was bid at $50/MWh and offered at $85/MWh on the Intercontinental Exchange, up from the $41.50/MWh that power for delivery Aug. 27 settled at Aug. 26.

TRADE FLOWS

Oil

**Louisiana Offshore Oil Port (LOOP) said it was executing its storm plan.

**Port of New Orleans and Port of Mobile -- covering Alabama and Mississippi coasts -- were closed to inbound traffic as of Aug. 28.

**Some other Gulf Coast ports were open but restricted, according to the US Coast Guard.

**Gasoline inventories in PADD III heading into the weekend were adequate at 2.5 million barrels higher relative to the five-year average, Platts Analytics said, but could be rapidly depleted in a week to the lowest levels since February.

Natural gas

**As of late Aug. 27, there were two tankers at Sabine Pass, one at Cameron LNG and one at Freeport LNG, according to Platts cFlow.

**Sabine Pilots advised late Aug. 27 that any facilities in the area that want to empty their berths should do so sooner rather than later as Ida approaches Louisiana.

**If Louisiana LNG facilities remain open, exports likely will be restricted until Ida passes. Pilots serving the channels were meeting to assess the situation, according to shipper notices.

INFRASTRUCTURE

Oil

**Crews were evacuated from 279 production platforms, or 49.82% of the 560 manned US Gulf platforms, BSEE said.

**BP said Aug. 28 it had shut in production and evacuated crews from its four US Gulf platforms.

**Shell shut in production and evacuated Ursa, Mars, Olympus and Appomattox assets, and shut in Auger and Enchilada/Salsa facilities.

**Shell was planning to restart its Stones field -- just west of Ida's projected path -- after shutting it down earlier in the week when the storm was tracking farther west.

**Shell shut down its 230,600 b/d Norco Refinery in Louisiana, as well as its Geismar petrochemical plant.

**Phillips 66 closed its 255,600 Alliance Refinery in Belle Chasse, Louisiana.

**Chevron shut in production from its operated Gulf of Mexico platforms, and closed its Fourchon and Empire terminals and pipelines in Louisiana.

**Murphy Oil, BHP, ExxonMobil and Equinor shut in and evacuated all of their offshore platforms.

**Louisiana's 17 refineries have aggregate capacity of 3.4 million b/d, representing about 20% of the nation's total capacity, according to US EIA data.

**Mississippi has a total refinery capacity of 394,000 b/d, according to EIA.

**These refineries accounted for 1.4-1.6 million b/d of gasoline output, 1.1-1.3 million b/d of distillate production, and 300,000-400,000 b/d of kerojet supply, Platts Analytics said.

**Colonial Pipeline said it was prepared and executing its storm plan.

Natural gas

**Cheniere Energy, Cameron LNG and Freeport LNG -- all west of Ida's path -- remained confident they could remain open.

**For petrochemicals facilities, more shutdowns are expected for both steam crackers and their downstream units, Platts Analytics said.

**Potential impacts include roughly 6.5 million t/year of ethylene capacity, 3.8 million tons of polyethylene, and 1.1 million tons for polypropylene, according to Platts Analytics.

**Other facilities include 3.6 million tons of PVC and 300,000 tons of MEG.

Power

**Midcontinent Independent System Operator declared a state of Conservative Operations for its MISO South Region, including Entergy, Cleco, and other electric utilities in Arkansas, Louisiana and Mississippi.

**Cleco, a large utility serving Louisiana, said it had secured the help of an additional 2,000 workers to assist in restoring service that the storm may disrupt.

**Entergy on Aug. 28 said it should be able to deploy roughly 16,000 workers, including from outside the region, to help restore power knocked out by the storm.

**Customers in the direct path of Ida could lose power for more than three weeks, said Entergy.