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Producers shut in 95% of US Gulf oil volumes; refiners close plants as Hurricane Ida makes landfall

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Producers shut in 95% of US Gulf oil volumes; refiners close plants as Hurricane Ida makes landfall

Highlights

More than 95% Gulf crude oil, 94% natural gas offline

Multiple Louisiana refineries, chemical plants closed

Widespread electricity outages began Aug. 29 ahead of landfall

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Power outages in Louisiana and beyond were spreading Aug. 29 after Category 4 Hurricane Ida made a Louisiana landfall, after roughly 95% of the US Gulf's oil and gas production was shut in and many Louisiana refineries and petrochemical plants were closed in advance of the major storm.

Ida was upgraded to a Category 4 hurricane with maximum sustained winds of 150 mph on Aug. 29, according to the US National Hurricane Center, before making landfall south of New Orleans near Port Fourchon just before noon CT as one of the most powerful storms to ever hit the US Gulf Coast. By 4 pm CT, Ida remained at Category 4 strength, but the sustained winds were down to 130 mph.

The US Bureau of Safety and Environmental Enforcement said Aug. 29 that 95.65% of the US Gulf's crude oil, or 1.741 million b/d, already was shut in, as well as 93.75% of the region's approximately 2.2 Bcf/d of natural gas production, or about 2.091 Bcf/d. An estimated 288 offshore platforms were evacuated -- 51.4% of the US Gulf's total.

FACTBOX: Power outages spread, refineries closed and almost 95% of US Gulf oil, gas offline as Hurricane Ida makes landfall

FACTBOX: Ida forces petrochemical shutdowns along Mississippi River

Related content: Diamond Green Diesel St. Charles, Louisiana, renewable diesel plant shut ahead of Ida

Close to 4.4 million b/d of operating refinery capacity is in the path of Ida as well, primarily in Louisiana, and at least half of that at-risk capacity came offline ahead of Ida as Phillips 66, Shell, ExxonMobil, Valero and others closed refining units. 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. The greatest impacts are expected in the eastern Louisiana refining and petrochemical hubs from Baton Rouge to New Orleans and potentially to Mississippi.

If the hurricane comes in with 120 mph winds or stronger, it could be "a major factor" in disrupting refining and petrochemical operations, Platts Analytics said. Ida would become a Category 5 hurricane if its winds hit 157 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.

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 the storage levels could be rapidly depleted in a week to the lowest levels since February.

Colonial Pipeline -- the primary fuel artery from Houston to the South and East Coast -- said Aug. 29 it temporarily shut down its Lines 1 and 2 systems from Houston to Greensboro, North Carolina. Colonial said the rest of the network from North Carolina to New Jersey is operating normally. Colonial said the closure is precautionary and should resume full service after Ida passes and the system is evaluated.

Louisiana and other Gulf Coast utility crews also were adding extra personnel in preparation for widespread power outages across the region, and Entergy warned much of the region could lose power for three weeks or so.

As of 3:30 pm CT Aug. 29, more than 410,000 customers were without power in Louisiana, led by 401,452 Entergy customers and 12,869 Cleco customers. Another 1,817 Entergy Mississippi customers were without power.

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.

OFFSHORE PRODUCTION

Historically, offshore production has returned to pre-storm levels 10-14 days after initial declines, placing the week of Sept. 6 as a likely time for production to fully rebound, according to Platts Analytics. The reduced supply levels helped trigger spikes in crude oil, natural gas and refined products prices on Aug. 27 at the end of weekly trading, including gasoline and jet fuel prices.

Most producers had shut in production and evacuated all crews from the US Gulf prior to Aug. 29.

Late Aug. 28, Shell was working to resume partial production at its Stones field, which the company had shut down several days earlier.

Shell, which has shut in production and evacuated all crews from most of its eight US Gulf platforms, said Aug. 28 it would resume partial production at its Stones field, which is just west of Ida's projected path. Shell had earlier shut in production from Stones when Ida was expected to travel more westward.

Otherwise, production remains shut in at Shell's Ursa, Mars, Olympus, Appomattox, Auger and Enchilada/Salsa platforms.

BP confirmed it had evacuated and shut in its four deepwater Gulf platforms, and Murphy Oil said Aug. 28 it had finished shutting in its volumes. Other Gulf producers, including Chevron, Equinor, BHP and ExxonMobil, said they had evacuated their personnel and were shutting in most of their offshore production.

ONSHORE DEVELOPMENTS

Out of the roughly 4.4 million b/d of refinery capacity in the storm's path, primarily in Louisiana, these facilities accounted for around 1.4 million-1.6 million b/d of gasoline output, 1.1 million -1.3 million b/d of distillate production and 300,000-400,000 b/d of kerojet supply.

Thus far, Shell said Aug. 28 it was closing its 230,600 b/d refinery in Norco, Louisiana, and Phillips 66 already had shuttered its 255,600 b/d Alliance Refinery in Belle Chasse, Louisiana.

"Shell has initiated a safe and orderly shutdown of its manufacturing facilities in Geismar and Norco, Louisiana, in anticipation of Hurricane Ida," said Shell's statement, also citing its Geismar petrochemical plant.

ExxonMobil said late Aug. 28 it was shutting some units at its 520,000 b/d Baton Rouge plant. And Valero Energy spokesperson Lillian Riojas said the company's 215,000 b/d St. Charles refinery in Norco and its 125,000 b/d refinery in Meraux, Louisiana were closed ahead of Ida.

The operating status of other regional refiners were unclear, although it was likely they, too, had taken some action to cut rates with estimates that as much as 2.2 million b/d of USGC refining capacity was offline ahead of Hurricane Ida.

Mike Karlovich, a spokesperson from PBF Energy, declined to discuss operations at the 190,000 b/d Chalmette, Louisiana, plant, citing company policies. And Marathon Petroleum's Jamal Kheiry also declined to comment on the status of the 578,000 b/d Garyville, Louisiana, plant.

Also uncertain was the operating status of Chevron's 356,440 b/d Pascagoula, Mississippi, refinery.

The US Coast Guard said the ports of New Orleans, Houma, Louisiana; and Pascagoula were closed to inbound and outbound traffic.

For petrochemical facilities, shutdowns are expected for both steam crackers and their downstream units. Potentially impacted facilities include roughly 6.5 million tons/year of ethylene capacity, 3.8 million tons of polyethylene, and 1.1 million tons of polypropylene, according to Platts Analytics. Other facilities include 3.6 million tons of PVC and 300,000 tons of MEG. The price implications are, of course, bullish, especially given that the industry has not fully recovered from the February USGC freeze, other outages this summer, and logistical challenges, said Platts Analytics.

PORT AND LNG MOVEMENTS

Chevron said Aug. 28 it had closed its Fourchon and Empire terminals in Louisiana and all related pipeline systems.

Port closures ahead of the storm will also cut exports of both crude and products from key facilities along the USGC.

However, LNG facilities in southwest Louisiana -- west of Ida's projected path -- said they were increasingly confidant they would not see significant impacts from the storm.

While Cheniere's Sabine Pass and Sempra Energy's Cameron LNG continued to operate, exports could still be restricted until Ida passes if the channels that feed the terminals shut down. Pilots serving both channels were meeting to assess the situation, according to notices to shippers.

Hurricane Ida zeros in on New Orleans-area refineries

Owner

Location

Capacity (b/d)

Status

Louisiana

Citgo

Lake Charles

418,000

operating

ExxonMobil

Baton Rouge

517,700

shut some units

Marathon

Garyville

578,000

status uncertain

Phillips 66

Westlake

260,000

operating

Phillips 66

Belle Chasse

255,600

shut down

PBF Energy

Chalmette

190,000

status uncertain

Shell

Norco

227,400

shut down

Valero

Meraux

125,000

shut down

Valero

Norco

215,000

shut down

Valero

Norco

215,000

shut down

Mississippi

Chevron

Pascagoula

356,440

status uncertain

Texas

Motiva

Port Arthur

607,000

operating

Total

Port Arthur

180,500

operating

Valero

Port Arthur

335,000

operating

ExxonMobil

Beaumont

369,024

operating