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Rebound in US industrial gas demand slows as Gulf Coast recovers from Hurricane Laura

Highlights

Southeast industrial demand falls 9% in September

Storm shuts seven major Texas, Louisiana refineries

Demand recovery in primary metals sector continues

New York — The nascent recovery in industrial gas demand is stumbling in the wake of Hurricane Laura amid a recent slowdown in operations at refineries and chemicals facilities across the US South and Gulf Coast.

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Month-to-date, US industrial gas demand is averaging 20.4 Bcf/d, down 270 MMcf/d, or about 1.3%, compared with the August average, data compiled by S&P Global Platts Analytics shows.

In the Southeast alone, where the contraction has been heavily concentrated, industrial demand this month is down 255 MMcf/d, or almost 9%, compared with its prior-month average.

In late August, as Hurricane Laura continued intensifying in the Gulf of Mexico, at least seven major refineries from Lake Charles, Louisiana to Houston, Texas took an estimated 2.34 million b/d in refining capacity offline. Several major chemical facilities in the region also temporarily suspended operations, including LyondellBasell's 400,000 mt/yr and 1 million mt/yr polypropylene plants in Lake Charles and Westlake Chemical's expansive southwest Louisiana petrochemicals complex.

In the final week of August, capacity utilization at US refineries dropped by over 5 percentage points to an estimated 76.7%, following a consecutive 15-week expansion since early May, data published Aug. 28 by the US Energy Information Administration shows.

Refining, chemicals, metals

In the past week, gas demand from sampled refining and chemicals facilities, located mainly along the US Gulf Coast, is down roughly 110 MMcf/d in both sectors, compared to their respective, average-demand levels in July, Platts Analytics data shows.

In stark contrast, sampled gas demand from the primary metals sector has continued its steady recovery, rising about 30 MMcf/d compared to its own July monthly average level.

While gas demand in the primary metals sector continues to grow, recent analytics forecasts are predicting a slow road to full recovery lies ahead as pandemic-fueled dislocations to the US and global economies keep construction and infrastructure industries growing more slowly this year.

Despite the recent setbacks at Gulf Coast oil and gas facilities, the return to a growth trajectory could be relatively swift as limited damage from Hurricane Laura allows many facilities to resume full operations. Earlier this week, Motiva, Valero, ExxonMobil and Chevron began preparing to restart their respective Texas and Louisiana refineries previously shuttered by the storm.

By October, industrial gas demand in the US Southeast should climb to over 6 Bcf/d, according to a recent forecast from Platts Analytics. That level would exceed the August average by about 100 MMcf/d and would only register about 120 MMcf/d below the October 2019 average, historical data shows.