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More than 25% of US Gulf oil, gas production offline ahead of Hurricane Sally


Producers shut in 497,072 b/d of crude

Close to 1 million b/d of crude refining capacity down

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Houston — US Gulf of Mexico producers have shut in roughly 27% of offshore oil and natural gas output ahead of the landfall of Hurricane Sally, which was slowly heading towards the Alabama coast Sept. 15, according to the US Bureau of Safety and Environmental Enforcement.

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Producers have shut in 497,072 b/d of crude and 760 MMcf/d of gas output, 26.87% and 28.03% of total offshore US Gulf output, respectively. A total of 152 platforms and rigs were evacuated, according to BSEE.

Shell said Sept. 15 it shut in production at its Appomattox platform, while also curtailing oil volumes at its large Olympus, Mars and Ursa facilities. Chevron said it has shuttered production at its Blind Faith and Petronius platforms in the deepwater US Gulf. Murphy confirmed it evacuated multiple platforms and took production volumes offline, but a spokeswoman declined to specify which facilities were impacted.

In addition, BP has evacuated non-essential personnel from its Na Kika and Thunderhorse platforms.

Sally, which is expected to make landfall on the Mississippi-Alabama border early Sept. 16, is not expected to impact oil operations as heavily as Hurricane Laura did at the end of August. Laura managed to shutter nearly 85% of Gulf oil production — more than 1.5 million b/d — and 2.3 million b/d of refining capacity.

As a result, there has been a limited impact on petroleum futures so far. NYMEX October crude futures settled at $38.28/b Sept. 15, up $1.02 on the day, while NYMEX October RBOB settled 3.13 cents higher at $1.1381/gal.

Refining, terminals

Phillips 66's 255,600 b/d Alliance refinery in Belle Chasse, Louisiana, remains shut in advance of Sally, although that region is no longer expected to feel much of an impact.

Chevron spokesman Sean Comey said the company's 356,400 b/d Pascagoula Refinery in Mississippi is still operating.

Shell said its Mobile refinery in Alabama plans to continue operating during Sally. However, only essential personnel will remain onsite.

Phillips 66 spokeswoman Melissa Ory said the company's 260,000 b/d Lake Charles refinery, which was shut ahead of Laura, could start up in two weeks after it has reliable electricity and operate while repairs are being made, which are expected to take several months. Electricity provider Entergy, which is rebuilding the destroyed transmission lines to the refinery and other facilities, said it hopes to restore power by the end of September.

Citgo Petroleum's 418,000 b/d Lake Charles refinery also was damaged by Laura and remains offline.

All told, that is close to 1 million b/d of crude refining capacity currently offline in Louisiana.

The refinery outages have boosted refined products prices on the US Gulf Coast, with diesel price differentials reaching highs last seen more than six months ago.

Chevron also has shut its Empire and Fourchon terminals and related pipeline systems, the company said.

The Louisiana Offshore Oil Port also suspended operations Sept. 13 at its marine terminal.

Likewise, the Cameron Highway Oil Pipeline System, known as CHOPS, has remained closed since service was disrupted by Laura. Flows on the system, which normally deliver to end points on the Texas Gulf Coast, are being redirected to the Poseidon or Auger pipelines for transportation to locations onshore in Louisiana, a Genesis Energy representative said.

CHOPS, the representative said, appears unlikely to resume normal operations before Oct. 1. An increase in Gulf of Mexico produced sour crude flows to the Louisiana area would provide more competition for Mars crude, which also delivers to end points in Louisiana, thus applying pressure on differentials for the grade.

Genesis said it expects to provide another update no later than Sept. 22.