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Washington — The US National Oceanic and Atmospheric Administration predicts four to eight hurricanes will develop during this year's Atlantic hurricane season, including two to four major storms with winds above 111 mph.

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Tropical storms and hurricanes pose an annual threat to energy and shipping infrastructure along the US Gulf and Atlantic coasts. As the US becomes a larger oil and gas exporter, the storms pose new risks to global flows, on top of the usual risks to domestic US power demand and fuel supplies.

NOAA sees a 40% probability of "near-normal" tropical storm activity during the season, which runs June 1 to November 30. The outlook found a 30% chance of "above-normal" activity and 30% chance of "below-normal" activity.

Related story and infographic: Growing exports add to annual hurricane risks for US energy sector

The outlook predicts nine to 15 named storms will develop, including four to eight hurricanes, of which two to four will be Category 3 or stronger.

An average season produces 12 named storms, six hurricanes and three major hurricanes.

NOAA said three climate factors influenced this year's outlook:

  • El Nino conditions, which typically suppress tropical storm activity
  • Warmer-than-average sea-surface temperatures, which can boost activity
  • West Africa's stronger-than-normal monsoon, which can also increase storm chances

The 2018 Atlantic hurricane season produced 15 named storms, including eight hurricanes, of which two were major.

The most damaging 2018 storms were Hurricane Florence in the Carolinas and Hurricane Michael on Florida's panhandle, which caused a combined $50 billion in damages, according to NOAA.

WIDESPREAD ENERGY IMPACTS

The US exports more than three times as much crude and LNG as it did when Hurricane Harvey hit the Houston area in August 2017. The storm did massive damage across the energy and shipping sectors, roiling markets for weeks.

Port closures could ripple across the new oil export infrastructure -- canceling vessel loadings, filling storage terminals and backing up pipelines. However, the pipeline and terminal buildout that has happened as a result of booming onshore production adds flexibility to reroute flows if one port is disrupted.

The April startup of the final section of Energy Transfer's 480,000 b/d Bayou Bridge pipeline, for example, allows southeast Louisiana refiners to continue receiving Permian Basin and other Midcontinent crudes via Nederland, Texas, if a storm cuts off other routes.

The Trump administration's willingness to waive the Jones Act - which bars non-US vessels from delivering goods between US ports - will depend on the severity of a storm and any resulting fuel shortage. Meanwhile, oil prices will be a main factor in whether the White House decides to tap the Strategic Petroleum Reserve.

For the natural gas sector, hurricanes pose a significant threat of destroying demand by knocking out large swaths of power generation as well as potentially shutting in one of the nation's four operating LNG export terminals.

Before the rise in US onshore production, the industry's main threat during hurricane season was to shut-in production in the offshore Gulf of Mexico. However, offshore gas production has plunged to 3.2 Bcf/d on average this year, compared with 11.1 Bcf/d in the same period of 2005, according to S&P Global Platts Analytics.

By contrast, gas demand from power generation in the US Southeast and Texas has nearly doubled to about 14.1 Bcf/d last year from 7.6 Bcf/d in 2005.

Risks to gas demand also include the growing list of liquefaction facilities exporting LNG. Four have started up since 2016, with another two expected in the near future. The total LNG feedgas demand from all six fully operational LNG terminals could be upwards of 11.3 Bcf/d, according to Platts Analytics.

The US power sector is hoping to improve the time it takes to restore power to homes and businesses after storms with improved resource management and new technology.

The large influx of petrochemical, LNG and refinery development along the Texas and Louisiana coasts in recent years means the impact of power losses could be magnified.

The five storms that hit the mainland US in 2017 and 2018 cut power demand, at their peak, by levels ranging from less than 7% for Hurricane Nate in October 2017, when it hit the Louisiana area of the Midcontinent Independent System Operator footprint, to more than 70% for Hurricane Irma in September 2017 when it hit Florida. During Irma, gas flows to the state's power plants fell 2.5 Bcf/day, according to Platts Analytics.

US nuclear plants are required to shut as a precaution several hours in advance of the expected arrival at facilities of hurricane-force winds.

In 2018, Southern Company reduced output at two nuclear units in Alabama in October as Michael approached, but did not have to shut the reactors. Duke Energy's 1,978-MW Brunswick station in North Carolina shut for six days in September because it was in the path of Florence.

-- Meghan Gordon, meghan.gordon@spglobal.com

-- Edited by Keiron Greenhalgh, newsdesk@spglobal.com

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