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US Gulf of Mexico producers shut in more production ahead of two tropical storms

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US Gulf of Mexico producers shut in more production ahead of two tropical storms

Highlights

Statoil shuts in Gulf production

Louisiana, Texas refineries at risk

US Gulf well-supplied with refined products

Houston — US Gulf of Mexico producers have opted to shut more of their production and evacuate crews Aug. 23 as meterologists revised the tracks of two tropical storms, Marco and Laura, that are set to come ashore back-to-back this week, likely along the Louisiana coast.

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Statoil said that it had shut in production and evacuated crews from its US Gulf platforms on Aug. 22. The company has 123,000 boe/d of offshore US oil and gas production from nine Gulf fields, its website said. The company is also developing two other fields, Vito and North Platte.

And late Aug. 22, Shell had "shut in production at all but one of our assets" in the US Gulf, the company said in a statement, but did not identify the field that continues to produce.

Earlier that day, the company said it had shut in "the majority" of its Gulf assets.

Shell operates the Appomattox field in the eastern Gulf, the Stones and Perdido hubs in the remote ultra-deepwaters, and the Mars, Auger, Ursa, Olympus, Echilada and Salsa in shallower deep waters. All are offshore Louisiana except for Perdido, which is ofshore Texas.

Also, "we are in the process of safely pausing our drilling operations," Shell said.

The US Gulf currently produces about 1.85 million b/d of oil and about 2.7 Bcf/d of natural gas, according to the federal Bureau of Safety and Environmental Enforcement.

As of Aug. 22, BSEE reported that operators had shut in 13% of US Gulf oil output, or about 240,785 b/d, and 4.4% of natural gas, or 19,000 Mcf/d. An update is expected Aug 23.

Marco, Laura threaten area refineries

In addition, the tracks for both storms have changed, as Marco's path has drifted east and Laura has migrated west of earlier forecasts. As a result, the storms are currently both predicted to hit the US Gulf Coast around Louisiana back-to-back early to midweek.

The storms pose a threat to area refineries, with the current storm cones covering roughly Houston, Texas to New Orleans, Louisiana.

Over 50% of US refining capacity is on the coast, with PADD III refining capacity, including condensate splitters, totaling over 10 million b/d, according to S&P Global Platts Analytics. Of that, 9.6 million b/d is in Texas, Louisiana and Mississippi.

"Depending on the severity, disruptions can last for a matter of days and most notably hurricanes Rita and Katrina upended operations during the fall of 2005," Platts Analytics analysts said in a report. "These historic storms led to some refineries being shuttered for weeks/months as extensive repairs became necessary. Overall US downtime amounted to over 3 million b/d for September and October of 2005, around five-six times average outages for the preceding five years for the respective months."

However, they added that refiners are currently cutting refinery runs because of weak demand owing to the coronavirus.

PADD III refinery runs averaged 7.8 million b/d the week ended Aug. 14, according to the US Energy Information Administration, 1.4 million b/d below the five-year average.

And the area is well-supplied with refined products. PADD III diesel inventories at 56.5 million barrels the week ending Aug. 14 were roughly 45% above the five-year average, while gasoline stocks at 89.3 million barrels were 13% above the five-year average.

Marco to become hurricane

Marco, which is forecasted to become a hurricane later Aug. 23, has now entered the Gulf of Mexico from the Caribbean Sea, according to the US National Hurricane Center. Storm watches are in effect for a band extending from Alabama to central Louisiana, including New Orleans.

Marco was earlier forecasted to make landfall in southeast Texas but the trajectory shifted substantially to the east late Aug. 22, according to the NHC. The storm is projected to make landfall late Aug. 24 or early Aug. 25 in southeast Louisiana.

Laura early Aug. 23 was passing over Hispanola and is projected to become a hurricane Aug. 26. It is targeted to make landfall along the central or eastern Louisiana coast late Aug. 26 or early Aug. 27, according to NHC.