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Producers shut in oil, gas output as Hurricane Ida moves toward US Gulf Coast

Highlights

Shell, Chevron, BP, BHP shut in platforms

More than half of Gulf oil offline; nearly half of natural gas

Ports restricted from Alabama to Texas: USGC

Upstream producers widely began shutting in oil and gas production from the US Gulf of Mexico Aug. 27 following preliminary evacuations of nonessential crews a day earlier as Hurricane Ida advanced toward the Gulf Coast --a major refining and processing center.

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Ida was upgraded from a tropical storm to a Category 1 hurricane Aug. 27 with the National Hurricane Center projecting a strengthening to a major Category 3 storm before making landfall Aug. 29 or Aug. 30 along the Louisiana coastline.

Ida is expected to become the first major hurricane of 2021 to significantly impact oil, gas, and refining operations.

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The US Bureau of Safety and Environmental Enforcement said Aug. 27 that about 58.5% of the US Gulf's crude oil, or 1.05 million b/d, already was shut-in, as well as 48.8% of the region's about 2.2 Bcf/d of natural gas production, or about 1.07 Bcf/d.

Also, crews have been evacuated from 89 production platforms, or 15.89% of the 560 manned US Gulf platforms, BSEE said.

Ports along the Gulf Coast were open but restricted, according to the US Coast Guard.

Among E&P producers, BP said Aug. 27 it continued to shut-in production and evacuate crews from its four US Gulf platforms.

USGC producers, refiners brace for Hurricane Ida, major storm impact

"The mobile offshore drilling units contracted to BP [which can be unmoored and moved to other locations] are in the process of safely evading the storms," the company said in a statement.

Shell said it continued to shut in production from and evacuate all personnel from its Ursa, Mars, Olympus, and Appomattox assets. Production also was shut in at Stones, Auger, and Enchilada/Salsa. The Stones field was attached to Turritella, an FPSO -- floating production, storage, and offloading vessel -- which was disconnected and moved to a safe location.

Chevron also said it was shutting in production from its operated Gulf of Mexico platforms. While the major wasn't specific, some of its large producing fields in or near Ida's predicted trajectory include Blind Faith, Big Foot, Tahiti, and Jack/St Malo.

BHP has shut in production at its operated Shenzi platform, spokeswoman Judy Dane. And W&T Offshore said it was evacuating crews from its platforms, but declined comment on production shut-ins.

WINDS NOW AT 75 MPH

The storm, traveling 15 mph according to the National Hurricane Center with winds estimated at 75 mph, was expected to hit western Cuba later Aug. 27 after strengthening into a hurricane.

At 2 pm Central time Friday afternoon, it was centered about 145 miles east of the western tip of Cuba.

From there, it should head into the US Gulf on a northwest track Aug. 28, still at hurricane strength, and swell to a major hurricane early Aug. 29 before turning north and making landfall just west of New Orleans later that day. A major hurricane has winds of more than 110 miles per hour.

The Louisiana Offshore Oil Port said it is executing its storm plan, although Clovelly Hub receipts and deliveries remained normal as of Aug. 27.

The US Coast Guard has begun to prepare for the storm, putting into effect port restrictions from Mobile, Alabama, to Port Arthur, Texas. The ports remain open with restrictions with gale force winds expected to arrive in 72 hours but are likely to begin to close as the storm draws nearer.

Refining and manufacturing facilities along the US Gulf Coast are closely monitoring the storm.

"Based on the projected path of the storm, our Alliance Refinery, Lake Charles Manufacturing Complex, Gulf Coast Lubricants Plant, and Midstream assets in Louisiana continue with their respective hurricane preparedness plans," Phillips 66 said on its storm website. "Refinery operations are being adjusted based on the storm's progression."

The hurricane could strike at the heart of USGC refining centers, said Rick Joswick, head of oil pricing and trade flow analytics at S&P Global Platts Analytics.

"If it does come ashore at 120 mph as forecast, this will be a major factor," Joswick said.

SEEN TRAVERSING MAJOR PRODUCING AREA

Current forecast tracks showed the storm may pass over or near areas with the heaviest concentrations of producing and downstream infrastructure in the US Gulf and Gulf Coast.

As Ida approached the Gulf, multiple LNG vessels continued to load and move in and out of liquefaction terminals in Louisiana and Texas.

As of afternoon Aug. 27, there were two tankers at Cheniere's Sabine Pass terminal in southwestern Louisiana. One tanker was seen at Sempra's Cameron LNG nearby, and one was seen at Freeport LNG in Texas, south of Houston.

Cheniere and Freeport LNG did not disclose any immediate plans to reduce operations ahead of the storm. Cameron LNG, however, issued a statement saying it was activating its hurricane preparedness plan and would assess whether to reduce operations at the site.

Pilots that serve the channels leading to the three facilities were reporting fairly normal operations as of mid-afternoon, although that was likely to change as the hurricane moved closer to shore, according to notices to shippers.

Offshore in the Gulf, there were about a dozen LNG tankers, some awaiting orders and others with captain's destinations set for US facilities, cFlow, Platts trade flow software, showed.

In other developments, NYMEX October WTI settled $1.32 higher at $68.74/b and ICE October Brent climbed $1.63 to $72.70/b Aug. 27.

NYMEX September RBOB settled up 1.88 cents at $2.2742/gal and September ULSD climbed 2.60 cents to $2.1092/gal.

Front-month Mars grade crude was heard bid at a $1.45/b discount to cash WTI Aug. 27, while the offer level was heard at a $1.20/b discount. This is up from an assessed value of a $1.55/b discount to cash WTI Aug. 26. One trader said the changes are coming from a combination of the potential production shut-ins in the USGC, as well as lost production from a recent Pemex platform fire in Mexico.

US Gulf Coast refined product prices rose ahead of Ida's arrival, with ULSD heard trading as high as a 4.70 cent/gal discount to front-month NYMEX ULSD futures, the highest level since May 12, market sources said.

Gasoline prices were seen higher while jet prices were the highest since early July.