New York — Hurricane Dorian is expected to strengthen into the first major hurricane to hit the US Southeast this season, making landfall early Monday on Florida's east coast, according to the National Hurricane Center.
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At press time, the storm was increasing in size and gathering speed. It was expected to continue to strengthen as it moves on a northwest heading toward Florida, potentially becoming a Category 3 hurricane as early as Friday afternoon, rising to Category 4 early Sunday afternoon.
While Dorian had yet to impact commodity prices and trade flows, various analysts and industry and government sources suggested it could pose significant risk to energy infrastructure and markets in the region.
**Dorian poses a risk to Florida's power sector, potentially impacting the several companies that provide power to the state.
**Florida Power & Light has two nuclear plants of two units each on south Florida's Atlantic Coast, the 1,770 MW Turkey Point plant in Homestead and the 2,213 MW St. Lucie plant in Jensen Beach. It is a regulatory requirement that US nuclear units must shut at least two hours before the projected arrival of hurricane-force winds, those over 74 mph.
**Nuclear reactors are protected against extreme winds, including tornado-strength gusts, but shut as a protective measure in case off-site power is lost. Three of the four FPL nuclear units shut in advance of or immediately after the landfall of Hurricane Irma in 2017. One unit shut because of the forecast of hurricane-force winds that did not subsequently materialize at the site, a second reactor shut because of an accumulation of salt on electrical insulators and a third shut when a valve failed after the storm had passed.
**FP&L has become Florida's largest generator of solar energy, with more 1,250 MW of capacity installed at 18 facilities throughout its service territory as of May 2019. Dorian could provide a stern test of solar generation's resilience in the face of hurricane-strength winds.
**FP&L, which serves roughly 5 million customers, was hammered by Hurricane Irma in September 2017, with 97% of its customers impacted.
**Duke Energy Florida, which serves roughly 1.8 million customers, owns and operates 19 natural gas, solar and coal plants, generating more than 10,000 MW. Three of Duke's largest facilities in Florida are the 1,632 MW gas-fired Citrus County plant, the 1,422 MW Crystal River coal-fired plant and the 2,045 MW Hines gas-fired facility.
**Gulf Power serves roughly 450,000 customers in eight counties throughout northwest Florida. The company was acquired in January by NextEra, the parent company of FP&L.
**Tampa Electric serves approximately 765,000 electricity customers in West Central Florida. The company owns three power plants capable of generating more than 5,000 MW.
**Power burn levels in Florida and Georgia are likely to be at risk. Platts Analytics data shows total sample demand for Florida has averaged 5.2 Bcf/d month to date, with gas burns from power plants accounting for 4.7 Bcf/d of that demand.
**Sample demand in Georgia has averaged 2.5 Bcf/d, with power plants accounting for roughly 1.9 Bcf/d of that.
**Platts Analytics forecasts total Southeast power burn to average 11.4 Bcf/d over the next week, approximately 0.1 Bcf/d less than levels experienced over the past week. However, cooler weather, heavy rainfall and potential flooding could add downside risk to power burn estimates, especially if severe weather damages power lines and related electricity infrastructure that could reduce loads.
**Sabal Trail Transmission pipeline terminates at a Central Florida Hub south of Orlando, Florida, where it interconnects with the two existing natural gas pipelines that serve central and southern Florida. The company said Thursday it is monitoring the storm.
**Florida Gas Zone 3 prices were down slightly Thursday morning, in contrast to the broader Southeast, where some locations were nearing 30-day highs. Florida softness could be due to uncertainty over gas-fired power generation demand during the storm.
**It is unlikely Hurricane Dorian will have a major impact on total US refined products consumption, although it could disrupt movements and deliveries.
**According to S&P Global Platts Analytics, Florida's distillate demand is roughly 149,000 b/d, about 3.8% of the US total, while the state's gasoline demand is 594,000 b/d, around 6.4% of the US total.
**Looking at the last eight major hurricanes dating back to 2005, Platts Analytics has calculated that on average hurricanes have caused gasoline demand in the affected states to fall 22.4% and distillate demand to fall 10.6%.
**Assuming the storm is isolated to Florida, demand losses should run 133,000 b/d for gasoline, 16,000 b/d for distillate and 10,000 b/d for jet fuel.
**Florida relies on waterborne refined products supplies, as it has no refineries and is not served by major pipelines. Refined products are delivered primarily to marine terminals at Jacksonville and Fort Lauderdale on the east coast and Tampa on the west coast.
**The US Coast Guard has set condition Whiskey for ports on the east and west coasts of Florida, meaning the ports remain open to traffic but departing ships must "do so within 12 hours of gale-force winds."
**The most recent refined products vessel to leave Fort Lauderdale was the Texas Voyager, which makes regular deliveries from Pascagoula, Mississippi, according to S&P Global ship tracking software cFlow.
**Kinder Morgan's Central Florida Pipeline delivers refined products from the Tampa terminal to Orlando. The company said Thursday it is monitoring the storm.
OFFSHORE OIL PRODUCTION
**Observers are focused on whether Dorian fizzles out after it makes landfall in Florida or continues over the Gulf of Mexico and toward some of the US' most prolific production areas offshore.
**Many large fields operated by BP, Chevron, Shell and a few midsized producers are sited slightly east of Louisiana's "big toe" in waters technically south of Mississippi and Alabama.
**Collectively, these fields account for the bulk of the Gulf's roughly 1.79 million b/d of oil, according to the US Energy Information Administration. Little crude is produced offshore Texas, which tends to be more gas-prone and found in shallower waters.
**The exception is Shell's Perdido Hub, a remote production facility in the Alaminos Canyon area of the southern Gulf located near the Mexican territorial boundary. Since 2010, the hub has produced oil and gas from at least three fields, and Shell has made a few large discoveries nearby.
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