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Hurricane Ida's pricing effects ripple across Texas with 77% of US Gulf oil, gas still offline

Energia | Energy Transition

Platts Global Integrated Energy Model

Hurricane Ida's pricing effects ripple across Texas with 77% of US Gulf oil, gas still offline

Destaques

Nearly 1.4 million b/d of crude still offline from US Gulf

PBF Chalmette refinery restarting

Chevron's Port Fourchon terminal operating

LOOP says its "supply chain is functioning" again

The ongoing crude oil production shortage in the US Gulf of Mexico following Hurricane Ida is now triggering demand increases and price hikes for both domestic light sweet crudes from the Permian Basin and for more imported crude grades.

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Ida made landfall Aug. 29 as a major Category 4 hurricane near Port Fourchon in Lafourche Parish, south of New Orleans, and close to 77% of the US Gulf's oil and gas production remains offline as of Sept. 9, according to the US Bureau of Safety and Environmental Enforcement.

As such, at least some of the price strengthening seen in Louisiana grades due to supply constraints now appear to be carrying over to light crudes in Houston, one trader said.

West Texas Intermediate crude in Houston and Midland had remained fairly steady in the days following the storm. However, on Sept. 9, values for WTI in both locations saw notable increases. WTI Midland was heard trading at a 60 cents/b premium to cash WTI – its highest level since March 13. WTI at the Magellan East Houston terminal rose 15 cents/b to trade at WTI plus $1/b, its highest level since April 20.

Louisiana crudes had seen the most immediate impacts to pricing following Ida, but values for sour crude Mars cooled off Sept. 9 after reaching a one-year high the day before.

On Sept. 8, front-month Mars was assessed at a $1.50/b premium to cash WTI, its highest level in one year and up about $4.10/b from pre-hurricane values. However, Mars differentials for October barrels began to soften Sept. 9, with a trade was heard at flat to WTI, followed by an offer heard at WTI plus 75 cents/b.

S&P Global Platts Analytics said the Gulf outages are triggering global crude oil price boosts. While global crude demand should soften over the next month, the fourth quarter is becoming increasingly bullish for crude as OPEC+ compliance stands strong and an Iran nuclear accord looking increasingly unlikely for 2021, Platts Analytics said, while also accounting for supply disruptions in Libya and Nigeria.

"Crude supply has a lot of downside risk which would point to oil prices remaining in the $70s," Platts Analytics added.

More than 10 days after Ida made landfall, 1.392 million b/d, or 76.5%, of crude oil production remained offline in the US, according to BSEE, while 1.723 Bcf/d, or 77.3%, of the natural gas was offline.

Offshore production following hurricanes and tropical storms is typically restored within 10 days. However, Ida, as one of the most powerful wind events to ever hit the US Gulf Coast, is causing longer term impacts from damaged ports, terminals, heliports, pipelines, platforms, vessels and more, slowing both the damage assessment process and the many necessary repairs.

Power and infrastructure

The primary utility for Louisiana, Entergy, said Sept. 9 it has restored power to nearly 80% of its nearly 1 million Louisiana and Mississippi customers that lost power. While the New Orleans metro area is now largely restored, more of the harder hit and increasingly rural areas, including some oil and gas ports, terminals and refineries, are likely still weeks away from receiving power.

Power restoration estimates in Lafourche, Terrebonne, Plaquemines and St. Charles parishes in Louisiana extend to "no later than" Sept. 29, Entergy said.

"In some of the hardest-hit areas in the path of Hurricane Ida, our teams are encountering extensive damage that will require rebuilding the system, as opposed to just a restoration," Entergy said.

Entergy said its strategy for restoring the hardest-hit areas involves having "the right resources at the right time in the right places."

For instance, Entergy brought on more than 4,000 vegetation workers to help clear fallen trees, brush and debris at the beginning of the restoration process.

"In later phases of the restoration, we need a fraction of that workforce." Entergy added.

Port Fourchon officials said that water was restored on Sept. 9 and that port tenants are continuing to assess their damage.

The US Coast Guard is keeping Bayou Lafourche closed north of Leeville because of multiple obstructions in the channel, especially between the Ted Gisclair Floodgate in Larose and the Leon Theriot Lock in Golden Meadow. NOAA Coast Survey is finalizing the survey process in Bayou Lafourche and plans to share its findings by Sept. 10, according to the port.

Chevron said Sept. 9 its Fourchon terminal is operating at reduced capacity with back-up power.

"It is ready to receive barrels from connecting pipelines when Gulf of Mexico assets have restarted," Chevron said in a statement. "Empire Terminal has commercial power, and we are currently conducting the necessary tests prior to starting up operations."

Port Fourchon is the home of the Louisiana Offshore Oil Port's onshore facilities, which includes a booster station and Clovelly Dome Storage Terminal. LOOP, the only deepwater port in the US capable of loading VLCCs with crude, had suspended deliveries ahead of Ida.

LOOP said Sept. 9 its "supply chain is functioning" now as the offshore oil port continues to work with shippers to receive and deliver crude oil to regional refineries.

Refineries returning

PBF Energy said Sept. 9 its 190,000 b/d Chalmette Refinery is "in the early stages of the restart process" and should be almost fully operational next week after the plant was shut down ahead of Ida.

PBF also said it blended its first batch of gasoline since Ida, using components in storage, and that it plans to start shipping finished gasoline and ULSD from tank inventories on Sept. 10.

Shell said it continues to assess its operations at its 227,400 b/d Norco Refinery, which continues to flare due to lack of power.

"We are continuing to complete repairs and are making visible improvements to minimize flaring until power is restored," the company said late Sept. 8.

Valero's 215,000 b/d Norco Refinery in St. Charles Parish is also without power, according to Entergy's outage tracker, while it shows power recently was restored to Valero's 125,000 b/d Meraux refinery in Chalmette.

Louisiana's two largest oil refineries -- Marathon Petroleum's 578,000 b/d Garyville plant and ExxonMobil's 520,000 b/d Baton Rouge plant -- both began restarting about a week ago, and the Baton Rouge complex is fully operational again.

Offshore efforts

Leading Gulf producer Shell said Sept. 8 that about 80% of its operated production remains offline, including deepwater plays at Appomattox, Mars, Olympus, Ursa, Auger, and Enchilada/Salsa.

Shell reported no "significant structural damage" from Ida there and said repairs are underway. Damage assessment continues at its West Delta offshore facility.

Shell said it re-staffed its South Pass 89 and Main Pass 69 platforms and is working to return them to service. The Green Canyon 19 platform returned to service and the Amberjack pipeline will be available for producers upstream of the platform. However, Shell said it is not yet able to provide service downstream to Fourchon.

"Platform startup will remain dependent on the availability of downstream infrastructure including pipelines and delivery locations," Shell said.

Louisiana refiners slowly restarting following Hurricane Ida:

Owner

Location

Capacity (b/d)

Status

Citgo

Lake Charles

418,000

operating

ExxonMobil

Baton Rouge

517,700

operating

Marathon

Garyville

578,000

restart in progress

Phillips 66

Westlake

260,000

operating

Phillips 66

Belle Chasse

255,600

power restored/repairs in progress

PBF Energy

Chalmette

190,000

restart in progress

Shell

Norco

227,400

no power/damage assessment

Valero

Meraux

125,000

power restored

Valero

Norco

215,000

no power/damage assessment