DI Blog

Insights across the energy value chain

Tropical Storm Barry is forecast to become the first hurricane of the 2019 season.  The storm is already affecting offshore operation and will soon begin to impact energy infrastructure onshore as well.  As projected storm paths appear to be shifting east, Barry is moving away from the heavy energy export infrastructure in the Port Arthur area.  However, the storm still poses a threat to energy infrastructure in the Louisiana area. Indeed, Phillips 66 announced that preparing to shut its 253,600 barrel per day Alliance refinery.  Other refineries in southern Louisiana may soon follow.

Barry’s cone of uncertainty has it passing by some of the largest oil and gas producing platforms in the Gulf of Mexico.  As of 11:30 CDT on Wednesday 07/10/2019, the storm had already led to the evacuation of 15 production platforms with 602,715 barrels of oil per day shut in and 496.2 mmcfd of gas shut-in according to the Bureau of Safety and Environmental Enforcement.  Since the EIA leverages BSEE’s outage monitoring as it’s only real-time component in Lower 48 production, that drop will appear in next week’s EIA report.

Although the storm is currently affecting supply, the impact of hurricanes on the US energy picture has drastically shifted over the past several years.  US oil production has grown substantially with most of those new barrels are coming from onshore in the Permian Basin of Texas and New Mexico and other shale plays such as North Dakota’s Bakken.  In natural gas, a similar situation has occurred and production from the Gulf of Mexico has waned in relative importance. The concern over Gulf of Mexico as a supply hub for production and waterborne imports has fallen. This has been replaced by a demand driven concern about the ability to load tankers for export. Though it appears Barry’s path is going to be favorable, Barry’s could still impact some of the major LNG and oil exporting terminals in the Gulf Coast.

The first terminal likely to be impacted by the storm is the Louisiana Offshore Oil Port (LOOP), which now falls within Barry’s cone of uncertainty.  LOOP, the only facility on the Gulf Coast capable of fully loading or unloading a VLCC is still used for imports, but as the chart below illustrates, that is happening far less frequently.

Crude Imports to Morgan City, LA (LOOP)

Source: US Customs & Border Patrol, DrillingInfo

With less of a need to import barrels, LOOP has been more actively loading tankers for export.  AIS data shows that the VLCC Aral, capable of holding more than 2 million barrels of crude departed the terminal on July 6th and is now headed for South Korea.  However, due to the timing of this storm, it does not appear that planned LOOP crude exports will be impacted.  The vessel Atlantic Dawn arrived with a crude cargo from Mexico on July 10.  With the need to bring that oil to shore, the terminal would not have been able to move oil out to the terminal anyways.

While LOOP is the only US offshore loading terminal, the Gulf of Mexico plays a key role in the reverse lightering operations that transfer US crude exports from the smaller vessels able to load at US inshore terminals onto the larger vessels that ultimately carry the crude to it’s destination.  These activities will likely need to halt given high seas as the storm is expected to travel through many of these designated lightering areas which are shown on the map above in light blue.

As the storm moves towards closer to shore, it’s projected to make landfall in Louisiana between the Mississippi river and Lake Charles.  South of Lake Charles lies the new Cameron LNG export terminal.  The most recent departure from the terminal was the LNG tanker Gaslog Sydney which departed on July 8th.  The Diamond Gas Sakura is in the Gulf of Mexico with a destination of Lake Charles and will likely end up at Cameron.  However on July 7th, prior to Barry’s development, the vessel changed the ETA it was signaling from July 18th to August 2nd, so it is unlikely to be impacted by the storm.   That delay could be due to reports of challenges with the cooling system at Cameron as it comes online.  Upriver of Cameron, Lake Charles is home to 2 refineries, Phillips 66 and Citgo, but like imports through LOOP, both of those refineries now require lower levels of supply via the water than they have in the past.  While they aren’t as reliant on waterborne shipments, those refineries could still be impacted by flooding or a loss of power.

Crude Imports to Lake Charles, LA (LOOP)

On the Mississippi river, the storm could impact St. James area oil terminals.  The river is already running high due to significant precipitation across the Midwest and this storm will likely exacerbate that situation.  Heightened river levels could prevent vessels from being able to safely load or unload cargoes.  The St. James area terminals are involved in the growing crude export business, but they have not seen as much growth as have the crude export terminals in Texas.  As the table below illustrates, Nustar’s St. James terminal is handling much of the crude export activity taking place in the area.

Likely Crude Export Activity at St. James Crude Terminals (Capacity in Barrels)

Source: VesselTracker, DrillingInfo

Overall given the storms current path, it seems as though it will spare some of the more important pieces of energy infrastructure on the Gulf Coast.  The biggest threat to exports from this storm would be if it were to shift further west towards the export hub in Port Arthur.  That area features the largest LNG export terminal: Cheniere Sabine Pass, a large LPG and crude export terminal in the Sunoco Logistics Mariner South, as well as other crude export terminals operated by Enterprise Products and Phillips 66.  Even if the storm avoids the area, weather could bring the boarding of tankers by harbor pilots to a halt, preventing vessels from being able to arrive or depart.  Cheniere has had to shut-in for previous storms and given its activity, a slowdown in its exports, would certainly slow demand and back up supply.  As the table below shows, the facility sends out nearly one LNG tanker every day.

LNG Tanker Activity at Cheniere’s Sabine Pass Terminal (Capacity in cubic meters)

Source: VesselTracker, DrillingInfo

For information on some of the capabilities highlighted in this analysis, please contact Bert Gilbert, bert.gilbert@drillinginfo.com.

The following two tabs change content below.

Bert Gilbert

Bert Gilbert is a consultant for DrillingInfo focusing on oil production and crude and refined products movements.