A record hurricane season may pose risks to Gulf oil production, refining and LNG exports
Energize Weekly, May 29, 2024
The prospect of a record-breaking hurricane season in 2024 poses risks for U.S. oil and gas production, refining and liquefied natural gas (LNG) exports, according to the federal Energy Information Administration (EIA).
The National Oceanic and Atmospheric Administration is forecasting 17 to 25 named tropical cyclones – the most it has ever forecast for the Atlantic Ocean – with four to seven major hurricanes.
Contributing to the heighten risk of hurricanes are near-record warm ocean temperatures in the Atlantic Ocean, development of La Niña conditions in the Pacific, reduced Atlantic trade winds and less wind shear.
In 2023, the hurricane season, which runs from June through November, had 20 named storms, but only one hurricane made landfall in the U.S.
This season, the odds do not look as good. “The potential for a stronger hurricane season suggests heightened risk for weather-related production outages in the U.S. oil and natural gas industry,” the EIA said.
In 2023, Gulf of Mexico (GOM) offshore oil production accounted for 14 percent of the national output. The industry’s offshore platforms and floating production units are the infrastructure most exposed to hurricanes.
“Offshore oil and natural gas floating production units must contend with some of the most severe hazards associated with hurricanes and tropical storms,” the IEA said. “They must have emergency procedures to evacuate nonessential personnel and temporarily halt production.”
Offshore natural gas production could similarly be hit by a hurricane, but it would have less of an impact as GOM natural gas output has been declining, slipping to 2 percent of domestic production in 2023 from 17 percent in 2005 – when hurricanes Katrina and Rita created significant disruption to gas supplies.
There are two clusters of refineries, one in Texas and another in Louisiana, that could also be threatened by hurricanes. The two refining areas account for 48 percent of all the refining capacity in the U.S.
“These facilities risk flooding or power outages associated with major storms or hurricanes,” the EIA said. “Like offshore floating production facilities, many refinery operators will evacuate nonessential personnel and temporarily stop production if they believe severe weather might injure employees or damage their facilities.”
The Texas Gulf Coast refineries in Corpus Christi, Port Arthur, and the Houston-Galveston region account for 5.5 million barrels a day (b/d) of refining capacity.
Texas is home to the largest refineries in the country, including Motiva’s 626,000-b/d Port Arthur refinery, Marathon’s 593,000-b/d Galveston Bay refinery, and ExxonMobil’s 610,000-b/d Beaumont and 564,000-b/d Baytown refineries.
Louisiana Gulf Coast refineries provide an additional 3.3 million b/d of capacity, including Marathon’s 596,000-b/d Garyville refinery northeast of New Orleans and ExxonMobil’s 523,000-b/d Baton Rouge refinery.
“The path of a single hurricane or major storm is unlikely to affect more than a single cluster of refineries,” the EIA said. “However, because of the total volume of refining capacity in either region, more than 1 million b/d of capacity could be temporarily taken offline in anticipation of a major storm.”
The U.S. has become the world’s largest export of LNG, and those shipments could also be impacted by a hurricane. Nearly 13 billion cubic feet of LNG export capacity is located on the Gulf Coast.
“Although LNG facilities generally have many layers of protection from direct impact, hurricanes can damage electrical and marine infrastructure and hamper ship movement,” the EIA said. “For example, the effects of Hurricane Laura which made landfall in August 2020, temporarily halted LNG exports from Louisiana’s Sabine Pass and Cameron LNG facilities.”
