This article was updated on Aug. 30 with reporting from Reuters and Hart Energy staff.
Crude oil slid and gasoline futures hit their highest since mid-2015 on Aug. 30 as flooding and damage from Tropical Storm Harvey shut over one-fifth of U.S. refineries, curbing demand for crude while raising the risk of fuel shortages.
Refineries with output of 4.1 million barrels per day were offline on Aug. 29, representing 23% of U.S. production, Goldman Sachs said. Restarting plants even under the best conditions can take a week or more.
“It will be a while before operations can return to normal and the U.S. refining industry is bracing itself for an extended shutdown,” Stephen Brennock of oil broker PVM said.
Brent oil, the international benchmark for crude trading, was down 50 cents at $51.50 a barrel by 8:39 EDT. U.S. crude fell 44 cents to $46.00.
Eagle Ford Shale E&P stocks fell on Aug. 29 amid reports of idled operations and 19% of Gulf of Mexico (GoM) oil production remained shut-in while 11 refineries on the Texas Gulf Coast were reported to have shuttered operations as Hurricane Harvey continued to torment the state.
Some Permian Basin and Eagle Ford Basin operators may also be affected by pipeline closures or reduced throughput.
ConocoPhillips (NYSE: COP) said on Aug. 30 that it resumed production in some parts of the Eagle Ford on a limited basis due to restricted offtake capacity. The company also said it expected to resume drilling and completion activities Aug. 30. ConocoPhillip’s Magnolia platform in the GoM was not impacted by Harvey.
Harvey is forecast to produce more rain—as much as 13 inches—through Sept. 1 over the upper Texas coast and into southwestern Louisiana. On Aug. 29, the storm was offshore Texas and forecast to move to the upper coasts of Texas toward evening.
More than a dozen Eagle Ford operators reported either suspending operations or evacuating personnel. Others said they have so far not been affected.
SM Energy Co. (NYSE: SM) said in an Aug. 28 regulatory filing that its operations are not in flooded areas and have not been affected by the storm. However, refinery impacts were being felt.
“We are experiencing temporary curtailments of some of our production due to the impact of the storm on third-party, downstream infrastructure,” SM Energy said. “It is too early to quantify any effect curtailments will have on our production as the storm continues to move through the state.”
Carrizo Oil & Gas Inc. (NYSE: CRZO) also said the biggest impact production it may face is third party terminals and midstream providers that shut down, Raymond James analysts said.
“While a storm of this magnitude will have an impact on our production, it’s too early at this point to quantify what that will be,” Raymond James quoted management as saying. Carrizo shares closed at $12.46 after a 6.5% drop to $12.48 on Aug. 28. Other companies, such as EOG Resources Inc. (NYSE: EOG), remained down, with EOG’s stock falling 1.6% to $83.15 on Aug. 29 from $84.52 on Aug. 25.
The Permian Basin was also affected by midstream shutdowns.
Incoming crude supplies to Houston were hampered by the closure of the Magellan Longhorn and BridgeTex pipelines from West Texas, halting a combined capacity of about 600,000 barrels per day (bbl/d), Sandy Fielden an analyst at Morningstar Commodities said in an Aug. 29 report.
“The 300,000 bbl/d Kinder Morgan Crude and Condensate pipeline into Houston from the Eagle Ford is also believed to be out of commission,” Fielden said.
Colonial Pipeline’s Houston system was affected by Harvey at its “origin, which includes Pasadena, Houston, and Cedar Bayou.” The company said it has reduced capacity. The pipeline delivers about 100 million gallons of gasoline, home heating oil, aviation fuel and other refined petroleum products.
The U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) said Aug. 29 that it continues to be in contact with pipeline operators.
“Contractors are poised to begin post-storm inspections of the pipeline infrastructure, which include aerial inspection by helicopter as soon as possible,” PHMSA said.
PHMSA’s website offers little other up-to-date information about pipeline operations.
Lonestar Resources US Inc. (NASDAQ: LONE), which moves much of its oil to terminals via truck said Aug. 28 that it had evacuated Eagle Ford Shale personnel before the storm hit. The “vast majority of its wells” in Dimmit and LaSalle counties, Texas, continued to produce or have resumed operations.
Lonestar CEO Frank D. Bracken III said that most importantly the Fort Worth, Texas, company’s employees and families are safe.
“We are grateful to the tireless work of our operations group to maintain high levels of uptime while preserving safety in the work environment,” he said.
The Texas Railroad Commission estimated that between 300,000 bbl/d and 500,000 bbl/d of crude production had been shut-in in the Eagle Ford region from a pre-storm production estimate of 870,000 bbl/d.
About 3 billion cubic feet of gas per day (Bcf/d) of natural gas production has been shut-in from a pre-storm production estimate of about 6 Bcf/d. The commission said on Aug. 26 it expected most idled production to come back online in the next few days, the U.S. Department of Energy said.
Other E&Ps took the following steps:
- BHP Billiton Ltd. (NYSE: BHP) shut down drilling and completion activities at its Eagle Ford shale operations.
- Chesapeake Energy Corp (NYSE: CHK) suspended drilling and completion of new wells in the Eagle Ford and evacuated staff.
- EOG evacuated high risk areas;
- Exxon Mobil Corp's (NYSE: XOM) XTO Energy unit said on Friday it has shut in some oil wells in the Eagle Ford shale region of Texas ahead of Hurricane Harvey
- Marathon Oil Corp. (NYSE: MRO) released non essential personnel and suspended operations where appropriate;
- Noble Energy Inc. (NYSE: NBL) halted well completions and sent nonessential personnel home.
- Pioneer Natural Resources Inc. (NYSE: PXD) said Aug. 24 it has stopped completing oil wells in the Eagle Ford shale region of Texas ahead of Harvey.
- Statoil ASA (NYSE: STO) evacuated staff; and
- Baytex Energy Corp. (NYSE:BTE) suspended drilling and completion operations and evacuated its Houston office. The company said operations should resume this week.
Oil and gas production from parts of the U.S. Gulf of Mexico remained shut-in due to Hurricane Harvey.
Just more than 18% of the oil production, or 323,760 bbl/d, was shut-in as of Aug. 30, according to figures released by the U.S. Bureau of Safety and Environmental Enforcement (BSEE). The amount is higher than the 319,523 bbl/d that BSEE said was shut-in on Aug. 29.
About 19%, or 611 MMcf/d, of the gas production was shut-in. This was less than Aug. 29 when about 615 MMcf/d was shut-in.
The storm, which made its third landfall on Aug. 30, forced the evacuation of offshore workers from 102 platforms. That’s the equivalent of nearly 14% of the 737 manned platforms in the GoM. Five of the 10 non-dynamically positioned rigs operating before the storm were also evacuated.
“After the storm has passed, facilities will be inspected,” BSEE said. “Once all standard checks have been completed, production from undamaged facilities will be brought back online immediately. Facilities sustaining damage may take longer to bring back on line.”
About a week after shutting down due to Harvey, some offshore workers for Royal Dutch Shell (NYSE: RDS.A) have returned to Perdido platform where they are assessing conditions, according to a Reuters report. The Perdido hub is among the deepest in the GoM at about 2,450 m (8,000 ft). It typically produces about 100,000 boe/d.
In an Aug. 28 post on Twitter, Shell’s storm center said U.S. Coast Guard visually confirmed the structural integrity of the Perdido spar during a fly-over.
Energy XXI Gulf Coast Inc. (NASDAQ: EXXI) said Aug. 28 that late last week the company evacuated all personnel from its western GoM facilities and production from those fields was temporarily shut-in. Facilities will remain shut-in until the weather in the GOM clears sufficiently to allow visual inspections to determine if any significant damage has occurred.
Energy XXI said about 4,000 net barrels of oil equivalent per day was curtailed due to the storm. Operations in the company's eastern GoM region were not impacted.
More refineries in east Texas may shut today, Corpus Christi area plants looking to resume operations, Raymond James said.
Darren Barbee can be reached at email@example.com.