TAYO ELEGBEDE
The American Petroleum Institute (API) has highlighted possible ways hurricane Laura may threaten the United States oil and gas operations.
The institute explained that refinery operations cani be hampered by a lack of crude oil feedstock if offshore production platforms or ports and pipelines have sustained damage or loss of power supply.
“Refineries and pipelines originating in the Gulf Coast region are major suppliers to other parts of the nation which is
why motorists in states far from Texas and Louisiana can sometimes feel the price effects of a hurricane,” it said.
The API added that operations may be strained if the storm tracks through the production-heavy Gulf of Mexico or makes landfall along the Gulf Coast region, which houses many of the nation’s refinery and natural gas processing centers.
The API, in its assembled fact sheet to help consumers better understand the interconnected nature of the U.S. fuel supply system and what happens when a supply shock such as a hurricane occurs, said the Gulf Coast region of Louisiana, Mississippi, Alabama and Texas is the heart of the nation’s oil and natural gas industry.
The area accounted for over 50% of U.S. refining capacity and Federal waters in the Gulf of Mexico accounted for about 15% of the oil and 2.7 percent of total natural gas production.
According to the EIA data, 60% gasoline used on the East Coast and about one quarter of the crude oil run in refineries in the Midwest are shipped
from the U.S. Gulf Coast region of the United States, and the country relies on pipelines, barges and tankers to deliver crude oil and refined petroleum products reliably to where they are needed throughout the country.
The API also noted that when a hurricane disrupts refinery or pipeline operations, the combination of an immediate loss of gasoline and diesel production and a lack of demand for crude can result in a two-tier market: the price of fuel can rise and the price of crude can fall. And at the same time, there can also be pockets of rising demand for fuel, which can cause a rise in demand for fuel.
It said, “In advance of a tropical storm or hurricane, companies will evaluate and may decide to evacuate all non-essential personnel and begin the process of shutting down production, refining operations and pipelines.
“After a storm passes, companies must perform extensive inspections and damage evaluations to determine when it is safe to resume operations. Even if there is no damage, operations cannot resume immediately.”
Oilprice.com had reported that “ahead of Laura’s landfall, oil producers in the Gulf had shut in more than 84% of oil production and more than half of gas production.
“The oil output shut-in stands at 1.558 million barrels per day bpd, and the gas output shut-in stands at 1.65 billion cu ft daily, as refiners were also shutting down and bracing themselves for the impact.”
Oilprice.com, however, noted that the likelihood of a serious oil or gasoline shortages as a result of the hurricane is slim, since there is enough oil and fuel in storage in other parts of the United States.
The report from oilprice.com added that while some believe that the tightening of both oil and gasoline inventories over the past few weeks could, combined with the hurricane to lead to some supply disruptions.
Statistics from the EIA indicates that both crude oil and gasoline stockpiles, are above the five-year average for this time of the year, so the supply disruption possibility is quite a distant one, unless the disruptive effects of hurricane Laura, such as floods, linger for longer, as it happened with Hurricane Harvey in 2017.
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