The Gulf Coast continues to grapple with crippling storm impacts as Tropical Storm Harvey moves slowly back toward the coast near the Texas-Louisiana border and flooding threats extend east into Louisiana.
Heavy rains spread over the Houston area and other locations in southeastern Texas and southern Louisiana, exacerbating what is already a catastrophic flood event, according to the National Weather Service.
Additional rainfall accumulations of 6–12 inches are expected across the upper Texas coast into southwestern Louisiana, with isolated storm totals as high as 50 inches, including in the Houston metro area. The extension of the flood threat into southeast Louisiana raises the prospect of further reductions or shutdowns around Port Arthur, Texas and Lake Charles, LA. Widespread infrastructure impacts are also being monitored for potential impact on operations.
The Port of Houston, a 25-mile-long complex of 150-plus private and public industrial terminals along the Houston Ship Channel, posted an alert on its website citing that all Port Houston facilities will remain closed on 29 August and that port officials are monitoring weather conditions to determine whether operations can safely resume on 30 August.
The port closed at noon on Friday in anticipation of Harvey. The Port of Corpus Christi, which did not flood but was close to Harvey’s eye, said its terminals had light to moderate damage. The port said in a statement that power has been restored to several facilities, while numerous others are still on emergency power, and hopes to achieve normal operations by 4 September.
The Port of Corpus Christi said it is coordinating with the US Army Corps of Engineers and the US Coast Guard to expedite channel surveys. The US Coast Guard has halted ship traffic at Houston, Corpus Christi and Freeport until port channels and navigation aids can be checked, according to the Journal of Commerce (JOC), an IHS Markit company. The Port of Freeport said in a statement that while Gate 14 is closed, several other gates remain open, and the terminal is in “fair condition” and roads inbound are “generally passable.” However, the port remains closed to traffic until further notice.
Union Pacific, BNSF and Kansas City Southern have suspended operations in the Houston and Corpus Christi areas and have issued traffic embargoes.
Currently, U.S. Gulf of Mexico operators have shut down approximately 320,000 b/d of crude oil output, equal to around 18 percent of total Gulf of Mexico production. In addition, about 0.62 Bcf/d of natural gas output was shut in, or about 19 percent of Gulf production. International crude prices continue to be mostly unchanged, although WTI at Cushing continues to be weaker, as a result of stranded crude unable to be consumed along the Gulf Coast.
IHS Markit
Onshore operators in the Eagle Ford, which was impacted by the flooding, are assessing any damage. Drilling and completion operations which were paused ahead of the storm are likely to resume later this week. The ability of personnel and oil field services to return to work, however, is still in question. The Eagle Ford produces about 1.3 MMb/d of crude and condensate, about 14 percent of all US output. A key limitation at the moment for producers, refiners and exporters along the Texas Gulf Coast is the shutdown of many key crude oil pipelines. Magellan’s lines from the Permian to Houston are shut, as well as the company’s pipeline distribution system within Houston.
With limited pipeline takeaway to the Gulf, Permian operators may begin to be impacted. The port of Corpus Christi sustained some damage but is working to resume normal operations by September 4. Corpus Christi is a key port for exporting US domestic light crude such as WTI and Eagle Ford.
Refining
Much of the Houston area remains underwater, however, the area is showing signs of recovery, especially from the Corpus Christi refining industry.
Flint Hills’ Corpus Christi refinery will begin a staged restart process this week, with the other three plants in the area likely to follow. Together these four plants represent around 4.5% of US refining capacity – and nearly 40% of the capacity currently offline. The Port of Corpus Christi also expects to re-open by the end of the week and resume “normal operations” by September 4. However, the news is far more uncertain in Houston, which is forecast to receive another 8-12 inches of rain over the next several days.
In fact, sources reported today that Marathon Petroleum is idling production at its two Houston refineries. These reports have not been confirmed by the company but, if true would increase the number of shuttered plants in the city to six. So far, no Houston refineries have reported significant damage, but as the Marathon development makes clear, the situation is still evolving and a full reckoning of the storm’s impact is simply not possible at this point. All four Houston area ports remain closed, as of Tuesday, and will not likely re-open before Thursday. While there appears to be some light at the end of the tunnel for Houston, Tropical Storm Harvey is now setting its sights on the sizeable Port Arthur/Lake Charles refining hub.
This region along the Texas-Louisiana border has already received significant rainfall (though nowhere as much as Houston) and it is expected to receive another 5-15 inches through Friday. Port Arthur/Lake Charles is home to seven refineries with a collective distillation capacity of nearly 2.3 million b/d – about 12.3% of the national total. ExxonMobil was already operating its 341,000 Beaumont refinery at reduced rates and today Motiva announced it will cut runs at its 600,000 b/d Port Arthur plant by 60%.
IHS Markit
The situation is still developing, but the other five refineries in the hub are surely weighing their options as the rain continues to fall. The total amount of distillation capacity confirmed offline remains at 2.0 million b/d. However, the amount of refining capacity operating at reduced rates has effectively doubled, rising from 1.1 million b/d to 2.2 million b/d. Moreover, another 1.3 million b/d is under imminent threat to reduce operations. Together, the affected facilities represent more than 30% of US refining capacity. As noted, some 800,000 b/d of Corpus Christi area capacity is expected to begin restarting this week, but even then it will be several days before they could resume normal operations.
Read the rest of the report here.
