Hurricane Laura's Damage Greater Than Any Storm Since 2008

According to daily estimates from the U.S. Bureau of Safety and Environmental Enforcement (BSEE), Hurricane Laura reduced crude oil production in the Federal Offshore Gulf of Mexico by an estimated 14.4 MMbbl over a 15-day period, the most of any hurricane since the combined effect of Hurricanes Gustav and Ike in 2008.

At its peak, the hurricane forced the evacuation of all 16 dynamically positioned drilling rigs (which are not physically tethered to the seafloor), 11 of the 12 non-dynamically positioned drilling rigs (which are physically moored to the seafloor), and nearly half of the 643 offshore production platforms operating in the Federal Offshore Gulf of Mexico.

Without personnel to oversee and manage these platforms, well operators shut in crude oil production. Production shut-ins in the area reached a daily high of 1.56 MMbbl on Aug. 25, two days before Hurricane Laura made landfall, or the equivalent of an 84% reduction in the region’s average daily crude oil production in 2019. In addition, Hurricane Marco likely affected the magnitude and timing of the production shut-ins from Hurricane Laura. Hurricane Marco made landfall on Aug. 24 and was still dissipating as Hurricane Laura passed through the region.

Production shut-ins resulting from Hurricane Laura were much smaller than the combined production disruptions following Hurricanes Gustav and Ike in 2008 and Hurricane Katrina in 2005. According to BSEE reports, Hurricanes Gustav and Ike shut in at least 69 MMbbl over a span of 168 days. Hurricane Katrina and later Hurricane Rita collectively shut in at least 163 MMbbl of production over a span of 298 days. Some of the platforms affected by those storms were irreparably damaged.

As storms approach, operators typically prepare their platforms by securing equipment and, if necessary, evacuating the platforms. Operators can pull drilling rigs out of the storm’s projected path or physically anchor them to the seabed, depending on the type of platform. Once a storm has made landfall, operators inspect affected platforms and rigs, and damaged rigs are typically returned to ports for repair; platforms and pipelines are repaired onsite.

Crude oil production typically resumes a few days after a tropical cyclone makes landfall, but in some cases, production can remain offline for months. In 2005, many platforms remained shut-in long after Hurricane Katrina had passed and did not return to operation before Hurricane Rita passed through the area later that year.

In the September 2020 Short-Term Energy Outlook, the U.S. Energy Information Administration (EIA) estimates that Federal Offshore Gulf of Mexico crude oil production fell to 1.4 MMbbld in August, the lowest monthly value since early 2015. EIA expects Federal Offshore Gulf of Mexico crude oil production to recover to nearly 2.0 MMbbld by December 2020 and average 1.8 MMbbld for the year.

SOURCE: The Weekly Propane Newsletter, October 8, 2020. Weekly Propane Newsletter subscribers receive all the latest posted and spot prices from major terminals and refineries around the U.S. delivered to inboxes every week. Receive a center spread of posted prices with hundreds of postings updated each week, along with market analysis, insightful commentary, and much more not found elsewhere.