Hurricane Harvey closes key oil, gas operations in Texas


Essential oil and gas facilities along the Texas Gulf Coast have temporarily closed down as Hurricane Harvey pounds the area with torrential rain and high winds, virtually guaranteeing gas prices will increase in the storm’s aftermath.

Before the Harvey made landfall late Friday, dozens of oil and gas systems were evacuated, three or more refineries had closed and two petrochemical plants had suspended operations.

Rains persist as Hurricane Harvey weakens over Texas (Reuters)

How soon they reopen is dependent upon the intensity of flood and the resumption of electricity to the regions. Experts say it is still too early to say, with the storm still moving throughout the area. But they think gas prices will increase 5 cents, to 25 cents per gallon.

Hurricane Harvey also continued to take a toll on U.S. aviation Saturday, with over 960 flight cancellations as of mid-day, based on FlightAware. Nearly 800 of the cancelled flights were scheduled to depart from or land at Houston’s two airports.

The shipping industry also is expected to be bothered by the worst storm to hit the refinery-rich Texas coast in over 50 years.

Here is how Harvey is likely to influence business and pocketbooks:

— REFINERIES: Virtually one-third of the country’s refining capacity sits in low-lying regions along the coast from Corpus Christi, Texas, to Lake Charles, Louisiana.

Many refineries at highest risk of having a direct attack from high winds have already closed down, but it’s the possibility of flooding in the Houston and Beaumont, Texas, places that could pinch gas supplies.

Flooding and power outages due to a storm surge are regarded as the largest risk.

“The biggest driver of just how much this increases gas prices is how much rain falls in Houston during the following few days,” Andy Lipow, president of consultant Lipow Oil Associates, said Saturday. “We’re in a wait-and-watch mode.”

For the time being, Lipow is forecasting gasoline prices will rise 10 cents per gallon east of the Rockies.

Tom Kloza, an analyst for the Oil Price Information Service, predicts that prices could rise by up to 25 cents a gallon, but that an increase of 5 cents to 15 cents is more likely, assuming that the hurricane does not cause lasting damage to refineries.

Flint Hills Resources announced it would shutter a refinery until Harvey hit and Valero Energy Corp. said it was closing two centers in Corpus Christi.

The possibility of supply interruptions sent gas futures to $1.74 a gallon, their highest level since April, before they retreated to about $1.67 by Friday afternoon.

In addition to the refinery closures, Formosa Plastics closed its petrochemical plant in Point Comfort, Texas, and OxyChem suspended operations at its petrochemical plant in Ingleside, Texas, according to Platts, an Samp;P Global branch that monitors the commodities and energy market.

— OIL AND GAS: Firms have been evacuating workers from oil platforms in the Gulf of Mexico, and that’s crimping the flow of gas and oil.

As of Friday, the U.S. Bureau of Safety and Environmental Enforcement said employees were eliminated from 86 of the 737 manned platforms used to pump oil and gas from under the Gulf.

The bureau estimated that platforms accounting for approximately 22 percent of oil production and 23 percent of natural gas output in the Gulf was shut down.

“We could see more generation be taken offline in the Gulf of Mexico” if the path of this storm wanders further east, said Jenna Delaney, an oil analyst for PIRA Energy. However, she noted, oil companies announced fewer stage shutdowns on Friday than they had on Thursday, which is an encouraging sign.

Exxon Mobil closed two of its own platforms and has been evacuating all employees in the anticipated path of the storm, ” said spokeswoman Suann Guthrie. Shell stopped operations on a large floating oil-production platform, and Anadarko evacuated workers and shut down four centers in the western Gulf while continuing to run those east of the storm’s predicted path.

On coast, ConcoPhillips ceased all operations in the Eagle Ford shale formation, which is located across a swath of South Texas inland from the Gulf. A company spokeswoman cited security and possible disruptions in getting gas and oil from the wells to advertise during the storm.

— SHIPPING: Transport terminals along the Texas coast shut down as the storm approached. Port operations in Corpus Christi and Galveston closed, and the port of Houston said container terminals and general cargo facilities were closing around midday Friday.

Charges for carrying cargo between the Gulf of Mexico and the U.S. East Coast increased.

— TRAVEL: After almost 1,200 flight cancellations Friday and Saturday, airlines had cancelled another 485 flights scheduled for Sunday, according to FlightAware.

Airlines were offering clients the opportunity to reschedule trips that would take them to Houston, San Antonio or Austin from Friday through the weekend.

— UTILITIES: Researchers in Texas Aamp;M University estimated that the storm could knock out electricity for at least 1.25 million people in Texas. They stated the hardest-hit regions will include Corpus Christi, which is on the shore, and San Antonio, which is about 140 miles inland.

— INSURANCE: A company that does predictions for insurance firms said wind-damage claims could top $6-billion, although it stated losses in the low billions are more likely.

Risk Management Solutions Inc. said losses from storm surges and inland flooding might be a larger source of losses. If the firm is right, that would put homeowners and the government-backed National Flood Insurance Program in danger.

The flooding program is conducted by the Federal Emergency Management Agency, which owes the Treasury about $23-billion in capital borrowed to pay the cost of past disasters, according to a recent report from the U.S. Government Accountability Office.

Homeowner policies with insurance companies don’t typically cover flood damage, yet a relatively small proportion of homeowners have flood insurance through the federal program.

— Michael Liedtke in San Francisco contributed to this story

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