Hurricane Harvey Strikes heart of U.S. energy Business

A hurricane in the center of the U.S. energy sector is set to curtail near-record U.S. oil production for many weeks, with the effect expected to reverberate throughout the nation and across international energy markets.

Harvey hit the Texas coast as a ferocious Category 4 hurricane, causing significant flooding that has knocked out 11 percent of U.S. refining capacity, a quarter of petroleum production from the U.S. Gulf of Mexico, and closed ports all along the Texas coast.

Gasoline stocks jumped as much as 7 per cent to their highest level in over two years in early Monday trading in Asia as traders took inventory of the storm’s effect.

The outages will restrict the access to U.S. crude, gasoline and other refined products for international customers and further push up prices, analysts said.

Damage evaluations could take days to weeks to complete, and the storm continues to drop unprecedented heights of rain because it lingers west of Houston, home to gas, oil, pipeline and chemical plants. And restarts are dangerous intervals, as fires and explosions may occur.

Up to now, the federal government hasn’t announced if it is going to discharge barrels of oil or refined products in the country’s Strategic Petroleum Reserve (SPR), which holds almost 680 million barrels of petroleum.

The SPR was created in the 1970s to reduce supply shocks in the aftermath of an embargo imposed by numerous members of the Organization of the Petroleum Exporting Countries (OPEC).

“This isn’t like anything we’ve ever seen before,” said Bruce Jefferis, chief executive of Aon Energy, a risk consulting practice. It’s too soon to gauge the full extent of Harvey’s harm to the region’s energy infrastructure, ” he said.

Greater than 30 inches (76 cm) fell in the Houston area in two days and far more rain is forecast, according to the National Weather Service.

The storm has been felt from coastal ports to inland oil and gas wells. Oil producers in the Eagle Ford shale area of south Texas have stopped some surgeries.

At least four marine terminals at the Corpus Christi area, an export hub for energy deliveries to Latin America and Asia, remained closed because of the storm.

“We just simply don’t understand yet the damage all this rain will have on Houston’s energy infrastructure,” said Andrew Lipow, president of energy consultancy Lipow Oil Associates LLC.

Texas refineries could be offline for up to a month when their storm-drainage pumps become submerged, he said.

Since the storm churned towards Texas on Friday, U.S. gas futures rose to their highest level in three years for this time of year. These gains came even before several big Houston area refiners, such as Exxon Mobil Corp, stopped some surgeries.

Exxon closed the 2nd biggest U.S. refinery, its 560,500 barrel-per-day (bpd) refinery in Baytown, Texas, complicated due to flooding. Royal Dutch Shell Plc also stopped operations at its 325,700-bpd Deer Park, Texas, refinery. The refinery might be closed for the week, it said.

Flooding on highways between Houston and Texas City closer to the shore led Marathon Petroleum Corp to reduce gas production in the business’s 459,000-bpd Galveston Bay Refinery in Texas City, said sources familiar with plant operations.

Marathon Petroleum employees were not able to drive to work and conditions in the plant forced the company to decrease gas outputsignal, said industry sources. Marathon spokesman Jamal Kheiry declined to talk about plant operations. Not every plant in the area was hit. Operations were stable in the biggest U.S. crude refinery, Motiva Enterprises’ 603,000-bpd Port Arthur plant, the company said.

Motiva double-staffed the refinery’s team before this storm, as did Complete SA in the business’s 225,500-bpd Port Arthur refinery, said sources familiar with plant operations.

Coastal refineries in Texas accounts for one-quarter of the U.S. crude oil refining capacity. All those refineries are affected by Harvey since Thursday when refineries in Corpus Christi, Texas, closed in production before the storm’s landfall on Friday.

Colonial Pipeline, the biggest mover of petrol, diesel and other refined products in the USA, said its operations hadn’t been influenced by Harvey. Any disruptions to the conduit would send prices across the U.S. Southeast and Northeast soaring. Dealers are keeping a close watch on whether there’ll be an outage in the pipeline.

Citgo Petroleum Corp and Flint Hills Resources , two of the refiners that closed last week as the storm approached, failed to provide updates concerning the status of the Corpus Christi refineries on Sunday.

Also on the Planet and Mail

Rescue crews race against rising floodwaters in Texas (Reuters)

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