The Market Awaits News of Hurricane Laura’s Impact to U.S. Gulf Coast Oil & Gas Infrastructure

August 28, 2020
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Many drilling platforms in the Gulf of Mexico were evacuated as Hurricane Laura approached. The category-4 hurricane brought devastating winds of up to 150 mph, prompting evacuations at upstream, midstream, and downstream facilities along the Gulf Coast energy corridor.

Sempra’s Cameron LNG Facility was directly in the storm path right along the yellow line. Additionally, Cheniere Energy’s Sabine Pass LNG facility was in Hurricane Laura’s path.

Supply

The Bureau of Safety and Environmental Enforcement (BSEE) stated on August 23, 2020 that 57.6% of the current Gulf of Mexico oil production (1MMBbl/d+) and 44.6% of offshore natural gas production (1,205 MMcf/d) had been shut-in ahead of the storm. This caused dry gas production to hit a 30-day low of 85.0 Bcf/d on August 28, 2020.

As of August 28, The amount of shut-in production has changed little, with 60.1% of offshore gas production, or 1,628 MMcf/d and 84.3% of oil production, or 1.59 MMBbl/d still held back.

Companies have begun conducting flyovers to assess the damage. In the coming days, we are expected to gain a better understanding of the damage caused by the storm and the expected duration of the production outages. In the last decade, AEGIS notes, even powerful storms have caused little lasting damage to offshore facilities, and production has returned quickly. Still, this storm was exceptionally strong.

Demand

The majority of U.S. LNG export capacity was forecast to lie in the storm’s path, as Cheniere Energy’s Sabine Pass LNG site, Sempra Energy’s Cameron LNG, and Freeport LNG (FLNG) account for nearly 75% (6.68 Bcf/d) of U.S. LNG export capacity. Sempra’s Cameron LNG site in Lake Charles, LA, was directly in the storm’s path and Cheniere’s Sabine Pass facility at the Texas-Louisiana border may have also been affected. The storm’s direction tilted westward, allowing Freeport LNG to be spared from any damage. That facility is located south of Houston.

In the days leading up to the hurricane, Cheniere and Sempra energy announced they would shut down their facilities that lie in the storm’s path. The closures caused flows to LNG facilities to drop to 2.1 Bcf/d, the lowest level since February 2019. Feedgas flows were averaging 4.4 Bcf/d in August before the closures.

Power demand, the last part of the equation, is down as Entergy has reported outages to over 900,000 customers. A disruption in electricity generation means less gas demand. PointLogic’s estimate of domestic gas consumption for power generation shows a modest pullback of 0.8 Bcf/d, and more may come as the power outages cause a decrease in gas-fired power generation.

We continue to monitor oil, gas, NGLs, regional markets, jet fuel, and interest rates for hedging opportunities. To learn more and see AEGIS opinion and recommendations, go to AEGIS View publications, or contact info@aegis-energy.com. Like what you see? Share this article with the button on the bottom right of your desktop. Market questions or comments? Contact us at view@aegis-energy.com.

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