Well Prepared & More Resilient: How US Refineries Passed Hurricane Test

  • Date: 18/09/17
  • Financial Times

Three weeks after Hurricane Harvey, it is clear that U.S. oil and gas companies have mostly been able to withstand the onslaught. Lessons learned from previous storms, in particular hurricanes Katrina and Rita in 2005, have made operations more resilient.

As Hurricane Harvey battered southern Texas on August 27, the National Weather Service described it as “unprecedented”. There had been stronger storms before, but the torrential rainfall brought by Harvey would have an impact that was “unknown” and “beyond anything experienced,” it warned.

The severity of the damage to the oil and gas industry of Houston and along the coast was one of those unknown effects. Total refining capacity in Texas is 5.6m barrels a day, 31 per cent of total US refining capacity. It also produces 36 per cent of US crude.

The flood waters lapping up around storage tanks at refineries owned by Valero Energy and Motiva, a subsidiary of Saudi Aramco, looked like a sign that there could be serious and lasting damage.

Three weeks on, it is clear that the oil and gas companies have mostly been able to withstand the threat. Lessons learned from previous storms, in particular hurricanes Katrina and Rita in 2005, have made operations more resilient.

“This storm was a test for how well the US can deal with these threats,” says Jamie Webster of the BCG Center for Energy Impact. “The industry, I would say, has passed with flying colours so far.”

Harvey has been a human catastrophe. At least 82 people were killed, and the mounds of ruined carpets, panelling, furniture and other possessions piled up outside tens of thousands of houses bear witness to the scale of the damage to property. Leaks from sewers, refineries and chemical plants during and after the storm have raised fears about the lasting effect on human health. But for the energy industry, the impact seems set to be mostly transient.

The US shale boom of the past 15 years has led to a greater concentration of oil and gas infrastructure in southern Texas, a region that has always been prone to hurricanes, raising the potential threat to domestic and global energy supplies.

In Harvey, the impact was dramatic, but shortlived. At the peak of the disruption, on August 29, about 3.9m barrels a day of refining capacity was shut down, with a further 1.5m b/d of capacity running at reduced rates, meaning that about a third of the industry in the US was affected to some degree.

The effect on oil production was smaller, but still significant: on August 29 about 320,000 b/d of offshore oil production in the gulf was shut off, along with 300,000-500,000 b/d of onshore production in the Eagle Ford shale of south Texas.

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