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Oil producers are starting to stop production in the Gulf of Mexico in anticipation of a tropical storm heading to Texas and Louisiana.
The storm, dubbed Barry, could become a tropical storm on Thursday and even a hurricane before landing on Saturday.
Oil companies with rigs in the Gulf of Mexico have struggled to stop production and evacuate their staff. "Tropical storms or hurricanes are likely to occur in the northern Gulf," said Jim Rouiller, chief weather forecaster at Energy Weather Group, in an email to Bloomberg News. "This will trigger widespread silos across the entire production region."
Anadarko Petroleum said it would remove all non-essential personnel from its operations in the eastern Gulf of Mexico. The company is no longer idling at four venues – the Constitution, Heidelberg, Holstein and Marco Polo platforms. Anadarko produces more than 160,000 barrels a day in the Gulf of Mexico.
Other companies have followed suit. Chevron, Royal Dutch Shell, BP and BHP all announced their departure.
On Wednesday, the Office of Environmental Safety and Protection, the offshore regulatory body in the US Department of the Interior, said at 11:30 am CT, 15 platforms reported evacuations, 2.24% of the 669 inhabited platforms in the Gulf. Although few, they come from large sources of production. BSEE said that 31.89% of oil production in the Gulf of Mexico had been blocked, as well as 17.85% of the region's natural gas production. Related: Demand is getting weaker, demand for prospects is limiting oil prices
While some platforms expect to reduce their production, others will continue to operate. "Right now, we anticipate minimal impacts on production resulting from this weather disruption and will continue to monitor weather reports, taking additional action if necessary," Shell said, according to the Houston Chronicle.
The Gulf of Mexico is no stranger to major storms and, as a rule, oil companies are quickly operational after the storm. The most obvious exceptions include Hurricane Katrina and Hurricane Harvey, among others, which have been the scene of massive destruction and serious disruption to the industry, whose repercussions have been felt on global markets.
But the real damage from the next storm could be in New Orleans, where the Mississippi River is already at historically high levels. The same floods that ravaged the agricultural region in recent months have already swelled the Mississippi as New Orleans passed. The storm surge from Barry could throw water into the city, preventing the Mississippi from flowing into the Gulf.
Worryingly, New Orleans was already suffering from floods Wednesday, several days before the tropical storm / hurricane was about to hit. A foot of rain could fall on the city between Friday and Saturday.
The result, some fears, could be a breach of the river's levees. The timing is exceptionally bad. The "double threat of extreme end-of-season flooding and extreme early season hurricanes" creates a unique and scary threat to New Orleans, as Eric Holthaus has described in an article for the New Republic. Of course, with the worsening of the climate crisis, it will surely not be the last time the Gulf will face such a threatening situation, even if New Orleans avoids the worst case scenario this time, Holthaus noted.
The storm comes at a time when the EIA has announced a huge reduction in crude oil inventories of 9.5 million barrels during the first week of July. Inventory news, combined with the approaching storm, rocked oil prices, helping to push benchmark prices by about 4% on Wednesday. "It's this great API and now the EIA storage report that's been driving up the market these days, and then you've started the storm," Bob Yawger, director of Futures Contracts, told Reuters Mizuho in New York. "The storm seems to be the real problem and will eventually stop offshore production on the Gulf Coast."
Anastacia Dialynas, an analyst at Bloomberg New Energy Finance, told Bloomberg News that it could have an immediate impact on production. Another 700,000 bpd could be at risk, said Dialynas. Related: A red flag for oil? China's crude oil consumption weakens
The Gulf of Mexico produces about 2 million barrels a day (Mb / d), a figure that has increased significantly in recent months and years. Last year, the Gulf produced an average of 1.67 Mb / d.
By Nick Cunningham from Oilprice.com
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