IHS Markit: Hurricane Harvey update

Crude

Gulf of Mexico production continues to recover, and with no reports of major damage to offshore platforms, it appears Gulf production is set for a complete recovery.

As of Friday, the volume of crude production still shut-in had declined to about 153 000 bpd (equal to around 9% of total Gulf of Mexico production), down from 324 000 bpd just two days ago. Natural gas production shut-in has now declined to about 0.4 billion ft³/d (about 13% of Gulf production) from 0.6 billion ft³/d on Wednesday.

Onshore production in the Eagle Ford is also expected to return quickly. As much as 500 000 bpd of Eagle Ford shale production (about a third of the play’s output) was shut-in in response to the storm, but is now returning.

Crude logistical disruptions are also showing signs of recovery with key pipelines from the Permian Basin returning to service.

Inland-produced crude that cannot be consumed by downed refineries is likely moving to Cushing storage. Some will also likely be exported as ports reopen.

Permian and Cushing WTI crude prices, however, remain about US$5 – 6/bbl below Brent, the international benchmark, reflecting in part the back up of crude caused by storm-related logistical constraints.

IHS Markit expects little change to its Brent price outlook as a result of this storm.

Refining

Recovery is underway within the Gulf Coast refining industry. All four Corpus Christi facilities (805 000 bpd) are restarting and should be up and running by the end of next week.

Several Houston and Lake Charles area plants are also ramping up production. The positive news has reversed gasoline’s dramatic price run – at least within the spot market.

The impact of the past week’s spot price rally has yet to fully reverberate down the value chain, and US retail gasoline prices are likely to rise by another 10 - 15 cents per gallon on average.

The biggest question at this point is the condition of the eight shuttered Houston area refineries, which together represent 15% (2.7 million bpd) of US distillation capacity.

Natural gas

On the supply front, overall US production has recovered to approximately pre-hurricane levels, with Texas data remaining volatile as pipeline and processing constraints continue.

Production losses peaked on 28 August at 2.3 billion ft³/d, but by 31 August losses had declined to 0.3 billion ft³/d primarily in the Gulf of Mexico.

Over the 9 days 23 - 31 August, approximately 11.5 billion ft³ of cumulative production was lost due to Harvey, spread across the Gulf of Mexico (6.2 billion ft³ or 54%), Texas (3.3 billion ft³ or 29%), and Louisiana (2.0 billion ft³ – 17%).

Transco Gulf of Mexico production totaled 0.66 billion ft³/d prior to the storm, fell to a low of 0.36 and rose back to 0.45 billion ft³/d by the 31 leaving production still 0.22 billion ft³/d lower than pre-storm levels.

The other Gulf of Mexico pipeline which still appears to be suffering materially from Harvey-related disruptions is Garden Banks where production is about 0.1 billion ft³/d lower than pre-storm levels.

Pipelines in Louisiana which bore the brunt of the storm related losses were ETC Tiger, Gulf South, Transco, Kinetica, and TGPL.

Pipelines in Texas which bore the brunt of the storm related losses were TGPL, Trunkline, TGT, NGPL, and Transco.

Helping offset the losses that occurred over this period (23/8 - 31/8) were increases in production from the Northeast (up 0.3 billion ft³/d) and Rockies (up 0.3 billion ft³/d in WY and CO) and New Mexico (0.15 billion ft³/d).

Natural gas liquids (NGLs)

US gas plant supply and refinery supply of NGLs are slowly recovering but are still constrained due to flood related storage and fractionation issues.

NGL export terminals continue to remain offline due to operational issues related to the storm despite the gradual restart of the Houston Ship Channel and Freeport.

It has been confirmed that Freeport will require dredging to increase draft levels to pre storm levels of 45 ft.

The constrained gas plant supply and export capacity has had global implications on NGL pricing.

Propane and butane prices remain sharply elevated versus prior to the storm. Ethane prices have fallen significantly as cracker and export demand is constrained. Higher levels of rejection (and lower ethane prices) may be required to balance the system in the near future.

Chemicals

Logistics (ship, barge, pipeline, rail or truck) are currently a primary barrier preventing a speedy recovery from getting under way.

The complete report is available here. 

Read the article online at: https://www.worldpipelines.com/equipment-and-safety/04092017/ihs-markit-hurricane-harvey-update/