US Gulf of Mexico oil and gas output returning ahead of Tropical Storm Beta’s landfall

Highlights

Shell shut in Perdido and ceased drilling at Mars platform

Texas crude oil and LNG shipments impacted by Beta

About 8% of crude oil and 6% of gas still offline in GoM

Houston —
Offshore US Gulf of Mexico oil and gas production continued to recover Sept. 21 as Tropical Storm Beta was preparing to make landfall along the Texas coast, US Bureau of Safety and Environmental Enforcement data showed.

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Less than 10% of the Gulf’s oil and gas volumes remained offline on Sept. 21 from the effects of Hurricane Sally last week, with much of the production still offline coming from Shell’s Perdido platform in the western Gulf that was shut in ahead of Beta.

Beta, which is no longer expected to strengthen into a hurricane before a Sept. 22 landfall near Corpus Christi, isn’t causing nearly as many disruptions to the energy infrastructure as did Sally and, to a greater extent, Hurricane Laura did in late August. However, Beta is still restricting movements and deliveries for crude oil and LNG tankers from the Texas coast to southwestern Louisiana.

According to BSEE, 154,604 b/d of crude output remained offline on Sept. 21, and 162 Mmcf/d of natural gas output, 8.36% and 5.98% of total Gulf output, respectively. That was down from more than 30% and 25% of oil and gas production offline Sept. 17, respectively.

The Perdido platform alone produces up to 100,000 boe/d, so there is not a whole lot else still offline. Shell also said on Sept. 21 that it has suspended drilling operations at its Mars platform because of storm conditions.

Beta is expected to make landfall near Corpus Christi and then meander along the coastline toward Houston as a weaker tropical depression.

The Port of Corpus Christi, which is the nation’s top oil-exporting hub, is operating at a restricted movement status for inbound tankers. Likewise, along a wide swath of the Texas and Louisiana Gulf Coast, pilot services were suspended or restricted within the channels that serve Cheniere’s Sabine Pass and Corpus Christi liquefaction facilities as well as Sempra Energy’s Cameron LNG.

That was expected to impact tankers in the vicinity of the export terminals. Gas deliveries to Sabine Pass fell Sept. 21 compared with a week earlier, while they remained stable at Corpus Christi. Gas deliveries to Cameron LNG remained at zero as the terminal’s three trains continued to be offline due to damage to power infrastructure from Hurricane Laura in late August.

Freeport LNG, south of Houston, was planning to maintain operations through Beta, as of Sept. 21, according to a spokeswoman. Those plans could change depending on the intensity and track of the storm. Feedgas flows to the terminal fell substantially ahead of the storm from levels a week earlier, S&P Global Platts Analytics data show.

Refineries still down

Corpus Christi area refiners were expected to keep operating during Beta, while closely monitoring the storm, according to refiners Valero Energy and Citgo Petroleum.

However, nearly 1 million b/d in refining capacity in Louisiana remained offline from hurricanes Laura and Sally.

Phillips 66’s 255,600 b/d Alliance refinery in Belle Chasse, Louisiana, was shut in advance of Sally. And, although the storm missed almost all of southeastern Louisiana, Phillips 66 said the Alliance refinery will remain closed for for maintenance originally scheduled for October.

Two major refineries — Phillips 66’s and Citgo Petroleum’s Lake Charles refineries in southwestern Louisiana — still remain shuttered after sustaining damage and the loss of power from Laura.

The loss of refining capacity, combined with lower export demand, has weakened demand for Mars medium sour crude, causing the Mars price differential to narrow. Mars ended Sept. 21 at a roughly 20 cents/b premium to cash WTI, down from a 35 cents/b premium assessment the prior trading day, and a $1.70/b premium on Sept. 8, S&P Global Platts data shows.