By Erwin Seba
HOUSTON (Reuters) – The 2023 Atlantic hurricane season has been exceptionally active, but fortunately, there have been no storms impacting the U.S. oil and natural gas fields in the northern Gulf of Mexico. This has resulted in energy companies saving billions of dollars in losses and consumers avoiding higher fuel costs.
This year’s hurricane season has already seen three major hurricanes with winds exceeding 111 mph (179 kph) out of a total of six hurricanes among 20 named tropical storms. However, the Gulf Coast oil industry faced minimal disruption with only one storm, Tropical Storm Harold, causing a temporary halt in operations at three refineries in Corpus Christi, Texas, due to power outages.
The Gulf of Mexico offshore operations contribute 15% of U.S. crude oil production and 5% of the nation’s natural gas production. Additionally, approximately half of the country’s refining capacity and natural gas processing plant capacity are located along the Gulf coast. Despite the fortunate outcome this year, there is still a necessary consideration of the inherent risks associated with the region.
“We got really, really lucky this year,” commented Colin White, a consultant with Rystad Energy in Houston. However, he also emphasized the need for producers to remain cautious given the potential risks.
The Atlantic hurricane season typically runs from June 1 to November 30. While the season is starting to wind down, Jim Foerster, chief meteorologist for DTN, described this year’s season as a powerhouse.
Over the past few years, storms like Hurricane Ida have caused an average shutdown of 24 million barrels of oil production annually in the Gulf. According to Rystad’s White, this corresponds to an average revenue loss of about $1.7 billion per year, assuming an oil price of $70 per barrel.
Fortunately, there have been no impacts on offshore production so far this year. Troy Vincent, senior oil market analyst for DTN, noted that last year’s hurricane season was the first since 2014 to leave most offshore production unaffected, with less than 200,000 barrels per day (bpd) of production being shut.
However, the perception of low-activity hurricane seasons as a safeguard against crude supply disruptions may change among refiners. Pet Jelinek, Ernst & Young Americas oil and gas leader, warned that recent developments in the energy industry, such as reduced global production of oil and gas, have led to more expensive feedstocks. This means that the benefits of a milder hurricane season may not be as advantageous for refiners and consumers as they once were.
(Reporting by Erwin Seba; Editing by Marguerita Choy)
