IHS Markit Hurricane Harvey Update (August 31, 2017)
HOUSTON, Aug 31, 2017 (BUSINESS WIRE) --
Copyright Business Wire 2017
IHS
Markit (Nasdaq: INFO), a world leader in critical information,
analytics and solutions, is releasing periodic updates on the impact of
Tropical Storm Harvey on the crude oil, refining and chemical sectors.
A summary of the latest update (as of end of day Wednesday, August 30)
follows below.
The complete report is available at http://bit.ly/2wqaAq4
Crude
--
As of Wednesday, U.S. Gulf of Mexico operators have shut down
approximately 324,000 b/d of crude oil output, equal to around 19
percent of total Gulf of Mexico production. In addition, about 0.61
Bcf/d of natural gas output was shut in, or about 19 percent of Gulf
production.
--
Perhaps the biggest issue in terms of recovery is the interconnected
nature of the Gulf energy industry. Even if crude production can
recover quickly without lingering damage, producers will have trouble
moving their crude if refineries remain offline or if ports are slow
to reopen, or if key pipelines remain down. Likewise, refiners that
are undamaged may have difficulty sourcing crude if the ports remain
closed.
--
There is still considerable uncertainty about any lingering damage to
offshore platforms and the extent of flooding damage to onshore oil
production. There is no official estimate of Eagle Ford volumes
impacted, although estimates are that perhaps 300,000 b/d of
production was shut in in advance of the storm.
--
The Eagle Ford produces about 1.3 MMb/d, or 14 percent of all U.S.
crude oil output. Given that large-scale shale production is a
relatively recent technology, it is not possible to determine yet
whether there will be any permanent production impact to the wells
once they restart.
--
The port of Corpus Christi sustained some damage but is working to
resume normal operations by September 4. Corpus Christi is a key port
for exporting U.S. domestic light crude such as WTI and Eagle Ford.
The ports of Houston, Galveston and Freeport are closed, with no firm
timetable for reopening. These ports are critical for moving imported
crude to the region's refineries (especially heavy crude) and also for
crude exports. U.S. crude exports have averaged over 900,000 b/d
year-to-date, and are almost entirely sourced out of the Gulf.
Refining
--
Tropical Storm Harvey has now officially moved on from Texas, but
floodwaters remain and the refining industry is still reeling.
--
The total amount of distillation capacity confirmed offline is now 3.3
million b/d, up from 2.0 million b/d on Tuesday. Another 2.2 million
b/d is either presumed idle, operating at severely reduced rates, or
still under imminent threat. Together, the affected facilities
represent over 30 percent of U.S. refining capacity.
--
Corpus Christi, despite taking the brunt of Harvey's initial landfall,
is currently faring the best. Flooding was far less severe in Corpus
Christi and active recovery has been underway for a couple days. The
region's four refineries, which collectively represent around 4.5
percent of U.S. distillation capacity, are all looking to begin
restart operations this week. The Port of Corpus Christi also expects
to partially re-open by the end of the week and resume "normal
operations" by September 4.
--
The news is far more uncertain in Houston, where floodwaters may
continue to rise today despite an end to the rain.
--
Five of the city's nine refineries, representing 7.2 percent of U.S.
distillation capacity, are officially confirmed to be offline. The
other four (another 6.2 percent of U.S. distillation capacity) are
almost certainly operating at reduced rates, if not completely idled.
--
So far, no Houston refineries have reported significant damage, but a
full reckoning of the storm's impact is simply not possible until the
waters recede and recovery begins. All four Houston area ports remain
closed Wednesday, and will not likely re-open before Friday.
--
Further east, the Beaumont-Port Arthur-Lake Charles refining hub is
also now dealing with catastrophic flooding. Three of this region's
seven refineries, including the country's largest plant, are now
officially offline. The other four are reportedly operating at
severely reduced rates.
Natural Gas Liquids (NGLs)
--
There has been widespread effects on supply, demand, exports, and
pricing of NGLs. Gas plant supply is expected to fall temporarily due
to the hurricane as fractionation operations were curtailed during the
storm.
--
Enterprise Products Partners released an update on Aug. 28 on
operations affected by Harvey. "At Enterprise's Mont Belvieu, Texas
facility, four of its eight NGL fractionators, three of its six
propylene fractionators and storage facilities are in service or
limited service. The main impacts of the storm at Mont Belvieu have
been rising water and loss of power," it said.
--
Loss of power is a factor in other operational curtailments for
Enterprise. "In South Texas, two of Enterprise's eight natural gas
processing plants, including its largest plant, Yoakum, are in
service. The remaining six natural gas processing plants and the Shoup
NGL fractionation facility are currently not in operation due to the
effects of the storm, including loss of power, loss of third party
services, minor damage and/or the level of natural gas production."
But it added that overall its natural gas, NGL and crude oil pipelines
serving South Texas and the Eagle Ford Shale are in commercial service.
--
ONEOK shut its fractionators at Mont Belvieu and information is not
yet available on whether they have returned to service.
--
Among other Mont Belvieu operators, a spokeswoman for Energy Transfer
Partners (ETP), parent company of Lone Star NGL, said there was "no
major damage to report" at its facilities and there has been "minimal
impact on our operations."
--
Targa reported impacts on Aug. 29 saying that damage to date to Targa
facilities has been minimal, that disruptions to operations are
expected to be limited and that normal operations will resume shortly
after flood waters recede.
--
Conditions associated with continued flooding in the Houston area, and
specifically the area of Targa's facilities in Mont Belvieu, Texas,
which include the Cedar Bayou Fractionator ("CBF"), today required CBF
to be temporarily taken out of service. Fractionation operations
should be able to resume quickly once water recedes and operation of
the freshwater supply wells is restored.
--
Flooding of the brine disposal pumps at Targa's Mont Belvieu terminal
has also impacted the facility's capacity for receiving raw products,
Targa said. The group were utilizing their storage position and
working with pipeline operators to manage natural gas liquids receipts
at lower volumes than normal.
--
Crestwood issued a force majeure update on Aug. 28, saying it expects
its Tres Palacios Gas Storage facility to remain closed through Aug.
31.
--
Force majeures were still in effect as of Aug. 28 on several pipeline
systems, including: Natural Gas Pipeline's (NGPL) segment 23 of the
Louisiana Line in Cameron Parish, La; the Kinetica Energy Express
Grand Chenier System due to a mandatory evacuation of lower Cameron
Parish, La.; and Kinetica's Sabine System, also due to the Cameron
Parish evacuation. NGPL updated on Aug. 29 that compressor stations
302 (Montgomery County, TX.), 342 (Cameron Parish, La.) and 343
(Liberty County, TX) were still unavailable.
--
Refinery supply of NGLs was also impacted by Hurricane Harvey.
Refinery production of NGLs is responsible for approximately 20
percent of total U.S. supply. PADD 3 is responsible for approximately
50 percent of refinery supply of NGLs.
--
NGL export capacity was also affected by the storm. Phillips66
temporarily suspended operations on Aug. 25 according to a notice on
the company's website. Phillips noted that this is due to the closure
of the port of Freeport, and added that its "other assets in the Gulf
Coast region continue to operate while implementing their hurricane
preparation plans."
--
Additionally, operations at Enterprises' Morgan's Point terminal have
been affected by the storm. The ethane terminal was put out of service
and is capable of 200,000 b/d of exports.
--
Targa's Galena Park Marine Terminal is not in service as the Houston
Ship Channel has been closed to ship traffic since August 25th.
Resumption of operations at Galena Park is dependent on the Coast
Guard reopening the Houston Ship Channel and inspection of the
pipelines between Mont Belvieu and Galena Park.
Chemical
--
Ethylene - The amount of confirmed outages has increased, pushing the
percentage of total U.S. ethylene production offline to 43 percent and
total U.S. ethylene consumption capacity to 31 percent. As of the time
of this writing, no ethylene production units have been confirmed to
be offline in Louisiana, although unconfirmed reports point to supply
chain constraints and storage issues. It may take weeks for the
overall ethylene market to approach pre-Hurricane production levels.
--
Propylene - The amount of confirmed PGP/CGP assets offline has
increased to 34 percent of the PGP/CGP and 28 percent of the RGP
supply. Another 6 percent of PGP/CGP supply and 1 percent RGP supply
is suspected down as well. Approximately 92 percent of the total U.S.
production for PGP/CGP lies in the potentially affected regions along
the Texas and Louisiana coastline. Likewise 88 percent of the total
propylene equivalent consumption capacity based on PGP/CGP feed also
lies within the potentially affected zone.
--
Polyethylene - IHS Markit calculations suggest that approximately 45
percent of U.S. PE production capacity is currently offline as a
direct result of Hurricane Harvey. Logistical constraints are further
complicating matters as many of the affected facilities have little or
no ability to ship any product that could be produced. U.S. producers
export approximately 420 KT of PE per month and it is this supply that
is expected to be significantly curtailed in the near term.
--
Polypropylene - Approximately 60 percent of North American PP
production could be currently offline. IHS Markit currently expects
rail car shipments on average will be delayed up to two weeks from
when the storm hit which means supplies would potentially start to
recover sometime the week of September 11th. However, this is only an
estimate and could change as more details emerge.
--
Benzene - Spot benzene prices have been volatile, jumping up as high
as $2.75 per gallon on Monday before falling sharply on Tuesday to as
low as $2.65 per gallon. The market has stabilized momentarily at
under the $2.70 per gallon level. The loss of production has largely
been offset by derivatives being shut down or running at reduced rates
as inventories are drawn down.
--
Toluene - Toluene prices have firmed but chemical demand is tempered
by derivative units also being affected. Gasoline and reformate prices
are spiking, with RBOB up nearly 30 percent over the last week.
Reformate was up to $2.30 per gallon and that will impact commercial
grade toluene. Blend values have increased to over $2.20 per gallon
and that will lead to refiners using toluene for gasoline as
production returns.
--
Mixed Xylenes - Mixed xylenes prices are increasing but production
from Lake Charles and imports from Europe should soften prices by next
week. The mixed xylenes will be needed for solvent demand and PX units
as they restart over the next two weeks. Imports are expected to be
moving from Europe, up to 10kt this week.
--
Para-xylene - PX production in Texas City is dependent on the
operation of Marathon's Galveston Bay refinery. An initial decision
yesterday to shut down the refinery was reversed today as the opening
of the port appears to be near. Product can't move from Corpus or
Houston, for the time being, with a PX unit in Pascagoula unaffected
to this point. The consumers will need to run on inventory or imported
material until production/shipments are resumed. Volume is expected to
move from EU to the U.S., up to 20kt.
--
Chlor Alkali/Vinyls - As of Wednesday August 30, 25 percent of U.S.
PVC capacity remains offline due to severe impacts from the hurricane,
mostly flooding but also supply disruptions of upstream feedstocks.
The duration of these supply interruptions is uncertain at this time.
--
Methanol - Current estimate is that 14 percent of U.S. formaldehyde
capacity is affected. In acetic acid, 83 percent of U.S. capacity is
in the affected area. For methanol, 45 percent of U.S. capacity is in
the affected area.
The complete report is available at http://bit.ly/2wqaAq4
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SOURCE: IHS Markit
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