Harvey drops production of Texas Gulf Coast refineries

By Patrick C. Miller | August 29, 2017

The effects of Hurricane Harvey are not only affecting offshore oil rigs and refineries along the Gulf Coast, but also onshore operations in the Eagle Ford shale play of south Texas.

The latest information from the Texas Railroad Commission estimates that 300,000 to 500,000 barrels per day of crude production has been shut down in the Eagle Ford region. Approximately 3 billion cubic feet per day of natural gas production has been shut in.

As of Tuesday morning, the U.S. Department of Energy reported that all six refineries in the Corpus Christi area and five refineries in the Houston and Galveston area were shut down. The refineries have a combined refining capacity of 2.4 million barrels per day—about 24 percent of total Gulf Coast refining capacity and nearly 13 percent of total U.S. refining capacity.

Four refineries in the Houston and Galveston region, one refinery in the Beaumont and Port Arthur area, and two refineries in the Lake Charles area were operating at reduced rates, according to DOE. The agency said that as of Monday, 19 percent of oil production 18 percent of natural gas production in Gulf of Mexico was shut-in

A report released Tuesday by Thomson Reuters Oil Insight regarding Harvey’s impact on Gulf Coast refineries forecasts the estimated gasoline losses to date at 8 to 9 million barrels and a loss of 6 to 7 million barrels in distillates. The report also said Harvey could cause fuel shortages in Latin America after shutting in about 1 million barrels per day of U.S. gasoline and diesel exports typically destined for Mexico and other countries.

John Auers, executive vice president of Dallas-based Turner, Mason & Co. who leads the firm’s activities in forecasting, said it’s still too early to speculate on the long-term impacts of Hurricane Harvey, especially on refineries.

“We won’t know for sure until they commence startup activities in the next two or three days,” he said. “But Houston and Port Arthur are still up in the air because flooding continues and it’s still raining. It could rain quite a bit more. It’s moving further east. Lake Charles and the Mississippi River could see further impacts.”

Auers’ weekly “Turning Point” blog examined the potential effects of Harvey on the refining industry and gasoline prices. He’s no stranger to the situation in Houston.

“Houston sees a lot of water,” he noted. “I’ve been down there during big rain events, but this is the biggest one ever. The level of flooding is something I’ve never seen there.”

In July 1979, Auers was an intern at Exxon’s Baytown refinery when Hurricane Claudette dumped 43 inches of rain on the area, setting an all-time record for a 24-hour period.

“Even as much as it was, it wasn’t as long-lasting or as widespread as this rainfall,” he recalled. “The total volume wasn’t near the level of what you’re seeing now.”

Auers said that while refineries and offshore drilling platforms are built to withstand the high winds of hurricanes, flooding exposes sensitive electrical equipment and control systems to water.

“Will the flooding cause significant equipment damage and require extended drying out periods before they can start back up? That’s the question,” he said.

It could be days or weeks before the full extent of the damage from Hurricane Harvey can be fully evaluated.

“The situation’s still going on and Harvey’s still wreaking havoc,” Auers said. “It’s not over. The time for damage assessment is still in front of us.”