(UPDATED at 7 p.m. with report of Hurricane Isaac
By Ben DuBose
HOUSTON -- Isaac strengthened into a hurricane Tuesday
just before its landfall in southeast Louisiana, but
energy companies are likely to be spared from significant
damage, analysts with Tudor Pickering Holt said.
Not expecting major onshore or offshore damage to
energy infrastructure, the analysts wrote in a research
note distributed on Tuesday.
The slow forward motion is likely to cause flooding
inland but should not create long term impact to oilfield
operations, they added.
Landfall expected Wednesday
As of 7 p.m. local time Tuesday night, Isaac made landfall
in extreme southeastern Louisiana as a Category 1
hurricane with sustained winds of 80 miles/hour, according
to the National Hurricane Center (NHC).
Isaac is likely to hold its hurricane
strength over the marshes of southeast Louisiana
before gradually weakening as it tracks northwest toward
New Orleans and through much of the state, the NHC forecasters
Isaac's winds could knock out power for days, and heavy rains
from the slow-moving storm could lead to flooding in
coastal Louisiana, Mississippi and Alabama. Intense
squalls were pounding the New Orleans area and its nearby
refineries late Tuesday.
But unlike prior Gulf of Mexico hurricanes such as Katrina,
Rita and Ike, Isaac is unlikely to inflict devastating or
catastrophic wind damage.
Eastern Gulf pipes and Louisiana-based NGL
infrastructure remain exposed, the Tudor analysts
cautioned. We expect modest impact.
Refinery shutdowns and rate
As of late Tuesday, five refineries in Isaac's
path said they are shut down or were in the process of
shutting down. Those sites have a combined output
of 936,500 bpd, representing 12% of total Gulf Coast
refining capacity, according to the
Department of Energy (DoE).
The five Louisiana refineries shut down
are the Phillips 66 Alliance refinery in Belle Chasse
(247,000 bpd), Valero at Norco (205,000 bpd), Motiva
at Convent (235,000 bpd), Placid Refining in Port Allen (57,000
bpd) and the ExxonMobil/PdVSA joint venture in
Chalmette (189,000 bpd).
Meanwhile, rates are reduced at Marathon
Petroleums Garyville refinery (490,000 bpd), Motiva
at Norco (233,500 bpd) and for ExxonMobil at
its massive Baton Rouge complex (502,500 bpd).
Gulf Coast refiners saw Louisiana Light & Sweet (LLS) crack
spreads widen $7.30/bbl on Monday, and the margin may
strengthen further due to the precautionary shut-ins, Tudor
analysts said. Light sweet crude closed Tuesday afternoon
at $96.33/bbl, up 86 cents from Monday.
However, history would suggest that spreads are more
likely than not to decline post storm passage, the
Offshore production effects
For the offshore industry, 93% of Gulf of Mexico oil
production and 67% of natural gas production was shut as of
midday Tuesday, the DoE reported. At least 503 Gulf platforms
(84%) and 49 rigs (64%) were evacuated.
That, in turn, led to declarations of force
majeure for several major US pipeline
systems, owing to production shut-ins in the
Gulf. The 1.2 million bpd Capline pipeline, which
transports crude to refineries in the US Midwest, was shut down
The production numbers could improve as soon as
Thursday, when Isaac is projected to be well inland. That
would presumably allow companies to begin re-staffing Gulf rigs
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