Harvey hits refineries responsible for more than 30% of US processing capacity

Hurricane Harvey’ damage in the Houston area has affected a group of refineries responsible for more than 30% of U.S. processing capacity, according to IHS Markit, 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.

According to the company, the total amount of distillation capacity confirmed offline is 3.3 million barrels per day (b/d), while another 2.2 million b/d is “either presumed idle, operating at severely reduced rates, or still under imminent threat.”

Here’s some of the highlights in its latest report. You can check the complete document in PDF format here.

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% of total Gulf of Mexico production. In addition, about 0.61 billion cubic feet per day (Bcf/d) of natural gas output was shut in, or about 19% 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 barrels per day (b/d) of production was shut in in advance of the storm.

The Eagle Ford produces about 1.3 million barrels per day (MMb/d), or 14% 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% 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% 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% of U.S. distillation capacity, are officially confirmed to be offline. The other four (another 6.2% 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.

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