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Average Hurricane Impact on GOM Output Called 'Modest'

The average impact on U.S. oil and natural gas production from Gulf of Mexico (GOM) hurricanes over a 45-year period was found to be "relatively modest" and the impact on energy supplies "typically short-lived," according to an analysis by IHS Inc.

Energy consultant IHS analyzed GOM storm data between 1960 and 2005 to correlate the overall impact of hurricanes on oil and gas production.

"Based on our IHS production data from 1960 through 2005, which includes record levels of damage from Hurricanes Katrina and Rita in 2005 and significant hurricane impact from four other hurricanes in the last decade, an average Gulf of Mexico hurricane season would likely disrupt only 1.4% of the annual oil production and 1.3% of the annual gas production," said IHS senior product manager Steve Trammel. "While Hurricanes Katrina and Rita were an exception, historically, our data shows the overall impact to be much less than most people might expect."

The historically low impact on production primarily is attributed to industry planning, said Trammel.

"The oil and gas companies are very focused on the safety of their personnel," he said. "Operators make the decision to pull crews off rigs well before a storm moves into the Gulf. Therefore, most disruptions to production are caused by suspension of operations as a safety precaution in the event that an approaching hurricane does threaten offshore production. As a result, average hurricane disruptions are short-lived with full production reestablished within a month."

Several leading forecasters, including Colorado State University, the National Oceanic and Atmospheric Administration, WSI Corp. and MDA EarthSat, have called for an above-average hurricane season this year.

When Hurricanes Katrina and Rita swept into the GOM in 2005, they combined to impart record damage to offshore GOM oil and gas production and facilities. The U.S. Minerals Management Service (MMS) reported that 3,050, or 75% of the platforms; 22,000 miles, or 67% of the pipelines; and about two-thirds of the region's refineries were in the combined paths of the two storms.

By mid-December 2005, cumulative shut-in oil was 101.7 million bbl, or 18.5% of annual GOM output; shut-in natural gas production totaled 526.2 Bcf, or 14.4% of annual production, IHS noted.

Six major hurricanes in the GOM have caused significant oil and gas production curtailments over the past 10 years, Trammel noted. Most of the production losses that occurred following Hurricanes Opal (1995), Georges (1998) and Lili (2002) was restored within a month, but Hurricane Ivan in 2004 disrupted 471 million bbl of oil production and 140 Bcf of gas. Category 5 storm Hurricane Katrina, which mangled infrastructure onshore and offshore, achieved 175 mph winds before it dropped to Category 3 and struck Louisiana on Aug. 29, 2005. Hurricane Rita, which also devastated energy infrastructure, struck the Texas coast on Sept. 24, 2005 as a Category 3 storm after achieving sustained winds of 180 mph.

In response to the increase in recent major hurricanes striking the GOM, the energy industry has improved evacuation plans and shut-in and restart procedures to ensure safety and to mitigate leaks and production loss, Trammel noted.

"Within economic limits, offshore structures are being engineered to withstand Category 5 hurricanes," he said. "In addition, the MMS has mandated new design specs for offshore facilities and has issued a series of Notices to Lessees and Operators, called NTLs, for rig fitness requirements, platform tie-downs and ocean current monitoring, which are all tied to hurricane season."

Even though historic average hurricane damage and production curtailment have been relatively modest, MMS and operator actions to mitigate impacts from future hurricanes are warranted, the IHS study found. The MMS has noted that GOM production and infrastructure is expanding farther out and deeper down, which IHS said will put more offshore facilities at risk from hurricane damage.

IHS production data indicate that the U.S. GOM produced 476 million bbl, or 25% of the U.S. total, and 2.8 Tcf of gas, or 12% of U.S. supplies, in 2007. Moreover, the deepwater GOM is yielding some world-class oil and gas discoveries. According to IHS data, GOM discoveries yielded 8.5 billion boe from 2000 through 2007, making it the seventh leading source/country in the world over that period. Currently, there are 3,639 producing oil wells and 3,788 gas wells in the U.S. GOM, according to IHS data.

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