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Harvey Punishing Texas, Louisiana NatGas Processing, Refineries

Tropical Storm Harvey rained its terror on Texas again on Wednesday, making landfall about 30 miles east-southeast of the massive petrochemical and refinery complex in Port Arthur. For the energy complex, processing plants and refineries were taking the biggest hits, with flooding expected to continue along the upper Texas coast and inland through Louisiana for the next few days.

On Wednesday morning, Golden Triangle Storage said its 13-Bcf capacity facility in Jefferson and Beaumont counties east of Houston was shut down and would not resume operations until plant personnel could safely return and inspect the facilities for damage.

During the shutdown, Golden Triangle will not be able to inject or withdraw gas from storage or wheel gas, and no nominations will be scheduled for gas flow until further notice.

As of Tuesday, Golden Pass Pipeline was operationally unavailable at the Golden Triangle Storage interconnect and reduced receipt and delivery capacities to zero, the company said. The site was experiencing localized flooding from Harvey and could not be accessed by Golden Pass workers. "As soon as the water subsides, we will send personnel out and update with more information at that time," Golden Pass said.

A Louisiana-based spokesperson for Sempra Energy noted that the storm was moving through southwestern part of the state on Wednesday, where its liquefied natural gas (LNG) export project in Cameron is under construction.

"The Cameron Parish Office of Emergency Preparedness is expected to lift the mandatory evacuation order at noon (Wednesday), and Cameron LNG plans to re-enter the site in the afternoon using its Damage Assessment Recovery Team,” the Sempra spokesperson said.

Gulf Coast LNG projects “remain largely unscathed,” said Tudor, Pickering, Holt & Co. (TPH). Analysts said LNG operations at Sabine Pass and construction at Corpus Christi terminals have weathered Harvey’s impact. “However, it is possible for production to be suspended for a short while if its storage tanks reach capacity and ships are still unable to reach the port.”

Natural gas liquids (NGL) operators were particularly hard hit as the rainfall swamped facilities.   

Houston-based Targa Resources Corp. said continued flooding in the Houston area, specifically near its facilities in Mont Belvieu, including the Cedar Bayou Fractionator (CBF), required the facility to be taken out of service temporarily.

“CBF was taken out of service due to flooding that disrupted the operation of freshwater supply pumps,” Targa said Wednesday. “Fractionation operations should be able to resume quickly once water recedes and operation of the freshwater supply wells is restored.”

A rain gauge in Mont Belvieu, where most NGLs in the state are processed, had registered 51.1 inches of rain through early Tuesday afternoon, according to Texas state climatologist John Nielsen-Gammon of Texas A&M University. Enterprise Products Partners LP (EPD) maintains the world's largest NGL complex at Mont Belvieu; it had reported limited operations on Tuesday.

The offshore region appeared to have stabilized, however. The Bureau of Safety and Environmental Enforcement (BSEE) said Wednesday workers had been evacuated from 102 (13.84%) Gulf of Mexico (GOM) production platforms and five of the GOM's 10 non-dynamically positioned rigs. Both numbers were unchanged from Tuesday. A total of 323,760 b/d (18.50%) of crude oil had been shut in along with 611 MMcf/d (18.98%) of natural gas, both about the same as in BSEE's report a day earlier.

Upstream Outages Possibly Impacted

Disruptions in brine disposal operations at the Mont Belvieu Terminal “have also negatively impacted the facility's capacity for receiving raw products due to flooding of brine disposal pumps” Targa said. “The company is currently utilizing its storage position and working with pipeline operators to manage natural gas liquids receipts at lower volumes than normal.”

The outages also may impact Targa’s upstream gathering and processing facilities, and it “may have to curtail operations at some of its natural gas processing plants until flood waters recede and conditions improve at Mont Belvieu. Any such curtailments are expected to be temporary subject to resuming normal operations at Mont Belvieu.”

Targa's Galena Park Marine Terminal has not been service since the Houston Ship Channel was closed to ship traffic last Friday ahead of Harvey coming ashore.

Resuming operations will be dependent on the U.S. Coast Guard reopening the ship channel and Targa’s inspection of pipelines between Mont Belvieu and Galena Park.

Targa’s South Texas assets, which include the Raptor and Silver Oak natural gas processing plants, “are all now operational and are undamaged. Operation of these facilities may still be impacted due to receipt of natural gas liquids constraints at Mont Belvieu.” And on the Louisiana coast, assets are operational and undamaged, but Targa is prepared for the upcoming rains and potential flooding.

"Our primary concern is for the safety and well being of our employees, their families, and their communities, and watching everyone in the Targa family rally together is inspiring," said CEO Joe Bob Perkins. "None of our assets have sustained any material damage at this point. The disruption to Targa operations at Mont Belvieu will hopefully be a very short term event, and we are working to be in position to ramp operations back up quickly."

DCP Midstream LLC said Wednesday it was monitoring the storm and preparing for “additional flooding over the next several days. The safety of our employees and their families remain our primary concern.

“Operationally, 600 MMcf/d of South Central Texas capacity remains shut in. All other facilities, including our Sand Hills, Southern Hills and other NGL pipelines connecting to the Gulf Coast remain operational.”           

AccuWeather predicted Harvey would be the “most costly natural disaster in U.S. history.

"The economy's impact, by the time its total destruction is completed, will approach $160 billion, which is similar to the combined effect of hurricanes Katrina and Sandy,” said AccuWeather Chairman Joel N. Myers. “This represents a negative impact on the economy of 8/10 of 1% of the gross national product, or GDP. The GDP is $19 trillion currently.

“Business leaders and the Federal Reserve, major banks, insurance companies, etc. should begin to factor in the negative impact this catastrophe will have on business, corporate earnings and employment. The disaster is just beginning in certain areas.”

Houston, the nation’s fourth largest city, “will be uninhabitable for weeks and possibly months due to water damage, mold, disease-ridden water and all that will follow this 1,000-year flood,” Myers said. “The worst flooding from Harvey is yet to come as rivers and bayous continue to rise in Texas with additional levees at risk for breaches and failures.”

Refineries Out Of Action

Meanwhile, around 25% of the nation’s refinery capacity, mostly centered in the Houston area, was estimated to be out of action early Wednesday. Early Wednesday Saudi Arabia-owned Motiva Enterprises said it completely shut down its refinery in Port Arthur east of Houston.

The Motiva facility, the largest in the country, is able to process more than 600,000 b/d of crude oil.

“At 5 a.m. on Wednesday...Motiva began a controlled shutdown of the Port Arthur refinery in response to increasing local flood conditions,” the company said. “Return to service is contingent upon recession of flood waters in the area.  Our priority remains the safety our employees and community.”

Total SA’s Port Arthur refinery also was closed late Tuesday after it lost power. A spokeswoman said the company was assessing the situation.

For Valero Energy, it is hit and miss for its Texas refineries. Startup was underway Wednesday at the Three Rivers facility north of Corpus Christi. The Houston and Texas City facilities continued to operate, but because of flooding and potential power supply interruption, the Port Arthur refinery has been shut down.

“We are providing assistance to our affected employees in Corpus Christi and Three Rivers, and now, we are focusing on employee needs in the greater Houston/Beaumont/Port Arthur area,” Valero said. The company also has contributed $1 million to the American Red Cross for relief efforts.

“We continue to work closely with local, regional and national government entities at all of our plants to address storm conditions. The safety of our workers, their families and surrounding communities is our primary focus as we continue to monitor the weather and determine our next steps.”

Valero is providing assistance to about 150 employees in the Corpus Christi and Three Rivers area with food, lodging and other personal needs and has assisted nearly 20 employees with home damage by helping them with roof repairs and debris removal.

“With ongoing flood conditions in the greater Houston area, we stand ready to support affected employees when it is safe to do so,” the San Antonio-based company said.

IHS Markit said a “key limitation at the moment for producers, refiners and exporters along the Texas Gulf Coast is the shutdown of many key crude oil pipelines. With limited pipeline takeaway to the Gulf, Permian operators may begin to be impacted.” Eagle Ford Shale producers have reported limited disruptions but some flooding, which forced areas to be evacuated.

According to IHS Markit, the Port of Corpus Christi, about 30 miles from Harvey’s landfall and an increasingly important port for exporting LNG and domestic light crude from the Eagle Ford, sustained some damage, but it is “working to resume normal operations” by Labor Day.

Ports, storage and demand recovery are key for NGL impact, noted Goldman Sachs. On the supply side, curtailments in the Eagle Ford Shale and offshore could be “more than offset by downstream industrial demand outage, particularly from the petrochemical industry,” which consumes 100% of the current domestic ethane production (except for exports/rejection), and 20% of the propane production.

“Port closures could also impair NGL exports, where net propane exports have averaged 775,000 b/d year-to-date, or close to half of average.”

From a midstream perspective, it’s too early to assess Harvey’s impact but most pipelines run underground and “should therefore not have material damage except where exposed, such as near river crossings,” according to Goldman. “Some midstream operators have preventatively shut-in gas/NGL/crude pipelines...but most have continued to run.”

“The past 24 hours have included heartening signs of recovery from the Corpus Christi refining industry,” said IHS Markit analysts. “Flint Hills’ Corpus Christi refinery will begin a staged restart process” as early as Wednesday, “with the other three plants in the area likely to follow suit later this week. Together these four plants represent around 4.5% of U.S. refining capacity -- and nearly 40% of the capacity currently is offline.”

Houston is “far more uncertain,” with another 8-12 inches of rain expected over the next few days. Sources told IHS Markit that Marathon Petroleum Corp. was “idling production at its two Houston refineries. These reports have not been confirmed by the company. If true, this would increase the number of shuttered plants in the city to six.”

Houston refineries to date have reported limited damage. “But the situation is still evolving and a full reckoning of the storm’s impact is simply not possible at this point. All four Houston area ports remain closed Tuesday, and will not likely reopen before Thursday.”

Harvey, still considered a tropical storm as of Wednesday morning, was aiming for the upper Texas coast and into Louisiana, with the region expected to receive 5-15 inches of rainfall through Friday.

“Port Arthur/Lake Charles is home to seven refineries with a collective distillation capacity of nearly 2.3 million b/d -- about 12.3% of the national total,” IHS Markit noted. “The total amount of distillation capacity confirmed offline remains at 2.0 million b/d. However, the amount of refining capacity operating at reduced rates has effectively doubled, rising from 1.1 million b/d to 2.2 million b/d. Another 1.3 million b/d is under imminent threat to reduce operations. Together, the affected facilities represent more than 30% of U.S. refining capacity.”

Even operators in the Appalachian Basin are keeping an eye on the Gulf Coast storm. Blue Racer Midstream LLC spokesperson Casey Nikoloric said the company has had no issues getting NGLs from its facilities in Ohio and West Virginia to the Gulf Coast yet, but as Harvey "moves through Beaumont, TX, and southern Louisiana, the likelihood increases."

Despite the limited operations reported by EPD this week, spokesperson Rick Rainey said the Appalachia-to-Texas Express pipeline -- a key outlet for ethane that terminates at the company's Mont Belvieu complex -- continued to operate without issue.

Around 70% of total U.S. production for ethylene is also centered in Texas, along with 65% of the total ethylene equivalent consumption capacity. Most units potentially are being impacted by the storm.

Harvey on Wednesday alone knocked out three crackers in the Port Arthur/Beaumont/Lake Charles region, which together produce 3.5 billion pounds of ethylene, noted TPH. Including the reported partial shutdown of Lyondellbasell’s facility in Channelview east of Houston, “we now estimate that 52% of U.S. cracker capacity is offline due to the storm,” the TPH analysts said.

There still were five operating crackers early Wednesday in the Port Arthur/Beaumont/Lake Charles area representing 15% of U.S. capacity.

However, with Harvey passing directly through the region, “it seems quite likely that we’ll be hearing of additional outages...However, the good news is that none of the downed plants have suffered significant damage (to our knowledge) and the restart process has already begun.”

Some Energy Businesses See Minimal Issues

Energy companies overall were reporting minimal damage to operations.

Houston-based Calpine Corp. said its fleet of natural gas-fired, combined-cycle power plants performed well. “Despite very difficult conditions, the vast majority of Calpine’s approximately 9 GW of Texas generating capacity is available for dispatch, and the balance is expected to be back online within the next few days with no material damage reported,” it said.

CEO Thad Hill said as of Wednesday morning, “we are thankful to report that all of our employees are accounted for and safe. Unfortunately, many have suffered substantial property loss and we are working to support them during this difficult time.”

Calpine’s downtown Houston headquarters is closed because of flooding, but the company prepared with backup teams stationed in Austin, Dallas and another Houston location, and was able to continue supporting its plants and wholesale and retail customers across the nation.

American Midstream Partners LP, also based in Houston, said its offshore facilities in the Eastern and Central GOM, primarily in Mississippi Canyon, as well as its onshore Gulf Coast assets, “have received no damage as a result of Hurricane Harvey,” and all assets “continue to operate normally. Some of the onshore assets experienced “minor disruptions” from flooding, and the operator is working to restore those operations.

American Midstream owns or has an interest in 4,000 miles of interstate and intrastate pipelines, as well as ownership in gas processing plants, fractionation facilities, an offshore semisubmersible floating production system with nameplate processing capacity of 100,000 b/d of crude oil and 240 MMcf/d of natural gas; and terminal sites with about 6.7 million b/d of storage capacity.

Donations Still Pouring In

The generosity of the energy sector continued on Wednesday, with Tulsa-based Williams contributing $500,000 to the United Way of Greater Houston's flood relief fund and deploying direct assistance efforts for any of its nearly 900 employees in need in Houston and surrounding areas.

“Williams has had a major presence in the Houston area for decades and our thoughts and prayers are with all of those affected, and especially our employees and their families, many of whom have deep roots in the community,” said Williams CEO Alan Armstrong. “While the effects of Hurricane Harvey are still ongoing and uncertain, we are focused on making sure our employees remain safe and are receiving necessary assistance. Additionally, we are committed to supporting the long-term recovery and rebuilding of the Texas Gulf Coast.”

Houston’s NRG Energy and its subsidiary Reliant also announced efforts to assist millions of Texans impacted, agreeing to provide more than $2 million, including $1 million in cash donations and in-kind relief efforts valued at more than $1 million in community support and customer assistance. The funding is to be used for impacted employees, power generation to assist first responders, backup power and phone chargers for Houstonians and enrollment and billing assistance to affected customers.

“We are devastated to witness the hardship and suffering endured by so many in and around Houston, Corpus Christi and southeast Texas,” said NRG CEO Mauricio Gutierrez. “Houston is our home, and NRG and our employees will do everything we can to provide assistance and resources to those in need and who are bearing the tragic effects of this historic natural disaster.”

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