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Nate Reduces GOM Natural Gas Output by 53% Friday as Operators Shutter Facilities

Tropical Storm (TS) Nate, gaining steam as it headed north toward an expected landing on the northern Gulf Coast, had by Friday midday reduced natural gas production from the offshore by more than half to about 1.713 Bcf/d.

Exploration and production companies and pipeline operators in Nate’s path were evacuating personnel and shutting in operations in the Gulf of Mexico (GOM), while natural gas processing facilities in Louisiana were suspending operations.

In its 4 p.m. CDT update Friday,the National Hurricane Center said Nate was near latitude 20.3 North, longitude 85.7 West, moving toward the north-northwest near 21 mph. A turn toward the north/northeast was expected into Sunday. On the forecast track, the center of Nate was expected to make landfall over the northern Gulf coast Saturday night or Sunday as a Category One or Two hurricane, with a storm surge of four to seven feet. A hurricane warning was issued Friday for metropolitan New Orleans and Lake Pontchartrain, with tropical storm warnings posted to the Florida border.

While Nate was not expected to be as strong a storm as hurricanes Harvey and Irma, its track is straight through the main GOM oil and gas producing area, which the two previous storms touched only tangentially.

Using operator reports submitted as of 11:30 a.m. CDT Friday, the Bureau of Safety and Environmental Enforcement (BSEE) estimated that more than half -- 53.2% -- of gas production was shut in, about 1.713 Bcf/d. About 71.1% of current oil production from the GOM also had been shut in, equating to about 1.24 million b/d.

“For perspective, shut-ins peaked at 430,000 b/d of oil and 835 MMcf/d of gas production during Hurricane Harvey,” noted Barclays Research analysts. Total U.S. gas production levels fell from Thursday to Friday from about 74.1 Bcf/d to 72.2 Bcf/d, “the lowest daily production level in the U.S. since late August.

“Despite the fall in production the prompt month contract traded down 6 cents, to $2.86/MMBtu, with cash trading flat at $2.91/MMBtu,” said analysts. “Though shut-ins are more than twice as severe as those during Hurricane Harvey, we expect production to rebound quickly.”

As of midday Friday, BSEE said personnel had been evacuated from 66 production platforms, 8.96% of the 737 manned platforms. Personnel also have been evacuated from five non-dynamically positioned (DP) rigs, equivalent to 20% of the 20 DP rigs working in the GOM.

Eleven DP rigs had moved off out of the storm’s path as a precaution, representing 61% of the 18 DP rigs in operation.

Chevron Corp., the largest GOM leaseholder, had begun to shut in output from its operated facilities and was evacuating “all associated personnel,” a spokeswoman said Friday. Affected facilities were Blind Faith, Genesis, Jack/St. Malo, Petronius and Tahiti.

Jack/St. Malo fields in 2016 produced on average 14 MMcf/d of gas 94,000 b/d of liquids. Tahiti in 2016 produced on average 13 MMcf/d of gas, 31,000 b/d of crude and 2,000 b/d of NGLs.

Friday afternoon Chevron Pipe Line Co. also initiated hurricane preparedness plans for two Gulf Coast assets, including the Fourchon and Empire terminals in Louisiana.

“Shippers have been notified of our plans to secure the terminals and to discontinue the receipt and delivery of crude oil until after the storm,” the Chevron spokeswoman said.

Chevron’s closures coincide with a mandatory evacuation ordered on Friday for Grand Isle, LA in Jefferson Parish, which is under a hurricane warning. St. Bernard Parish also was requiring residents outside of its levee protection system to leave, and other parishes were advising residents to voluntarily evacuate.

Anadarko Petroleum Corp., which works in the deepwater and partners in some of its projects with ExxonMobil Corp. said it had removed all personnel from Horn Mountain and shut in production as of Friday morning and planned to remove all personnel and shut in Marlin on Friday. Nonessential personnel also had been removed from the Constitution, Holstein, Lucius and Marco Polo platforms.

“We continue to monitor the storm, and are prepared to remove additional personnel and shut in other operated facilities if necessary to ensure the safety of our people and protect the environment,” Anadarko said.

ExxonMobil and Statoil SA also were pulling personnel from their platforms and preparing to shut in operations. More E&Ps working in Nate’s path were expected to take action on Friday as well.

“Nate is favored to make landfall along the Louisiana and Alabama coasts Monday, likely to result in minor production disruptions, but also with demand destruction through comfortable temperatures and power outages,” said Natgasweather.com in an update Friday.

“Nate is not a major storm but it is still nasty,” said analyst Phil Flynn of the Price Futures Group. He noted that the storm is in the sight of the Louisiana Offshore Oil Port, “one of the most important fuel handling facilities” on the Gulf Coast. On Friday LOOP had suspended operations.

GOM natural gas output was at its lowest level since Hurricane Isaac hit the area in August 2012, Genscape’s team said. “Flow impacts became evident” in Thursday’s pipeline nominations and were in “full force” Friday.

Daily production data issued Friday by Genscape’s Spring Rock showed a 190 MMcf/d day/day decline in GOM production, attributed mostly to declines on Destin Pipeline’s Okeanos system, Transcontinental Gas Pipe Line Co. (Transco) and the Nautilus Pipeline.

In sample data, Genscape said declines from Thursday were led by Destin, minus 0.37 Bcf/d; Discovery, minus 0.25 Bcf/d; Mississippi (MS) Canyon, minus 0.22 Bcf/d; Nautilus, minus 0.17 Bcf/d; and Transco, minus 0.11 Bcf/d.

Chandeleur Pipe Line Co. declared a force majeure and was planning to shut in two GOM platforms by noon Friday -- Main Pass (MP) 41B and MP 41L. Combined, the platforms have averaged 10 MMcf/d of gas for the last month, according to Genscape. 

Targa Resources Corp.’s Venice gas processing plant in Plaquemine Parish, LA, also was suspending operations. As a result, MS Canyon and Venice Gathering, which supply gas to the Venice plant, had shuttered operations.

Evening cycle nominations gathering system meters on MS Canyon and Venice Gathering had fallen from 328 MMcf day/day on Thursday to “effectively zero” on Friday, said Genscape. Together, gathering receipts for the two systems had averaged 350 MMcf/d for the past two weeks.

In addition, Enterprise Product Partners LP’s Pascagoula, MS, operations were suspended, with Destin offshore output shut-in. Destin, which supplies gas to the Enterprise plant in Jackson County, on Thursday had begun evacuating all personnel from the MP 260 platform.

The Pascagoula plant did not expect to be able to process gas from Destin’s offshore system, and the evening cycle nominations supported this, said Genscape. Receipts from Destin offshore gathering meters had fallen on Friday to 28 MMcf/d from a two-week average of 536 MMcf/d.

The aftermath of hurricanes Harvey, which slammed the Gulf Coast in late August, and Irma, which made landfall in Florida on Sept. 10, each took a toll on U.S. employment during September, according to the U.S. Labor Department.

The Bureau of Labor Statistics (BLS) in its September jobs report issued Friday, showing a 33,000 decrease in total nonfarm payrolls, worse than forecast and the first job loss report in seven years.

“A sharp employment decline in food services and drinking places and below-trend growth in some other industries likely reflected the impact of Hurricanes Irma and Harvey,” BLS said.

“Our analysis suggests that the net effect of these hurricanes was to reduce the estimate of total nonfarm payroll employment for September. There was no discernible effect on the national unemployment rate. No changes were made to either the establishment or household survey estimation procedures for the September figures.”

Harvey temporarily shut down about 25% of gas and oil production in the GOM and as much as 20% of U.S. refining capacity. Irma tore a destructive path through the Caribbean before striking Florida, and it sharply reduced power demand. 

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