Houston may suffer from “third world-like conditions” for weeks to come as the Gulf Coast attempts to pick up the mangled pieces from Harvey’s destruction, a weather expert said Friday.

Ports were beginning to open along the Gulf Coast, and a relatively quick recovery was expected by producers working in the Eagle Ford Shale. The oil and gas industry may be on the road to recovery, but the storm’s impacts, still inflicting pain across the region Friday, could hinder a quick return to normal.

While it’s too soon to assess the damage, Accuweather on Friday increased its prediction for Harvey’s cost to $190 billion, or 1% of total U.S. gross domestic product.

“The economic impact will be felt across the country and for the rest of the year as issues created by the storm will ripple across the country and impact everything from food and gas prices to shipping costs, jobs and more,” said Accuweather founder Joel N. Myers. “The disaster continues, and the extent of human suffering will only increase as flood waters and lack of electricity and basic services puts Houston into third world-like conditions for days or weeks to come.”

And as if conditions weren’t dire enough, meteorologists are tracking the path of Irma, a Category 3 hurricane, to determine if and where it may make landfall in the United States.

“If Irma builds to a Category 4, and then hits the U.S. mainland, as a Category 4, it will be the first time in more than 100 years the U.S. has been hit by two Category 4 hurricanes in the same year,” said Accuweather’s Evan Myers, expert senior meteorologist.

Natural Gas Demand Down

Natural gas demand reductions from both Harvey and a broader cooling trend “have more than offset the reductions in supply associated with the hurricane, with the result that prices have hardly moved,” IHS Markit’s team said Friday.

“According to OPIS/PointLogic daily tracking data, modeled wellhead natural gas production in the U.S. Lower 48 was reduced by approximately 1.9 Bcf/d during the hurricane period Aug. 25-28, in comparison to the prior four days August 20-23…”
Gulf of Mexico (GOM) production began to decline Aug. 24 as offshore platforms were evacuated, so that day was affected by the hurricane, which made landfall late on Aug. 25.

The impact on gas output was roughly evenly split between the state of Texas, where the Eagle Ford Shale in South Texas was impacted, and the GOM, said IHS Markit’s team.

“The maximum daily production loss was on Aug. 26, when the decline measured approximately 2.5% of U.S. production, or 2.02 Bcf/d,” said analysts. “By contrast, power demand fell by approximately 7.6 Bcf/d in the U.S. over the same period, with Texas contributing approximately 1.3 Bcf/d to that total reduction.”

Adding in a reduction in residential/commercial gas demand, total U.S. consumption fell by about 8.2 Bcf/d from Aug. 20-23 to Aug. 25-28, according to IHS Markit. The reduction occurred as overall cooling degree days in the continental United States declined from 11 to seven, according to the National Oceanic and Atmospheric Administration.

Hurricane Harvey, and both its contribution to cooler weather and a broader cooling trend, have taken much more demand out of the natural gas market than supply,” said IHS Markit.

A spokeswoman for Sempra Energy on Friday said construction activity at the planned liquefied natural gas (LNG) export facility in Cameron, LA, should resume on Tuesday. Engineers have determined there was “no significant damage” based on preliminary inspections.

“Our thoughts and prayers are with the people of Texas and Louisiana, and we continue to monitor the situation and support our Texas/Louisiana employees, their families and their safety during this difficult time,” the Sempra spokeswoman said.

Mont Belvieu NGL Processing Hampered

Based on company reports as of Friday morning, around 45% of total natural gas liquids (NGL) fractionation capacity potentially was impacted because of Harvey. Operations at Mont Belvieu were constrained, with only four of the eight fractionators run by the largest operator, Enterprise Products Partners LP, in operation. Targa’s Cedar Bayou Fractionators was shut in on Wednesday, while Oneok’s fractionation was operating at reduced volumes.

Reduced operations at Mont Belvieu rippled through several upstream gas processing facilities as far as West Texas. DCP Midstream’s five gas processing plants, with total capacity of 160 MMcf/d, were shut down in the Permian Basin because of NGL transportation issues to the Gulf Coast. DCP also has shut in 845 MMcf/d of gas processing capacity in South Texas, but it was preparing to restart one 200 MMcf/d plant at reduced volumes.

Ports Reopening Along Gulf Coast

Port Houston reopened its terminals on Friday with some restrictions. The U.S. Coast Guard allowed limited operations along the Houston Ship Channel to resume on Thursday.

The ports in Galveston, Freeport and Corpus Christi also have reopened to limited traffic, while the Port of Lake Charles, LA, also reopened.

Meanwhile, east of Houston, Port Arthur and Beaumont ports remained closed Friday by severe flooding.

There were significant signs of recovery in the offshore region. Workers remained evacuated from 75 (10.18%) Gulf of Mexico (GOM) production platforms, 19 fewer than on Thursday, the Bureau of Safety and Environmental Enforcement (BSEE) said Friday afternoon. Five non-dynamically positioned rigs had been evacuated for several days in response to Harvey; on Friday personnel had returned to all five, BSEE said.

A total of 152,989 b/d (8.74%) of crude oil was shut in along Friday, down from 236,115 b/d on Thursday and the 428,568 b/d BSEE reported last Saturday (Aug. 26). Also declining was shut-in natural gas, which hit 406 MMcf/d (12.61%) Friday, compared with 568 MMcf/d on Thursday and a peak of 835 MMcf/d last Saturday.

Eagle Ford, Permian Impacts

The Railroad Commission of Texas estimated that as much as 500,000 b/d of Eagle Ford Shale production, or around one-third of its current output, was shut-in because of Harvey.

As much as 10% of U.S. drilling could be delayed because of Harvey, according to Raymond James & Associates Inc.

Analyst J. Marshall Adkins said more than half of the rigs running in the Eagle Ford Shale — the only play directly impacted by Harvey — were suspended drilling ahead of the storm. Muddy conditions also may hinder a quick return to work.

“Given that much of oil and gas activity occurs in areas only accessible via dirt roads, the heavy rainfall usually makes the movement of trucks and supplies much more difficult,” Adkins wrote. “The trucking and rail of sand, chemicals, and personnel to the well site will all take more time given the likely nasty condition of many Eagle Ford access roads.”

A temporary drop in the rig count by as much as 45 rigs because of flooding could be a catalyst for higher oil prices, Adkins wrote.

IHS Markit’s analysts said a key limitation for producers in the Eagle Ford “remains takeaway capacity, given that most of Houston-area refineries are still offline or at reduced capacity. The restart of Corpus Christi refineries, however, should be a positive in terms of returning Eagle Ford wells to production.

With Corpus Christi’s port reopening, U.S. crude oil exports should resume, specifically Eagle Ford and Permian Basin volumes.

U.S. crude exports have averaged more than 900,000 b/d year-to-date, almost entirely sourced from the GOM, with Corpus handling about 250,000 b/d.

“There have been no reports yet of a slowdown in Permian crude oil production, although crude storage in the field could become a limiting factor for operators if key pipelines to the Houston-area remain shut,” said IHS Markit.