The worst may not be over for the Gulf Coast oil and gas industry in what one forecaster expects to be the most costly natural disaster in U.S. history. And Hurricane Irma, a Category 2 storm as of Thursday midday, now is lurking on the same early path across the Atlantic that Harvey took.

Irma, which reached hurricane status Thursday morning and then was quickly upgraded to a Category 2, was moving west-northwest toward the Lesser Antilles Islands. In its 10 a.m. CDT update, the National Hurricane Center said Irma is forecast to become a major hurricane by Friday and could be extremely dangerous.

AccuWeather forecasters said meteorologists could be tracking the storm through mid-September. “It is way too soon to say with certainty where and if this system will impact the U.S.,” AccuWeather Hurricane Expert Dan Kottlowski said.

NatGasWeather forecasters also said Irma was up to 10 days away from being close enough to be of concern to the United States, but it could be a strong hurricane on approach.

Jacob Meisel, chief weather analyst at Bespoke Weather Services, said the storm is certainly a threat to the United States, as a strong ridge of high pressure across the north central Atlantic will steer the storm slightly south of west over the coming few days.

“Such a move is rather rare for these storms, and increases the odds of it making landfall in the United States (though it still may curve out to sea before reaching the East Coast in a number of scenarios),” Meisel said. “Frankly, it is still too early to say with any confidence what region is most at risk with the storm.”

Some models show a risk of landfall near the southeastern U.S. or along the East Coast, while others show a Florida landfall and still others show the storm may re-enter into the Gulf of Mexico (GOM).

While Irma is more of a threat for the East Coast or southeast than the GOM currently, there is a chance it ends up in the GOM if it takes the southernmost of its potential tracks. If If it takes the northernmost track, Irma could re-curve harmlessly out to sea. What is clear is that a Texas landfall with this system is rather unlikely, Meisel said.

Texas and western Louisiana are by no means out of the woods, though. Over the weekend and into next week, a weak low pressure center looks to gradually develop in the western GOM, and there is a risk that it could become another tropical cyclone (Jose), Meisel said.

“The atmosphere is not quite as favorable as it was for Harvey, as the hurricane cooled some of the waters in the western Gulf, but if this formed, it could exacerbate impacts from Harvey, especially if it were to make landfall in Texas or western Louisiana,” Meisel said.

Any formation is still a few days away, and models notoriously struggle with tropical cyclone development, but the western Gulf will still to be watched closely over the holiday weekend, he added.

As the floods recede from homes and businesses, people are attempting to pick up the ruined pieces of their lives. For the energy sector, whose processing and refinery operations are concentrated along the Texas and Louisiana coasts, it will not be easy. However, some facilities are reporting progress, a sign that eventually — whenever that may be — business will return to some state of “normal.”

Natural Gas Demand Still Volatile

Natural gas demand remained volatile in the wake of Harvey, and signs of improvement are threatened by any new developments, according to Genscape Inc.

Using average daily gas demand from Aug. 21-23 as a baseline for the south-central region leading into Harvey, the data and analytics company said Thursday’s gas demand impact estimate is based largely upon early cycle gas nominations of 5.9 Bcf/d. That is a net impact adjusted for 0.7 Bcf/d typical decrease in south-central demand on Saturdays and Sundays. The cumulative impact using the approach is 33.4 Bcf/d.

Midstream operations appear to be main bottleneck to supply along the Gulf Coast. And the worst may not be over for energy operators or commodity prices, analysts said.

Issues impacting the Enterprise Product Partners LP Mont Belvieu facility 40 miles north of Houston should be resolved relatively soon, according to Genscape. The Mont Belvieu facility is the largest natural gas liquids (NGL) processor in the country, and also the site of massive rainfall and flooding.

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.

Many processors had to reduce output or shutter facilities because of flooding, including DCP Midstream, Targa Resources Partners LP and Oneok.

“Our sample of DCP Midstream volumes is already back to about 75% of pre-storm levels in just the past two days,” Genscape said. “Additionally, Genscape’s oil team’s proprietary monitor on the Seminole pipeline observed a resumption of flows, with volumes getting back up to 120,000 b/d of flow eastward from Hobbs, NM, toward Mont Belvieu.”

The offshore region showed the first slight signs of recovery. The Bureau of Safety and Environmental Enforcement (BSEE) said Thursday workers remained evacuated from 94 (12.75%) Gulf of Mexico (GOM) production platforms — eight fewer than on Wednesday — and five of the GOM’s 10 non-dynamically positioned rigs were also evacuated. A total of 236,115 b/d (13.49%) of crude oil was shut in along with 568 MMcf/d (17.64%) of natural gas. Those numbers were down from Wednesday, when BSEE reported 323,760 b/d (18.50%) of crude oil and 611 MMcf/d (18.98%) of natural gas shut in.

For the offshore, production processing also was resuming.

Gulf South Pipeline’s Enterprise Burns Point gas processing plant in St. Mary Parish, LA, was returning online Thursday morning, according to a notice on the company’s electronic bulletin board. Once the processing resumes, Point Chevreuil, E.I. Block 32 platform, Belle Isle and Rabbit Island Production all would be able to operate, according to Gulf South.

Still, there are several closures or partial shut-ins.Crestwood Midstream Partners LP issued a force majeure for the Tres Palacios Gas Storage LLC facility and expected it to remain closed through at least Thursday, according to IHS Markit. The analyst firm said force majeures were in place as of Thursday for the Natural Gas Pipeline Co. (NGPL) segment 23 of the Louisiana Line in Cameron Parish, LA; the Kinetica Energy Express Grand Chenier System because of a mandatory evacuation of lower Cameron Parish, LA; and Kinetica’s Sabine System, also because of the Cameron Parish evacuation. NGPL compressor stations 302 in Montgomery County, TX, 342 in Cameron Parish and 343 in Liberty County, TX, still were unavailable.

As for industrial demand, Genscape proprietary monitors are seeing shuttered facilities starting to return to service. The company’s cameras on Thursday morning detected the restart Wednesday afternoon of the Dow Chemical Co.’s Freeport ethylene cracker on the Texas Coast. The 2.3 million lb/year facility had been idle since Sunday.

Refinery Issues Possibly Only Beginning

Department of Energy (DOE) Secretary Rick Perry on Thursday tapped the Strategic Petroleum Reserve (SPR) to offset fuel shortages. The DOE plans to deliver 500,000 bbl of crude to the Lake Charles, LA refinery operated by Phillips 66. “The Department will continue to provide assistance as deemed necessary, and will continue to review incoming requests for SPR crude oil,” DOE said. The oil is being drawn from SPR’s West Hackberry site, a mix of 200,000 bbl of sweet crude and 300,000 bbl of sour crude.

Motiva, which operates the largest oil refinery in the country east of Houston, said Thursday it is “conducting all necessary assessments and preparations to ready the Port Arthur Refinery for startup as soon as the local area flooding has receded. Given the unprecedented flooding in the city of Port Arthur, it remains uncertain how quickly the flood waters will recede, so we cannot provide a timeline for restart at this time. Our priority remains the safety of our employees and community.”

BofA Merrill Lynch Global Research analysts said refinery maintenance is “around the corner” and with the potential for flood damage, “we could well see an extended period of outages. Consequently, crude demand in the U.S. could stay soft just as crude oil imports start to flow in again. All these crude barrels will end up in inventory.”

Any extended outages could drag West Texas Intermediate (WTI) prices even lower, according to analysts. “Weakness in the term structure of WTI could feed into Brent” prices and as the United States attempts to attract foreign cargoes, spiking Gulf Coast gasoline and distillate prices “could continue to feed into Europe and even impact Asian prices in September. Most importantly, the weakness in WTI will encourage more U.S. crude exports and less imports, and even briefly drag down Brent to $47/bbl.”

ClearView Energy Partners LLC said it estimated as much as 5.2 million b/d of GOM refining capacity, or 27.6% of U.S. nameplate, remained offline or partially offline on Thursday, which means they may face crude oil shortages. Colonial Pipeline, the largest oil pipeline in the country, suspended deliveries Wednesday night of diesel and jet fuel to the East Coast via Line 2 (1.16 million b/d) and announced plans to suspend gasoline deliveries Thursday via Line 1 (1.37 MM bbl/d).

“In tandem with the ongoing outage of the 660,000 b/d Explorer pipeline, which ships refined products from the GOM to the Midwest, major pipeline throughput disruptions from Hurricane Harvey now total 3.2 million bl/d,” ClearView estimated.

According to IHS Markit, 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 b/d of production was shut in in advance of the storm.”

In Harvey’s wake, the Arkema Inc. chemicals facility north of Houston in Crosby notified the Harris County Emergency Operations Center around 2 a.m. CDT Thursday to report two small explosions and black smoke. Local officials earlier this week had evacuated residents from an area 1.5 miles from the plant because of the impending emergency at the plant, which lost its primary power and two sources of emergency backup power with the flooding.

Some of Arkema’s organic peroxides products burn if not stored at low temperature, company officials said. Organic peroxides are extremely flammable, and Arkema officials said the best course of action would be to let the fire burn itself out.

The plant, in a rural area, employs 57 people. No hospitals, schools, correctional facilities, recreational areas or industrial/commercial areas in the vicinity, Arkema said. “The plant has never experienced flooding of this magnitude before.”

Meanwhile, CenterPoint, which services the Houston area, had restored service to about 95% of its customers, with about 100,000 still without power Wednesday, down from the peak of 780,000. Austin Energy had reduced the number of outage customers to under 200; outages peaked at about 19,000 customers over last weekend.