The 2023 Atlantic Hurricane Season Spares U.S. Oil and Gas Fields
Amid an exceptionally active Atlantic hurricane season, U.S. oil and gas fields in the northern Gulf of Mexico have managed to avoid any significant storm impact. This stroke of luck has saved energy companies billions of dollars in potential losses and prevented consumers from facing higher fuel costs. So far, the 2023 Atlantic hurricane season has witnessed above-average activity, with six hurricanes and twenty named tropical storms, including three major hurricanes with winds exceeding 111 mph (179 kph).
Minimal Disruptions to Oil and Gas Operations
The only disruption to operations this year occurred on August 23 when Tropical Storm Harold caused a one-day power outage at three refineries in Corpus Christi, Texas. This isolated incident represents the most substantial impact on the Gulf Coast oil industry. The Gulf of Mexico offshore operations contribute to 15% of oil production and 5% of the nation’s natural gas production. Additionally, almost half of the country’s refining capacity and natural gas processing plant capacity are located along the Gulf Coast.
“We got really, really lucky this year,” said Colin White, a consultant with Rystad Energy in Houston. However, producers still need to consider the inherent risk involved in their operations.
A Season of Powerhouse Hurricanes
The official hurricane season began on June 1 and will end on November 30. Jim Foerster, chief meteorologist for DTN, acknowledged that while he hesitates to declare the season over, it is gradually waning. Foerster described this season as a powerhouse, given its remarkable intensity and activity.
Historical Impact and Current Trends
Between 2019 and 2021, storms in the Gulf, such as Hurricane Ida, resulted in an average annual shutdown of 24 million barrels of oil production. Based on an assumed oil price of $70 per barrel, this equates to an average revenue loss of approximately $1.7 billion per year, according to Rystad’s Colin White. However, this year, no offshore production has been impacted so far.
Interestingly, the previous hurricane season in 2022 was the first since 2014 that left most offshore production unaffected, with a shut production of less than 200,000 barrels per day (bpd), as stated by Troy Vincent, senior oil market analyst for DTN.
Changing Dynamics and Implications
While refiners have traditionally welcomed low-activity hurricane seasons due to reduced supply disruptions, Pet Jelinek, Ernst & Young Americas oil and gas leader, believes this perspective may change. Jelinek highlights that tropical storms in the Gulf of Mexico can significantly impact energy operations, disrupting production, supply chains, and pricing. Moreover, the evolving energy system, characterized by reduced global oil and gas production, has led to higher feedstock prices. As a result, the benefits of milder hurricane seasons may not be as advantageous for refiners and consumers as they once were.
As the 2023 Atlantic hurricane season progresses, the energy industry remains vigilant, hoping that the favorable trend of avoiding major disruptions will continue. However, it is crucial to remember that nature can be unpredictable, underscoring the ongoing need for preparedness in this ever-changing landscape.
