Rystad Energy - Energy Knowledge House

Commentary

Hurricane Delta

Another week, another hurricane causing shut-ins of offshore production platforms in the Gulf of Mexico. Over the past seven weeks, there have now been four tropical weather systems forcing operators to evacuate offshore facilities. This time it is Hurricane Delta, which has already caused the highest level of shut-ins ever recorded in a single day, surpassing the 2002 record set by Hurricane Lili. Average daily production in October in the US sector of the Gulf of Mexico is forecast by Rystad Energy to fall by nearly 400,000 bpd of oil and more than 350 MMcfd of gas due to outages.

Another week, another hurricane causing shut-ins of offshore production platforms in the Gulf of Mexico. Over the past seven weeks, there have now been four tropical weather systems forcing operators to evacuate offshore facilities. This time it is Hurricane Delta, which has already caused the highest level of shut-ins ever recorded in a single day, surpassing the 2002 record set by Hurricane Lili. Average daily production in October in the US sector of the Gulf of Mexico is forecast by Rystad Energy to fall by nearly 400,000 barrels per day (bpd) of oil and more than 350 million cubic feet per day (MMcfd) of gas due to outages.

Hurricane Delta is the fifth named weather system to cause production shut-ins during the 2020 Gulf of Mexico hurricane season. There have been so many major storms this year that the naming system made it through the entire alphabet, forcing a switch to the Greek alphabet for the remainder of the season. The previous storms to affect US offshore production this year have been Cristobal in June, Marco and Laura in August, and Sally in September. Collectively, these storms caused a total of about 21 million barrels of oil to be shut in – a tally that is now destined to rise sharply as Delta cuts a path across the Gulf.

20201009_Upstream_HurricaneDelta_Fig1.jpg

The Bureau of Safety & Environmental Enforcement (BSEE) reported 1.69 million bpd shut in on 8 October, setting a new volume record for reported shut-ins on a single day in the Gulf of Mexico. This eclipses the 1.64 million bpd mark set by Hurricane Lili in 2002.

Given the magnitude of shut-ins so far, we currently estimate a total of 12 million barrels in outages, slightly lower than the 14.4 million barrels that were collectively held back in August when tropical storm Marco and Hurricane Laura caused widespread evacuation of offshore personnel from platforms and rigs across the Gulf. The total effect on average US oil output during the month of October is expected to be a drop of about 390,000 bpd. In terms of gas, the BSEE has reported as much as 1.675 MMcfd shut in on a single day, and we estimate the cumulative effect of the hurricane will be about 11 billion cubic feet – or 365 MMcfd averaged over the month of October.

20201009_Upstream_HurricaneDelta_Fig2.jpg

This has been a turbulent autumn for offshore operators in the Gulf. Marco and Laura struck like a tag-team in August, overlapping operators’ evacuation and redeployment windows. Then there were only eight days of normal operations between Laura and Sally, and another 14 days of relative tranquility between Sally and Delta. We currently estimate that Delta will affect production for another 13 days before operations return to normal. The 2020 hurricane season has now delivered two of the four most potent hurricanes on record in terms of forcing operators to shut in production.

20201009_Upstream_HurricaneDelta_Fig3.jpg

Our estimate for the peak shut-ins is based on the current reported numbers from the BSEE. The modelling of the redeployment to restore output is based on comparable storms, as can be seen in Figure 4. Landfall is expected to occur on Friday 9 October and redeployments are expected to commence on 10 October. Shut-in production is therefore expected to decline from 11 October in a fashion comparable to the sample shown below.

20201009_Upstream_HurricaneDelta_Fig4.jpg

We continue to monitor the situation and will revise our estimates in the days to come as data materializes.