Refinery problems tied to the flooding from Tropical Storm Harvey and pipeline outages pose the biggest source of sector disruptions, Goldman Sachs said.
Tropical Storm Harvey picked up pace and strength as it moved out of southern Texas overnight. The storm is on track to move east toward Louisiana and the Lower Mississippi Valley through Friday. The threat of flooding for the Houston metropolitan area has ebbed and southwestern Louisiana is expecting as much as 6 inches of rain. As much as 5 feet of rain was forecast earlier this week for Houston.
Flooding continues and is now the greatest threat to the U.S. Gulf Coast energy infrastructure where it is leading to further refinery outages and port closures even as some production starts to come back online,” an emailed report from Goldman Sachs read. “We view persistent refinery and midstream capacity outages as the two biggest potential sources of sustainable disruptions, in turn creating risk that the ongoing recovery in production will only be partial.”
The latest estimate from pricing group S&P Global Platts found a dozen petrochemical complexes shut because of the storm and all of those are in Texas. The largest crude oil refinery in the country, Motiva’s 603,000 barrel per day facility in Port Arthur, Texas, started shutting early Wednesday morning.
“At 5 a.m., Motiva began a controlled shutdown of the Port Arthur refinery in response to increasing local flood conditions,” the company said in a statement emailed to UPI. “Return to service is contingent upon recession of flood waters in the area.”
By Monday, about 2.2 million barrels per day of Texas refining capacity was down because of Harvey. That represents about 12 percent of the total U.S. refining capacity. Goldman Sachs estimated about 3.9 million barrels of refining capacity across the entire region was down and Platts added that vessel traffic in and out of the U.S. Gulf Coast was largely closed because of the storm, crimping imports and exports.
“All ports near the storm are now closed,” Goldman’s report read.
On the production side, Goldman said U.S. output might not be able to recover if there’s widespread damage to industrial facilities, storage areas and pipelines. For refineries, the report said about 10 percent of the total capacity might be offline for several months, based on comparisons from Hurricanes Rita and Katrina.