Category Archives: Texas Oil Refineries

Did Oil and Gas Pass ‘Unprecedented’ Weather Test?

 Issue 111 – Refineries and oil storage flooded by Harvey August 30, 2017

Introduction…August 27 Hurricane Harvey pummeled Texas described by the National Weather Service as ‘unprecedented.’  This hurricane delivered torrential rainfall that was ‘unknown’ and ‘beyond any experience.’

The severity of the storm damage to the oil and gas industry of Houston and along the coast was unknown.

Valero Energy and Motiva, a Saudi Aramco subsidiary, experienced flood waters around storage tanks looking like serious and lasting damage.

Three weeks later it was apparent that lessons learned from Katrina and Rita in 2005 made operations recovery much quicker.

Harvey’s impact was considerable but short-lived.  At the point of greatest disruptions, August 29, about 3.9 million b/d of refining was offline.  Additionally, 1.5 million b/d experienced reduced capacity.

Just 17 days later, the impact was minimal with only three refineries with combined capacity of 325,000 b/d remained offline.  Another 1.4 million b/d was starting up and only 2.3 million b/d was operating below maximum output.

In conclusion...The industry was able to reassure the world, that it faced the unprecedented challenge of Harvey, and weathered the storm.

Source: Ed Crooks, “How US oil and gas passed the test of ‘unprecedented’ weather,” Financial Times, 16 Sept 2017.

Texas Refineries Prepare To Reopen – Gasoline Falls

 Issue 109 – Marathon Petroleum Refinery In Houston

Introduction...Wednesday night the reports came out that Texas would have gasoline shortage.  Thursday the lines started forming at the gas stations.  I needed gas, but decided to wait until Friday when the lines would be gone.  Well, the lines were gone, but so was the gasoline.  I went to a dozen stations before i found a Walmart that had gas.  The station was hidden behind a retaining wall, so the motorists emptied the Racetrac across the street.

By Sunday, I saw several of these gas stations were refueled and selling again.

What happened?  After rising 25% last month, gasoline prices fell for first time in two weeks as impact of Hurricane Harvey impact assessed.  Some Texas Gulf refineries have opened Saturday including Exxon Mobil 560,500 barrel per day (bpd) Baytown facility, the second largest oil refinery.  Several others are preparing to restart its refineries this week include Citgo Petroleum 157,500 bpd refinery in Corpus Christi, Texas.  Phillips 66 is preparing to resume operations at its 247,000 bpd facility in Baytown, Texas.

Another positive change for the oil industry is Occidental Petroleum has re-opened its Ingleside, Texas which is a key export hub for Permian Basin oil producers.

About 4.4 million barrels a day of U.S. refining remains closed.  The Strategic Petroleum Reserve will supply 1 million barrels of crude to the Gulf Coast plant.

Saturday, the volume of offshore U.S. Gulf of Mexico crude production still shut in declined to about 160,000 bpd.

Nearly half of U.S. refining capacity is located in the Gulf Coast region located near crude oil supplies from Texas oil fields.  Most major Texas ports remained closed to large vessels, limiting offloading imported crude.

In summary…While the Hurricane Harvey’s impact on Houston and the Gulf Coast has been horrific, the Texas oil production and crude refining facilities are being restored at a rapid pace.

What Impact Will Hurricane Harvey Have On Gasoline And Crude Pricing?

 Issue 108 – Harvey Rainfall In Texas Beyond Anything Experienced

Introduction…Hopes for an immediate relief from Hurricane Harvey’s wrath in Houston and along Gulf Coast seem unlikely. The National Weather Service calls the flooding “unprecedented” and warns things may become more dire if a record-breaking 50 inches of rain falls on parts of Texas in coming days.  How will Harvey disrupt gasoline and crude supplies and pricing?

Impact on Texas refining capacity…So far 10 refiners close as Harvey brings havoc to the hub of Texas energy.  Here is the short list of the top refineries closed:

By late afternoon Sunday, refineries run by Exxon, Citgo, Petobras, Flint Hills, Magellan, Buckeye, Shell, Phillips 66, and two plants run by Valero Energy were closed according to S&P Global Platts and the companies.  Total refining shut down estimated to be 2.2 million barrels per day or one-third of the nation’s capacity to refine oil into gasoline, diesel and other products.

Also 22% of the oil and 26% of the natural gas produced in the gulf was closed.

Bull and Bear response to Harvey...”It’s a gasoline story more than a crude oil story at the moment,” Ed Morse, Citi’s global head of commodities research, told CNBC’s “Squawk on the Street” on Friday.

Gulf Coast gasoline for spot delivery was at $1.73 per gallon, up 23 cents from Tuesday, according to Oil Price Information Service. Nymex gasoline was up about 5 cents over the same period.

“If we get rapid accumulation in 24 hours the refineries simply can’t pump the water fast enough out of the location,” he told CNBC’s “Squawk Box.” That could lead to damage to electric pumps in refineries, potentially requiring repairs that could take weeks or months, he added.

As the consensus estimate begins forming around a weeks-long outage, the picture for crude demand just becomes worse and worse, said John Kilduff, founding partner at energy hedge fund Again Capital due to deduction in demand by the refineries.

In summary…The full impact of Harvey on gasoline and crude inventories and pricing will be determined in the next three or four days until the storm damage to the refineries is fully determined.

More than 6.5 million people live in the region impacted by Harvey and several deaths have been reported.  The flooding impact is “unprecedented.”  Our thoughts and prayers go out to those suffering.