Latest from TheOilDrum:
Hurricane Ike's current track currently is headed directly for Houston/Galveston and is expected by the National Hurricane Center to be Category 3 at Saturday landfall, in striking distance of 5-6 million bpd of US petroleum refining capacity. (Perspective: 5 MMBBL is about 30% of US capacity (about 15 MMBBL), and a bit less than 6% of global capacity (~85 MMBBL). Also, the MMS reported Wednesday that staff has been evacuated from 452 production platforms (63.0%) and 81 rigs (66.9%) – (95.9% of the oil production and 73.1% of the natural gas production has been shut-in as a precautionary measure for Hurricane Ike.) Updated 9/12 09:30 EDT
Current Situation: At 8am ET we are seeing 110 knot winds at the Shell
Garden Banks platform - however, that is at 122m above the surface.
Observations are normally standardized to 10m, so 95 knot surface winds
are reasonable. Peak wave heights are in the 30-40 ft range across the
entire GoM lease areas. These are within the range modern equipment can
handle, however, as with Gustav, some of the older platforms with 35ft
air gaps may have damage, but the newer deep water stuff should be OK.
We will probably permanently loose 2-3% production as these older
platforms will not be replaced. Overall, despite losing most of
September production, by the end of October we should be back to 75%+
and offshore production should recover to 90-95% by the end of the year.
The key question is refinery damage. Storm surge flooding is definitely
the big risk. If the storm center makes landfall on or north of
Galveston, the peak surges will be north of the main refineries. In
fact the latest WRF run puts the peaks over Port Arthur (attached).
There is a lot of infrastructure out there. Current models are showing
that there will be at least 1 MMBBL offline for 30 days, with the
potential for 5 MMBBL offline at 30 days and 4 MMBBL at 60 days, 1 to 2
MMBBL out through the end of the year. That would certainly cause
significant shortages of refined products (eg gasoline).
How likely are the really bad scenarios? I can't emphasize enough that
in these discussions, I am focused on the damage a storm is likely to do
to key infrastructure. That is a *very* different perspective from the
Hurricane Center or emergency managers. Their job is to keep people
from harm. My job is to accurately forecast the impact of the storm on
critical infrastructure. These are very different perspectives, and Ike
illustrates our dilemmas almost perfectly. NHC and the emergency
managers have to play up the risks or people will not evacuate. They
never want to be wrong on the low side, so if there is any potential for
intensification, they will plug that in to the forecast. Unfortunately,
that plays on the fears in the oil/gas markets, and drives up prices
unrealistically, so I spend a lot of time downplaying the NHC forecasts
as they tend to my "hot" from a damage perspective. The risk is that
someone will read my infrastructure forecasts and decide not to
evacuate. That's stupid; rigs and refineries can be replaced, lives cant.
That said, my thinking is the storm will not be over 100 knots surface
winds at landfall, and flooding will largely be confined to the coast,
and inland wind damage to the refineries will not cause long term
outages. That's not great, but as noted yesterday 100 knots is when
things start to get out of hand, and I think we will be below that
threshold. To sum up, I think it's a 1 in 5 at this point for the bad,
long term refinery damage scenarios. It all depends on exactly where
the intense winds end up, and we won't know that until the storm is 6-12
hours out
