Isaac takes turn for worse, threatens Gulf energy production

Wind and rain and Isaac have taken a nasty turn right into the heart of Gulf oil production. State of emergency and evacuation orders are in place along the Gulf oil and refining areas. Oil prices started to soar shortly after weather analyst Dave Tolleris of WXRISK told me that Isaac may miss Florida completely and turn into a Category 2 Hurricane and head directly into refineries and production near Alabama and Louisiana. Dave said that we are rapidly approaching that point of landfall with Isaac and the models have taken a surprising turn. He said that the European models were showing land fall between Pensacola and New Orleans but then suddenly jumped east and now shows landfall in Apalachicola, Florida. To say that I was surprised by this would be understatement, but then when I considered the time frame (within 84 hour) it just might be a hiccup. Indeed the 12z European ensemble mean position does still show a land fall between Pensacola and Mobile, Alabama. You can see Dave's latest updates searching WXRISK.

With the storm heading to the big refineries, gas prices will spike especially considering the news of a massive explosion at Venezuela’s largest refinery that killed at least 39 people. Venezuelan government officials hope it can be restarted in two days once the blaze has been extinguished and the area deemed secure. Yet the truth is that the market is fearful that this refinery will be off line for some time.

That means Hurricane Isaac could add more woes to the gasoline market driving prices to a four-month high. Tropical Storm, soon to be Hurricane, Isaac is possibly headed right into some of our country’s largest refineries. Not only do we have to worry about wind damage, but as we have learned from previous storms, we may have to worry about flood damage as well. Reuters reports that after initially calling for Tropical Storm Isaac to pass well east of the U.S. offshore production zone, forecasters are now predicting a more westward track which could bring Isaac as a powerful Category 2 hurricane over the heart of the U.S. offshore oil patch, which produces about 23% of U.S. oil output and 7% of its natural gas output. Isaac could be the biggest test to U.S. energy infrastructure since 2008, when Hurricanes Gustav and Ike disrupted offshore oil output for months as well as damaged onshore natural gas processing plants and pipelines.

London-based BP Plc, the biggest U.S. Gulf producer, on Sunday evacuated all of its Gulf of Mexico rigs, after earlier shutting down its giant Thunder Horse platform, the world's largest, which can process 250,000 barrels of oil and 200 million cubic of natural gas per day (mmcfd), and three others. BP's evacuations and shutdowns initiated Sunday included Atlantis, the world's second-largest offshore platform, which can produce up to 200,000 bpd of oil and 189 mmcf per day of gas. Other offshore operators like Chevron Corp. and Royal Dutch/Shell have evacuated some workers, though they have not yet shut down any production.

The U.S. Bureau of Safety and Environmental Enforcement says offshore oil and gas operators in the Gulf of Mexico are evacuating platforms and rigs in the path of Tropical Storm Isaac. The Bureau of Safety and Environmental Enforcement (BSEE) Hurricane Response Team is activated and monitoring the operators’ activities. The team will continue to work with offshore operators and other state and federal agencies until operations return to normal and the storm is no longer a threat to Gulf of Mexico oil and gas activities. Based on data from offshore operator reports submitted, personnel have been evacuated from a total of 39 production platforms, equivalent to 6.54% of the 596 manned platforms in the Gulf of Mexico. Production platforms are the structures located offshore from which oil and natural gas are produced. Unlike drilling rigs, which typically move from location to location, production facilities remain in the same location throughout a project’s duration.

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