Isaac takes turn for worse, threatens Gulf energy production

Personnel have been evacuated from eight rigs, equivalent to 10.5% of the 76 rigs currently operating in the Gulf. Rigs can include several types of self-contained offshore drilling facilities including jackup rigs, submersibles and semi-submersibles. As part of the evacuation process, personnel activate the applicable shut-in procedure, which can frequently be accomplished from a remote location. This involves closing the sub-surface safety valves located below the surface of the ocean floor to prevent the release of oil or gas. During previous hurricane seasons, the shut-in valves functioned 100% of the time, efficiently shutting in production from wells on the Outer Continental Shelf and protecting the marine and coastal environments. Shutting-in oil and gas production is a standard procedure conducted by industry for safety and environmental reasons.

From operator reports, it is estimated that approximately 24.19% of the current daily oil production in the Gulf of Mexico has been shut-in. It is also estimated that approximately 8.24% of the current daily natural gas production in the Gulf of Mexico has been shut-in. The production percentages are calculated using information submitted by offshore operators in daily reports. Shut-in production information included in these reports is based on the amount of oil and gas the operator expected to produce that day. The shut-in production figures therefore are estimates, which BSEE compares to historical production reports to ensure the estimates follow a logical pattern.

After the hurricane has passed, facilities will be inspected. Once all standard checks have been completed, production from undamaged facilities will be brought back on line immediately. Facilities sustaining damage may take longer to bring back on line. BSEE will continue to update the evacuation and shut-in statistics at 1:00 p.m. CDT each day as appropriate. Outage figures will rise in the days ahead, according to forecasters at Weather Insight, an arm of Thomson Reuters, who predict the storm will spur short-term shutdowns of 85% of U.S. offshore oil capacity and 68 percent of its natural gas output. Isaac has a 95% chance of entering the heart of the oil and gas producing region, Weather Insight said on Sunday.

Isaac could also impact the U.S. refinery row along the Gulf Coast, which stretches from Mississippi to south Texas and accounts from more than 40% of U.S. fuel output. Chevron's 330,000 barrel per day (bpd) Pascagoula, Mississippi, refinery is near the storm's expected landfall. The Louisiana Offshore Oil Port (LOOP), which can offload about 1 million barrels per day of foreign crude for delivery to Gulf Coast refiners, remained in operation on Sunday, a spokeswoman said.

And if that wasn’t enough to worry about as Isaac bears down on the crude oil market, the Energy Information Administration arm of the Department of Energy gives oil bulls more ammunition. The EIA warns that surplus oil production stands at a “quite modest” 2.4 million compared to 2009 through 2011 levels of about 2.4 million barrels per day. This of course becomes more of an issue with Isaac getting ready to cause havoc and rising geopolitical risk with Iran and Syria. The Energy Information Administration puts global oil production at an average 88.7 million barrels a day in July and August. The report was mandated by Congress to assess the oil market in countries other than Iran.

Of course we also have to consider the weaker than expected data in China and Germany and big bad Ben Bernanke going to Jackson Hole and what he has to say could impact oil as much as Isaac.


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About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at Learn even more on our website at


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