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E&E News: Interior-Most Gulf oil production still offline post-Ida

Stephen Lewerenz

By Heather Richards

September 10, 2021 7:23 AM EDT

Most of the oil and gas production in the Gulf of Mexico remains offline nearly two weeks after Hurricane Ida ripped through the ports of south Louisiana and forced the evacuation of workers from dozens of offshore rigs and platforms.

Three-quarters of Gulf offshore crude oil production is halted, as well as 77 percent of natural gas, according to an update yesterday from the Bureau of Safety and Environmental Enforcement (BSEE).

Experts are unsure of how long industry will take to fully ramp back up. The refining sector along the Gulf Coast that accounts for roughly half of the country’s refining and gas processing capacity is gradually getting into gear.

But many offshore platforms remain without power or workers have not yet returned. BSEE reported 71 platforms and four rigs still without staffing. Major operators say they are gradually bringing operations back to life and adjusting to ports that have suffered damage.

“The oil production recovery from the U.S. post Hurricane Ida is slow-paced and refineries, whose capacity is returning quicker than producers can follow, are facing difficulties to source oil, which is causing prices to rise,” Nishant Bhushan, an oil markets analyst at Rystad Energy, said in a brief yesterday.

Price fears prompted the Biden administration to tap the Strategic Petroleum Reserve last week, exchanging 1.5 million barrels with Exxon Mobil Corp. to help increase processing at its Baton Rouge facility (Energywire, Sept. 3).

Ida made landfall at Port Fourchon in Louisiana on Aug. 29, battering the central facilities that service the offshore oil and gas sector with winds as high as 150 miles per hour. The storm, which is responsible for the deaths of 82 people in eight states, then wound its way through the nervous system of the Gulf refining and petrochemical sector.

The storm's aftermath has seen reports of hundreds of oil spills, diesel leaks and toxic releases, including a 14-mile oil slick from a broken oil pipeline that was later capped by offshore driller Talos Energy Inc. (Greenwire, Sept. 2).

Experts say Ida’s freeze on production in the Gulf is not unlike those in previous large storms, like Hurricanes Gustav and Ike in 2008, or the devastation wrought by Hurricanes Katrina and Rita in 2005, according to a Wood Mackenzie analysis.

“In both of those years, downstream production facilities suffered extensive damage and it took almost 5 months for oil production to recover after Gustav/Ike, and 12 months after Katrina/Rita,” Wood Mackenzie reported in a note shared with E&E News.

Royal Dutch Shell PLC reported 80 percent of its oil production offline in an update yesterday, including its deepwater projects Appomattox, Mars, Olympus, Ursa, Auger and Enchilada/Salsa.

Earlier in the week, Shell disclosed damage to a transfer station that serves as an important conduit, bringing roughly 359,000 barrels of oil equivalent per day to onshore refineries.

Chevron Corp. reported no severe damage to its offshore facilities and has redeployed personnel to its offshore platforms. BP PLC disclosed that flyovers had revealed “no obvious major damages” to its facilities and that it had begun the process of restarting operations.

But BP was making repairs at Port Fourchon and had temporarily relocated its shore base to Galveston, Texas, and its heliport to Lafayette, La.

Port Fourchon is the central artery that connects the oil and gas production offshore to the refineries, chemical plants and pipeline networks of the Southeast. The port is open on backup power at a reduced capacity but sustained severe impacts from the storm.

“Logistical issues with Port Fourchon have prevented a lot of oil and gas activities from resuming,” said Stephen Lewerenz, spokesman for the Louisiana Oil and Gas Association. “Open access to Port Fourchon is critical not only to Louisiana's energy needs but to economic development. Every day that the port is closed to industry, South Louisiana loses tens of millions of dollars in investment and jobs.”

Return to normal for the Gulf of Mexico, which supplies 15% of U.S. oil production and 5% of natural gas production in the country, is expected to stretch over weeks or months.

Wood Mackenzie's Genscape estimates 1.4 million barrels of oil a day will remain shut in the Gulf for the next two weeks. Rystad said 550,000 to 580,000 barrels per day in production could be lost for September.

Spills and demands

Ida’s direct hit on the oil and gas sector has recharged ongoing tensions over the Biden administration’s approach to the federal oil and gas program.

Politicians from Gulf states say Ida has increased the need for the White House to resume regular oil and gas leasing. The sale of new oil leases offshore has been on hold since January, as the administration assesses the federal oil program’s climate impacts. The Interior Department recently said it would hold an offshore lease sale, after a Louisiana federal judge temporarily blocked the continuation of the leasing moratorium. A specific date hasn't been announced.

In a letter to Interior Secretary Deb Haaland, Louisiana Republican Reps. Garret Graves and Steve Scalise warned of spiking gasoline prices from the stalled Gulf activity.

“We urge you to work with producers to expedite efforts to resume domestic energy production in the Gulf of Mexico as quickly as possible,” they wrote.

Environmental groups have also been galvanized by the oil and gas fallout of Ida, demanding an end to offshore oil and gas activity and greater accountability for the industry’s massive environmental fallout after large storms.

“Each hurricane, we see the unmitigated pollution from industry spilling into communities,” Scott Eustis, community science director for Healthy Gulf, said in a statement. The organization performed several flyovers of the Gulf Coast after Ida and has reported 11 oil spills to the National Spill Response Center.

Stephen Lewerenz

Stephen Lewerenz
Louisiana Oil & Gas Association