Phil Flynn
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Phil Flynn

Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665

[Carolyn Davis, NGI]

Tropical Storm (TS) Nate, gaining steam as it headed north toward an expected landing on the northern Gulf Coast, had by Friday morning reduced natural gas production from the offshore to a five-year low of 1.3 Bcf/d, according to Genscape Inc.

Exploration and production companies and pipeline operators in Nate’s path were evacuating personnel and shutting in operations in the Gulf of Mexico (GOM), while natural gas processing facilities in Louisiana were suspending operations.

In a 7 a.m. CDT update Friday by the National Hurricane Center, Nate was near latitude 17.8 North, longitude 84.8 West, moving toward the north-northwest near 14 mph. This general track was expected to continue “with a marked increase in forward speed” through the weekend.

On the forecast track, Nate was seen moving into the southern GOM by Friday night and approaching the northern Gulf Coast Saturday evening as a hurricane.

While Nate was not expected to be as strong a storm as hurricanes Harvey and Irma, its track is straight through the main GOM oil and gas producing area, which the two previous storms touched only tangentially.

Based on data from offshore operator reports submitted to the Bureau of Safety and Environmental Enforcement as of 11:30 CDT Thursday, about 6.42% of natural gas production, or 206.71 MMcf/d, had been shut-in, while 14.55% of the oil production was shut-in, representing about 254,607 b/d.

Chevron Corp., the largest GOM leaseholder, had begun to shut in output from its operated facilities and was evacuating “all associated personnel,” a spokeswoman said Friday. Affected facilities were Blind Faith, Genesis, Jack/St. Malo, Petronius and Tahiti.

Jack/St. Malo fields in 2016 produced on average 14 MMcf/d of gas 94,000 b/d of liquids. Tahiti in 2016 produced on average 13 MMcf/d of gas, 31,000 b/d of crude and 2,000 b/d of NGLs.

Anadarko Petroleum Corp., which works in the deepwater and partners in some of its projects with ExxonMobil Corp. said it had removed all personnel from Horn Mountain and shut in production as of Friday morning and planned to remove all personnel and shut in Marlin on Friday.

Anadarko also removed nonessential personnel from the Constitution, Holstein, Lucius and Marco Polo platforms.

“We continue to monitor the storm, and are prepared to remove additional personnel and shut in other operated facilities if necessary to ensure the safety of our people and protect the environment,” Anadarko said.

ExxonMobil and Statoil SA also were pulling personnel from their platforms and preparing to shut in operations. More E&Ps working in Nate’s path were expected to take action on Friday as well.

“Nate is favored to make landfall along the Louisiana and Alabama coasts Monday, likely to result in minor production disruptions, but also with demand destruction through comfortable temperatures and power outages,” said in an update Friday.

“Nate is not a major storm but it is still nasty,” said analyst Phil Flynn of the Price Futures Group. He noted that the storm is in the sight of the Louisiana Offshore Oil Port, “one of the most important fuel handling facilities” on the Gulf Coast. On Friday LOOP had suspended operations.

GOM natural gas output was at its lowest level since Hurricane Isaac hit the area in August 2012, Genscape’s team said.

“Flow impacts became evident” in Thursday’s pipeline nominations and were in “full force” Friday morning.

Daily production data issued Friday by Genscape’s Spring Rock showed a 190 MMcf/d day/day decline in GOM production, attributed mostly to declines on Destin Pipeline’s Okeanos system, Transcontinental Gas Pipe Line Co. (Transco) and the Nautilus Pipeline.

In sample data, Genscape said declines from Thursday were led by Destin, minus 0.37 Bcf/d; Discovery, minus 0.25 Bcf/d; Mississippi (MS) Canyon, minus 0.22 Bcf/d; Nautilus, minus 0.17 Bcf/d; and Transco, minus 0.11 Bcf/d.

Chandeleur Pipe Line Co. declared a force majeure and was planning to shut in two GOM platforms by noon Friday — Main Pass (MP) 41B and MP 41L. Combined, the platforms have averaged 10 MMcf/d of gas for the last month, according to Genscape.

Targa Resources Corp.’s Venice gas processing plant in Plaquemine Parish, LA, also was suspending operations. As a result, MS Canyon and Venice Gathering, which supply gas to the Venice plant, had shuttered operations.

Evening cycle nominations gathering system meters on MS Canyon and Venice Gathering had fallen from 328 MMcf day/day on Thursday to “effectively zero” on Friday, said Genscape. Together, gathering receipts for the two systems had averaged 350 MMcf/d for the past two weeks.

In addition, Enterprise Product Partners LP’s Pascagoula, MS, operations were suspended, with Destin offshore output shut-in. Destin, which supplies gas to the Enterprise plant in Jackson County, on Thursday had begun evacuating all personnel from the MP 260 platform.

The Pascagoula plant did not expect to be able to process gas from Destin’s offshore system, and the evening cycle nominations supported this, said Genscape. Receipts from Destin offshore gathering meters had fallen on Friday to 28 MMcf/d from a two-week average of 536 MMcf/d.

The aftermath of hurricanes Harvey, which slammed the Gulf Coast in late August, and Irma, which made landfall in Florida on Sept. 10, each took a toll on U.S. employment during September, according to the U.S. Labor Department.

The Bureau of Labor Statistics (BLS) in its September jobs report issued Friday, showing a 33,000 decrease in total nonfarm payrolls, worse than forecast and the first job loss report in seven years.

“A sharp employment decline in food services and drinking places and below-trend growth in some other industries likely reflected the impact of Hurricanes Irma and Harvey,” BLS said.

“Our analysis suggests that the net effect of these hurricanes was to reduce the estimate of total nonfarm payroll employment for September. There was no discernible effect on the national unemployment rate. No changes were made to either the establishment or household survey estimation procedures for the September figures.”

Harvey temporarily shut down about 25% of gas and oil production in the GOM and as much as 20% of U.S. refining capacity. Irma tore a destructive path through the Caribbean before striking Florida, and it sharply reduced power demand.

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