Mother Nature has certainly been at her cruellest over the past month or so. As I write this, central Mexico is dealing with the effects of a 7.1 magnitude earthquake, which struck on the exact same day as a violent earthquake that hit Mexico City back in 1985.
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During July through September, South Asia was subjected to widespread monsoon flooding, which is thought to have killed over 1200 people, while affecting millions of others.
And, of course, Hurricanes Harvey, Irma and Maria have caused untold destruction throughout parts of the US and across the Caribbean.
While it is difficult to find solace during such challenging times, it has been encouraging to read stories of solidarity in the midst of the devastation. The US oil and gas industry can also be proud that it has stood up well to the unprecedented challenges that it has faced since Harvey first made landfall in Texas on 25 August.
As of 19 September, IHS Markit estimates that 15 of the 20 refineries affected by Hurricane Harvey are at or near normal operating rates, although approximately 1 million bpd of distillation capacity remains offline.1 Of the five refineries that are yet to resume operations, four are in the process of actively restarting. The timeline for the one remaining refinery remains unclear at this point. IHS Markit notes that while the refined product markets have calmed considerably – the NYMEX RROB spot price has essentially returned to its pre-hurricane level – this price recovery was “far slower than for any previous hurricane, underscoring the fact that Harvey was the single greatest disruptive event to ever afflict the US refining industry.”
Disruptive it certainly was. On 29 August, approximately 3.9 million bpd of refining capacity was shut down, with an additional 1.5 million bpd running at reduced rates. Considering the extent of the disruption, it is somewhat miraculous that the industry has shown such positive signs of recovery so quickly.
Encouragingly, it also seems that the US energy industry has learned valuable lessons from previous natural disasters. Karen Harbert, President of the Global Energy Institute at the US Chamber of Commerce, notes that the US energy industry invested significantly in resiliency to withstand wind and flood damage following the destruction caused by Hurricanes Katrina and Rita, 12 years ago. In a recent report, the Financial Times (FT) cites Marathon Petroleum as a good example of such resiliency planning.2
The company built the control centre at its Galveston Bay refinery to withstand winds from a Category 5 hurricane (which is stronger than Harvey when it made landfall). The refinery remained operational during the recent storm, although it did run at a reduced rate. The FT also explains how more advanced forecasting from the US government’s National Weather Service provided essential early warning of Harvey’s potential threat, while a 15 ft high concrete floodwall built by the US Army Corps of Engineers after Katrina and Rita helped to protect the Valero and Marathon Petroleum refineries.
While the US energy industry can be proud of the resiliency that it has shown in recent weeks, we can all hope that other valuable lessons will be learned to help improve operations and safety in the event of similar challenges in the future.
- ‘IHS Markit Hurricane Update’, IHS Markit, (19 September 2017).
- CROOKS, E., ‘How US oil and gas passed test of ‘unprecedented’ weather’, Financial Times, (16 September 2017).