Hurricane Laura poses biggest storm threat to US oil output in 15 years

The US energy industry on Tuesday was preparing for a major hurricane strike, cutting crude production at a rate approaching the level of 2005’s Hurricane Katrina and halting oil refining at plants along the Texas-Louisiana coast.

Officials in the two states ordered hundreds of thousands of coastal residents to flee inland as Hurricane Laura strengthened and forecasters predicted it would become a major hurricane with sustained, 115 mile per hour (185 kph) winds.

At least a 10-foot (3-meter) storm surge will likely hit the upper Texas coast later this week, said Chris Kerr, a meteorologist at agriculture, energy and weather data provider DTN. He said rapid intensification could even produce a devastating Category 4 hurricane.

Oil producers on Tuesday had evacuated 310 offshore facilities and shut 1.56 million barrels per day of crude output, 84% of Gulf of Mexico’s offshore production, near the 90% outage that Katrina brought 15 years ago.

The storm will make landfall by early Thursday in an area that accounts for more than 45% of total US petroleum refining capacity and 17% of oil production, according to the Energy Information Administration.

Refiners that produce gasoline and diesel fuel were taking steps to halt nine facilities that process nearly 2.9 million bpd of oil, 14.6% of the US total capacity, according to Reuters tallies.

The impact on refineries so far is less than Hurricane Harvey, whose drenching rains took down nearly one quarter of US refining capacity three years ago.

US gasoline futures have jumped as much as 10% since Friday, while crude benchmarks settled at a five-month high on Tuesday due to the shutdowns.

“There will be a significant storm surge from Galveston (Texas) to the Sabine River,” an area encompassing some of the region’s largest refineries, said DTN’s Kerr. “There are ideal conditions in central and west Gulf for rapid intensification.”

Officials in Texas and Louisiana called for mandatory evacuations affecting half a million people. Residents from areas of Houston east to Orange, Texas, should flee the area and seek shelter inland, Texas officials said.

Cheniere Energy Inc, the largest US exporter of liquefied natural gas, evacuated staff and suspended operations at its Sabine Pass LNG export terminal on the Texas/Louisiana border.

Motiva Enterprises, Total SA and Valero Energy began cutting operations at their Port Arthur, Texas, refineries, according to people familiar with the matter.

Total, Motiva and Valero confirmed the shutdowns, and a Valero spokeswoman said it also was reviewing the risks to its Texas City, plant southeast of Houston.

Citgo Petroleum was halting operations at its 418,000 bpd refinery in Lake Charles, Louisiana, and Chevron shut gasoline production at its 112,000 bpd Pasadena, Texas, refinery, spokespeople said.

Exxon Mobil Corp began shutting production at its large Beaumont, Texas, refinery and reduced output at its Baytown, Texas, plant ahead of a possible shutdown.

Exxon confirmed it was initiating a shutdown at Beaumont and was preparing for possible severe weather at its Baytown refinery and chemical complex, a spokesman said. If the Baytown plant fully halts processing, total shutdowns along the coast would hit 2.89 million bpd.

Marathon Petroleum declined to comment on the status of its 585,000 bpd plant in Texas City, the second largest refinery in the United States after Motiva’s.