Gulf of Mexico Production Still Hampered by Francine

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Crews are returning to their offshore work stations and oil and gas production is recovering, though about 20% of the crude oil production from the Gulf of Mexico remains offline in the wake of tropical storm activity, the federal government said.

Watches and warnings related to what was left of Hurricane Francine ended during the weekend. The storm made landfall last week as a Category 2 hurricane, knocking power out for nearly a half million people in the Gulf Coast states.

At its peak, Francine had shut in about 42% of the total offshore crude oil production and about half of the natural gas output. As of Sunday, however, federal data showed that only 19% of the total crude oil production, or about 340,000 barrels per day (BBL/d), was still offline. About 27% of the gas production was still offline, though the Gulf of Mexico is only a nominal producer, accounting for about 2% of the nation's total.

Markets were rallying on Monday amid reports of ongoing production issues and jitters ahead of a rate decision from the U.S. Federal Reserve. With about a half hour to go before markets opened in New York, the price for Brent crude oil, the global benchmark, was trading Monday in the mid $72-per-barrel range, up some 1% in pre-market movements.

Francine also caused problems for the nation's refineries and crude oil exporters. Federal data showed refineries in southern Louisiana with a combined processing capacity of 3 million BBL/d were running below peak last week.

Several ports in the Gulf Coast were either closed or operating with restrictions as well, limiting the potential for some 4 million BBL/d worth of exports in the aftermath of Francine.

In terms of new threats from storm activity in the Atlantic, the U.S. National Hurricane Center has a tropical storm warning in place for parts of North Carolina, where as much as 10 inches of rain are expected from potential Tropical Cyclone 8.

Further out in the Atlantic, Tropical Depression Gordon is falling apart and poses no threat to the U.S. mainland.

The latest assessment of the damage from Francine followed a report from the Energy information Administration (EIA), the data arm of the Energy Department, forecasting that offshore production is expected to remain relatively flat as new fields and new methods offset natural field maturation.

Gulf oil production this year is expected to average 1.8 million BBL/d, a decline of about 100,000 BBL/d from 2023. Output expands only to 1.9 million BBL/d next year.

Operators, however, are trying to improve their production potential. Chevron Corporation (NYSE:CVX) (San Ramon, California) and Shell plc (NYSE:SHEL) (London, England) are both planning to waterflood some of their fields in the Gulf of Mexico. Waterflooding is a method of enhanced oil recovery (EOR) that uses injected water to physically sweep oil and associated gas toward the production well, stimulating flows.

Both said waterflooding would lead to more output, with Shell saying that EOR could more than double the reserve potential at its Vito prospect to about 60 million barrels of oil equivalent.

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