U.S. Energy Companies Prepare for Francine

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Several companies working in and around the U.S. Gulf Coast are curtailing operations ahead of Francine, a tropical storm that's widely expected to make landfall as a Category 3 hurricane later this week.

"Damaging and life-threatening hurricane-force winds are expected in portions of southern Louisiana Wednesday, where a hurricane warning is in effect," a Tuesday forecast from the National Hurricane Center read. "Preparations to protect life and property should be complete by tonight, since tropical storm conditions are expected to begin within this area early Wednesday."

Energy companies working in and around the area have already prepared. Industrial Info Resources (IIR) can confirm that CITGO (Houston, Texas) plans to operate its refinery in Lake Charles, Louisiana, on a skeleton crew starting Wednesday, though the facility and its 463,000 barrels per day (BBL/d) in capacity should stay online during the storm.

Subscribers to Industrial Info's Global Market Intelligence (GMI) Refining Plant Database can click here for a profile on CITGO's Lake Charles refinery.

Offshore, personnel had been evacuated from 130 production platforms, 35% of the 371 manned platforms in the Gulf of Mexico, as of Tuesday, the U.S. Bureau of Safety and Environmental Enforcement (BSEE) reported.

A total of 412,070 BBL/d of oil per day, or 23.55% of Gulf of Mexico production, was shut in. A total of 494 million cubic feet per day of natural gas, or 25.56% of Gulf of Mexico production, also was shut in, the BSEE reported.

Chevron (NYSE:CVX) (San Ramon, California) was among those pulling non-essential staff from its rigs in the Gulf of Mexico. Industrial Info verified that some staff were pulled from its Big Foot platform ahead of Francine's landfall. The platform has a peak capacity of 75,000 BBL/d, though production is not expected to be impacted at this time.

Hillary Stevenson, a senior director for energy market intelligence at Industrial Info, said she expects much of the offshore production centers will be spared.

"The storm will churn through the western portions of the Gulf of Mexico and will likely miss the deepwater production operations further south and east," she said.

Markets were unfazed by the storm. Traders seemed more focused on lackluster performance from the world's leading economies than storm activity in the Gulf of Mexico. The price for Brent crude oil, the global benchmark, was down a staggering 3.7% in mid-day trading Tuesday to move below $70 per barrel for the first time since November 2021.

Francine nevertheless is the first major storm to pose a significant threat to the regional energy sector, dubbed PADD III, since Hurricane Beryl made landfall in early July. Beryl left millions of people in the Houston metropolitan area without power for days and a tornado outbreak from the storm later knocked Exxon Mobil Corporation's (NYSE:XOM) (Spring, Texas) refinery in Joliet, Illinois, out of service for weeks.

Forecasters had expected a busier-than-average Atlantic hurricane season, though activity so far has been muted. So much so that The Washington Post ran a column Monday questioning the accuracy of early-season forecasts, noting public trust may be waning given the lack of significant activity in the Atlantic.

Forecasters, however, have noted that, while hurricane season got off to an early start with the arrival of Beryl, peak hurricane season is right around the corner and lasts through mid-October. Apart from Francine, two storms were brewing deep in the Atlantic. One of those has a 70% chance of strengthening into a cyclone within the next week.

Not all operators are downbeat on the storm. Talos Energy (NYSE:TALO) (Houston, Texas) said Tuesday it confirmed an oil and gas discovery at its Ewing Bank prospect in the Gulf of Mexico. Preliminary estimates put the recoverable reserve potential at between 15 million and 25 million barrels of oil equivalent.

The Gulf of Mexico is low in natural gas, while crude oil extraction is considered low carbon relative to other basins. Federal data show offshore production should average 1.8 million BBL/d this year, representing about 14% of total U.S. oil production.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).