Tropical Low: Putting the Pressure on Gas Production

As spring transitions into summer, the annual Atlantic hurricane season has begun. With the El Nino conditions present during last year’s hurricane season, coastal areas enjoyed a reprieve from the frequent landfalls that typically occur. However, according to a new report by Colorado State University, the 2016 Atlantic Hurricane Season is expected to be about average, with a forecast for 12 named storms and two major (Category 3-4-5) ones.
Major hurricanes are some of the most devastating and costly natural disasters that regularly impact the United States, affecting infrastructure of all kinds. The natural gas industry is an excellent example of these effects. When a hurricane strikes an area with natural gas transportation or drilling infrastructure, facilities are often placed in a “shut-in” status. Under shut-in conditions, natural gas facilities temporarily cease operations to minimize the potential for storm-related accidents.
When Hurricane Rita made landfall on September 24, 2005, communities in its path were still recovering from the impacts of Hurricane Katrina, barely a month previous. Although not nearly as devastating as the latter, Rita is nonetheless remembered for causing devastation across the US mainland. Rita’s impact was not limited to onshore infrastructure; as can be seen from the map below, Rita tracked directly over drilling rigs in the Gulf of Mexico, and continued over a large amount of pipeline infrastructure.
Rita Storm Path ABB - Final
This kind of storm track had huge impacts on gas production in the Gulf as producers raced to shut-in their facilities before the storm hit. The increase in shut-ins had a rapid effect on gas production:
Rita Gulf NG Production and Shut-In ABB
As the number of shut-in facilities increased, a supply shortage developed, and higher prices were seen at the nearby Henry Hub.
Rita Henry Hub Price ABB
Given the precipitous drop in production during Rita, gas producers incurred significant production and revenue losses. In the below graph, actual production quantities are shown with the average of the previous two weeks used as a proxy for potential output.
Potential Production vs Actual ABB
This is just one example of how a natural disaster such as a hurricane can impact our natural gas infrastructure. As the hurricane season continues shut-in data can be viewed as it is reported within the Velocity Suite.

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Author: Velocity Suite Intern
Near-average 2016 Atlantic hurricane season
NHC Annual Summary – 2015 Atlantic Hurricane Season
Hurricane Rita – National Oceanic and Atmospheric Administration