As Tropical Storm Karen dissipated, so have concerns of what was previously expected to be a difficult hurricane season.
After Tropical Storm Karen passed, the National Weather Service listed no coastal watches or warnings. Crude oil in the Gulf of Mexico (GOM) gained $0.90 to a premium of $4.00 per barrel more than West Texas Intermediate, according to data compiled by Bloomberg. It’s the highest level since September 4, 2013.
BP Plc (ticker: BP), Marathon Oil (ticker: MRO), Chevron (ticker: CVX) and Anadarko Petroleum Corp. (ticker: APC) were among companies that evacuated workers and shut in oil and natural gas production from GOM platforms because of Tropical Storm Karen. Companies started returning workers on October 5, 2013, according to the U.S. Bureau of Safety and Environmental Enforcement. More than 2.9 MMBOE had been shut in since October 3, 2013, along with a total of 269 rigs, just more than half in the Gulf.
We remind readers Anadarko also shut in approximately 675 wells in preparation of the devastating Colorado floods. Third quarter results are upcoming – we’ll wait to see if the Gulf of Mexico shut-ins had any impact on production expectations for BP, MRO, CVX or other Gulf of Mexico operators.
2013 Weather Expectations
On June 11, 2013 the Energy Information Administration (EIA) said it expected worse losses in GOM oil and gas production than was seen in 2012. The study estimated tropical storms in the GOM to result in a median loss of 19.3 MMBOE, up from 14.3 MMBOE in 2012. An additional median loss of 46.4 Bcfe in natural gas output was predicted due to the 13 to 20 named storms forecast by the U.S. National Oceanic and Atmospheric Administration for the six-month 2013 Atlantic hurricane season, which began June 1, 2013.
To recap, a total of 19 named storms in the 2012 hurricane season accounted for 32.1 Bcfe in lost natural gas production.
The GOM produces 1.3 MMBOPD of crude oil, or 23% of the United States’ oil production. In 2011, 1.7 Tcfe in natural gas came from the Gulf. Safety standards depend on the intensity of a storm and the path it takes across production areas, according to the EIA.
To date, 11 storms have crossed the Gulf of Mexico, which is on par with numbers from past seasons. Only two are classified as hurricanes.
Robert Corty, associate professor of atmospheric science at Texas A&M, says the unusual amount of dry air is affecting the storms. “The dry air coming across the Atlantic from Africa prevented a lot of storms from developing during August, and the ones that did develop were not very strong. So the result has been a hurricane season of about normal in number of storms, but these have been relatively weak ones so far.”
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