A potentially active hurricane season could shut in a substantial portion of oil and natural gas production in the Gulf of Mexico (GOM) this year, according to an analysis by Enverus Intelligence Research (EIR).
"Should a hurricane disrupt oil and gas production in the GOM, EIR's mid-impact case estimates 40% of total GOM production would be shut in and take seven days to recover; and a high-impact case estimates 90% shut-in and 16 days to recover," said EIR Vice President Marvin Ma, who authored the report.
EIR estimates that an average hurricane season would impact GOM oil and gas production by about 3% overall during the third quarter of this year.
U.S. natural gas prices, meanwhile, are likely to become more sensitive to hurricanes over the coming years as Gulf Coast LNG export capacity continues to grow, the EIR team said.
The Enverus subsidiary noted that 15 Bcf/d of liquefaction capacity is expected to enter service along the Gulf Coast by the end of this decade.
The analysis follows an updated prediction for Atlantic hurricane activity from the National Oceanic and Atmospheric Administration (NOAA). Forecasters revised the likelihood of an above-normal hurricane season to 60% from the previous estimate of 30% issued in May.
“Forecasters believe that current ocean and atmospheric conditions, such as record-warm Atlantic sea surface temperatures, are likely to counterbalance the usually limiting atmospheric conditions associated with the ongoing El Niño event,” NOAA said.
For the six-month hurricane season ending Nov. 30, NOAA’s updated outlook calls for 14-21 named storms, of which six to 11 could become hurricanes. “Of those, two to five could become major hurricanes (winds of 111 mph or greater),” NOAA said. “NOAA provides these ranges with a 70% confidence. These updated ranges include storms that have already formed this season.”
Meanwhile, the National Hurricane Center on Friday gave a disturbance in the northwestern Caribbean a 30% chance of cyclone formation in the next 48 hours, with the potential to move northward into the Gulf of Mexico.
“Environmental conditions appear conducive for gradual development of this system during the next several days, and a tropical depression is likely to form late this weekend or early next week while moving generally northward over the northwestern Caribbean Sea and eastern Gulf of Mexico,” the NHC said.
GOM producers currently supply about 5% of total U.S. dry gas production, according to the Energy Information Administration. There were 2,193 active leases spanning 11.75 million acres in the GOM as of August, according to the Bureau of Ocean Energy Management.
In its most recent forecast published in July 2022, the Bureau of Ocean Energy Management said it expects GOM gas production to hold steady about 2.3 and 2.5 Bcf/d during the 2022-2031 period.
The Energy Information Administration, for its part, has said it expects GOM gas production to average 2.1 Bcf/d this year.
As for the impact of hurricanes on oil prices, “Absent a direct hit on energy infrastructure, EIR points out that hurricane-related shut-ins historically have not led to material and durable changes” to the price of crude, researchers said. “In the past, the U.S. Strategic Petroleum Reserve (SPR) has responded to the GOM shut-ins with releases to offset supply losses. But depressed SPR stocks could weaken its ability to respond to any supply disruptions this season.”
The most recent hurricane to majorly impact GOM oil and gas production was Ida, a category 4 storm that shut in 96% of oil and 94% of gas output in federally administered GOM waters in late August 2021, according to estimates from the Department of Interior.
In other offshore news, BOEM’s federal GOM Lease Sale 261 is set for Sept. 27, and would include 12,395 blocks on close to 67 million acres on the Outer Continental Shelf in the Western, Central, and Eastern Planning Areas in the GOM.
