Energy industry optimistic about upcoming hurricane season

06 01, 2012 by Fuel Fix

Hurricane season officially begins today, but the oil and natural gas industry is optimistic that the season will have only a minimal impact on operations in the Gulf of Mexico.

U.S. forecasters have predicted that this year’s season could produce between nine and 15 tropical storms, with four to eight becoming hurricanes.

That’s good news for the energy industry, especially after last year’s busy season.

The industry was forced last year to shutdown refineries in the northeast as a precaution for Irene, one of the costliest storms in U.S. history. The industry also evacuated several offshore platforms as tropical storms swelled in the Gulf.

While there is optimism going into the season, analysts warn it only takes one major hurricane to cause havoc to the production and refining businesses in the Gulf Coast.

“If we have a major hurricane hitting the right spot in the Gulf, it could lead to a spike in oil and gasoline prices,” Chris Lafakis, an economist at Moody’s Analytics, told Dow Jones.

The Gulf of Mexico accounts for about 29 percent of offshore production and 12 percent of natural gas production, according to the U.S. Energy Information Administration.

However, a major hurricane can have a more significant impact on the refinery sector in the Gulf. The area is home to about 40 percent of crude oil refining and 30 percent of natural gas refining.

Hurricane Katrina is an example of how significant that impact can be.

Katrina forced nine of the 20 refineries and production facilities along the Gulf Coast to close. Those closures reduced oil supplies by 1.4 million barrels a day, or roughly 8 percent of the total U.S. production, according to a PBS story.

Consumers saw the impact almost immediately.

Gasoline prices jumped from $2.58 on August 29, the day Katrina made landfall in the Gulf Coast, to $3.03 on September 5. Gasoline didn’t return to pre-Katrina prices until October 24, an eight-week rise.

Katrina also made officials questions whether too much refining has been center in the vulnerable Gulf region.

“Our hearing will discuss whether we have reached our limits of refining capacity, and whether this nation has concentrated our refining and distribution system too much in the Gulf region,” Senate Energy and Natural Resources Committee Chairman Pete Domenici, R-N.M., said in a statement

Of course, the expansion of the Motiva, a joint venture of Royal Dutch Shell and Saudi Aramco, shows that the industry isn’t moving refinery away from the Gulf Coast.

But it isn’t just the oil and gas industry carefully watching the hurricane season now and in the future.

The wind industry could also face challenges from Mother Nature, according to a study by Carnegie Mellon University.

According to their study, 50 gigawatts of power may be vulnerable to hurricane damage, because the maximum wind speeds can exceed the design limits of current wind turbines. Most turbines are designed to handle wind speeds seen in category 1 storms.

The study examined four wind farms, including one in Galveston County. Over the span of 20 years, the study estimated there was a 60 percent chance at least one wind turbine would be destroyed by a Hurricane in Galveston, according to a New York Times story.

The study estimated there was a 30 percent chance that half of the wind turbines could be destroyed in 20 years, according to the Times story.

The impact could be mitigated by using wind turbines that could yawn or rotate quicker in the high-speed winds.