Likely intensifies to hurricane strength before making landfall in Florida
August 4, 2024
Key Observations:
TS Debby is presently on track to be a greater threat to coastal communities in Florida than to the offshore oil and gas platforms located further west. However, Debby’s sudden intensification is a potent reminder that hot sea surface temperatures in the Atlantic, Caribbean, and Gulf of Mexico are primed to sustain frequent and rapid major storm formation over the next six weeks.
Storm-friendly conditions portend elevated risk for unplanned disruptions to energy operations from Guyana and Venezuela to Mexico and the U.S. Gulf Coast. The July 8 landfall of Hurricane Beryl (earliest to form Category 5 storm in the modern era) spurred dozens of tornados across Texas and Louisiana, curbed 1.5 Bcf/d of natural gas exports through the Freeport LNG terminal, and cut power service to more than 2.7 million people in Houston.
It took about two weeks to restore Freeport’s full logistical ability to move gas supply to international destinations. In the meantime, the breakdown in that ‘conveyor belt’ resulted in backed-up gas supply all the way to the wellhead that could only clear through a large dive in basis price.
Sudden absence of supply would likely require the opposite solution: a price spike. The share of U.S. gas production sourced from the Federal Offshore Gulf of Mexico and Louisiana has halved since the 2005 Atlantic Hurricane season (to 9% from 18%). But level of output is still large relative to world demand: 11.4 Bcf/d. Similarly, the region’s share of U.S. crude oil production has dropped to 14% from 28%, but the level of output is large and has increased to 1.89 mbd from 1.39 mbd.
Source: NOAA, EIA, Blacklight Research.
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