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Offshore Oil Wells, Ports Shut as Hurricane Sally Advances on U.S. Gulf

September 15, 2020

Hurricane Sally (Photo: NOAA)

Energy companies, ports and refiners raced on Monday to shut down as Hurricane Sally grew stronger while lumbering toward the central U.S. Gulf Coast, the second significant hurricane to shutter oil and gas activity over the last month.

The hurricane is disrupting oil imports and exports as the nation's sole offshore terminal, the Louisiana Offshore Oil Port (LOOP), stopped loading tanker ships on Sunday, while the port of New Orleans closed on Monday.

The U.S. government said 21%, or nearly 396,000 barrels per day (bpd), of offshore crude oil production and 25%, or 685 million cubic feet per day (mmcfd), of natural gas output were shut in the U.S.-regulated northern Gulf of Mexico. That area produces about 17% of U.S. crude oil and 5% of U.S. natural gas output.

Sally was upgraded to a hurricane on Monday, with expected landfall on Tuesday, the U.S. National Hurricane Center (NHC) said, but its trajectory has shifted east toward Mississippi, likely sparing some of Louisiana's refining operations.

As of 4 p.m. CDT (2100 GMT), Sally was about 105 miles (170 km) east-southeast of the mouth of the Mississippi River, and winds were picking up, with sustained winds of up to 100 mph (155 kph).

Numerous offshore production facilities have been shut, including those operated by Chevron Corp and BP Plc . Last month, Hurricane Laura forced roughly 1.5 million barrels per day of output to close temporarily.

The port of New Orleans and LOOP combined exported about 307,000 bpd of crude and 411,000 bpd of refined products, and imported about 342,000 bpd of crude for the June-August period, according to Kpler data.

Sally's impact could extend beyond the storm's duration, said an industry analyst.

"I don't expect to see damage from wind, but we could see a significant amount of onshore flooding that impacts infrastructure that subsequently impacts Gulf of Mexico production," said Andrew Lipow of Lipow Oil Associates in Houston.

Officials in Mississippi and Louisiana issued mandatory evacuations for residents in low-lying areas.

The U.S. Coast Guard said all traffic from the port of New Orleans would be stopped at 6 p.m. CDT (2300 GMT).

The Coast Guard shut the ports of Gulfport and Pascagoula, Mississippi, Mobile, Alabama and Pensacola, Florida, at midday.

Refiners in the region wound down operations. The Phillips 66 Alliance oil refinery, which processes 255,600 bpd at a site along the Mississippi River on the coast of Louisiana, shut on Monday, said operator Phillips 66.

Shell cut production to minimum rates on Monday at its 227,400-bpd Norco, Louisiana, refinery, including idling its crude distillation unit, said sources familiar with plant operations.

Valero Energy Corp's 125,000-bpd Meraux, Louisiana, refinery plans to continue normal operations as the storm will pass to the east, sources told Reuters.

PBF Energy Inc's 190,000-bpd Chalmette, Louisiana, refinery was also continuing normal operations, said sources familiar with operations at that plant.

Chevron, BP, Equinor and Murphy Oil Corp evacuated some offshore workers from production platforms, the companies reported. Royal Dutch Shell Plc curtailed production at its Olympus, Mars and Appomattox platforms on Monday, the company said.

(Reporting by Erwin Seba, Gary McWilliams and Devika Krishna Kumar; Editing by Bernadette Baum and Timothy Gardner)

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