Weather Risk, Barry, and GOM Oil & Gas

As the disturbance (Potential Tropical Cyclone #2/Barry) in the northern Gulf of Mexico is anticipated to become a tropical depression later today, coastal Louisiana is now bracing for dangerous winds, rain and storm surge at least for the next 72 hours.  Regardless of whether or not this disturbance reaches hurricane status by the time it reaches land, the threat to property and life is significant and all warnings should be taken seriously.

The recent ensemble of forecast models are placing the track a little closer to New Orleans.  The problem with this is that with Atlantic cyclonic activity, the heaviest bands of moisture and the strongest winds are located in the northeast quadrant of the system; this increases the risk of damage to New Orleans and much of the Mississippi River delta.  New Orleans is already affected by heavy rains and flooding this week, and this system will only exacerbate the effects.

Regarding energy concerns, there are already reports of gas producers evacuating production platforms and rigs as a precaution.  According to the United States Bureau of Safety and Environmental Enforcement, workers have been evacuated from 15 platforms (2.24% of total GOM platforms) and 4 non-dynamically positioned rigs as of yesterday; in addition, 3 movable rigs have been relocated. Once the system passes, the duration of inspections will dictated when production will be back online.  Additional production curtailments are anticipated, so price activity in Oil, Natural Gas (see CME Group) and the subsequent effect on producers will be monitored.

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