Hurricane Michael, officially upgraded from a Tropical Storm to a Hurricane late yesterday morning, continues to barrel toward the southeast U.S. and is expected to make landfall in the Florida Panhandle by tomorrow (Wednesday, October 10) as a Category 3. While supply-side impacts for the natural gas market are emerging, overall expectations are for less market disruptions than those of similar, previous storms.
Gulf of Mexico Producers Respond Ahead of Landfall
After the storm makes landfall, meteorologists expect it to weaken and move northeastward but remain powerful enough to drop 2-5 inches of rain along the already-saturated Carolinas, battered by Hurricane Florence just a few weeks ago. The current projected path shows the storm traveling through the east side of the Gulf of Mexico (GoM), approaching Mobile Bay, on the coast of Alabama and Mississippi, a heavy production area in the Gulf of Mexico. Genscape's Daily Pipe Production Data for the GoM show production estimates declined rapidly over Monday and Tuesday as offshore producers, such as BP and Anadarko, prepared by shutting in production and evacuating personnel from offshore production platforms. The storm-related impacts are estimated at ~1.2 Bcf/d for Tuesday morning, and ~0.9 Bcf/d for Monday. The GoM production estimate for Monday was revised downward, day-over-day by ~425 MMcf/d as more producers evacuated throughout the day.
On the production side, today's estimate for GoM productions is down to 1,695 MMcf/d, more than 1 Bcf/d below the prior 14-day average. Producers announced evacuations and shut-ins on Destin, Transcontinental and Nautilus Pipelines, shutting in approximately 855 Mmcf/d from these three pipelines alone, as of October 9. On October 7, Hess announced they would be evacuating the Tubular Bells Platform on Transcontinental Pipeline. On October 8, BP and Anadarko announced they would be evacuating personnel and shutting in production on multiple platforms that make up a large piece of the Okeanos Gathering System which feeds gas into Destin Pipeline. BP's Na Kika and Thunder Horse platforms, as well as Anadarko's Horn Mountain and Marlin platforms are all shut-in. The morning of October 9, Nautilus Pipeline posted notice that all personnel at the Ship Shoal 207 platform were to be evacuated, with all production at Manta Ray B meter shut-in.
Power Outages and a Nuclear Shut-Down Possible
The last major hurricane to make landfall in Florida was Hurricane Irma, which hit southwestern Florida in September 2017. Demand destruction associated with Hurricane Michael is expected to be less than that of Irma because Michael should miss the largest demand areas in Florida. In comparison, total power demand destruction during Irma was approximately 10 Bcf over a 7-day period. Power demand fell by around 2.5 Bcf/d during the storm in the U.S. Southeast region (mostly in Florida). On September 11, 2017, 6.1 million customers in Florida were without power (56 percent of the state) which fell to 2.6 million by September 15. Although Michael is also likely to bring widespread power outages, they are unlikely to have the gas demand impact of outages during Irma because more of the impacts will be in the lower-population-density Panhandle and in southern Georgia rather than higher populated peninsular Florida.
During Hurricane Florence, which struck North Carolina only months ago, the approximately 1858 MW Brunswick nuclear plant went offline due to hurricane-strength winds and sustained flooding and remained fully down for about a week with lingering impacts on the tail end of that time frame according to our plant monitoring data. There are nuclear power plants in the path of Hurricane Michael (most notably the Joseph M. Farley plant in southeastern Alabama with 1750 MW capacity), raising questions about whether sustained nuclear shutdowns could prove a boost to natural gas demand despite greater offsetting power destruction due to outages and cooler temperatures. Forecasts are now indicating the possibility of hurricane-strength wind speeds greater than 75 mph in Houston County, Alabama where the Joseph M. Farley plant is located, which typically results in precautionary shut down measures as the winds approach. However, the storm is expected to pass through the area quickly, so barring accessibility issues or damage to the plant from wind and flooding, sustained shutdowns are not expected.
To follow along with natural gas production changes and to stay up to date on the impacts of Hurricane Michael with Genscape's Natural Gas Production Forecast.