Yet again, the Texas-Louisiana coast is bracing for a hurricane that has the potential to be really bad, not just for the people and homes in the storm’s path, but for the region’s all-important energy sector. Hurricane Laura will be crossing a swath of the Gulf of Mexico dotted with oil and gas production platforms, and is headed for an area chockablock with tank farms, refineries, and steam crackers, as well as export terminals of every stripe: crude oil, refined products, ethane, LPG, and LNG. There’s a good chance there’ll be a lot of disruption to many energy-related activities for at least the balance of this week — and maybe longer — but one of the biggest hits could come to Mont Belvieu, TX, the center of NGL storage and fractionation. Today, we discuss how the storm might affect not only storage at the U.S.’s largest NGL hub, but gas-processing activity hundreds of miles inland.
Laura strengthened into a Category 1 hurricane Tuesday morning, and it’s now expected to be upgraded to a catastrophic Category 4, with sustained winds of at least 130 mph, by the time it makes landfall late tonight or early Thursday morning. As of Tuesday evening, the hurricane’s projected landfall is within the area between San Luis Pass, TX (near Galveston), and Morgan City, LA (about 250 miles to the east); it also is expected to batter inland areas like eastern Houston; Beaumont, TX; and Lafayette, LA. As we said in our introduction, that geography includes a lot of significant energy infrastructure, much of which has the potential to be impacted by hurricane-force winds and flooding, and to be affected by interruptions at other facilities they depend on. We’ve been through this before, of course — many times — and we know the drill. Offshore platforms in the Gulf are evacuated. Shipping within and near the path of the hurricane are shut down. And, as we discussed in our After the Storm blog series on Hurricane Harvey, which dumped as much as 50 inches of rain in southeastern Texas three Augusts ago, refineries and other onshore operations do all they can to protect their personnel and their assets.
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Of course, each Gulf Coast hurricane impacts energy infrastructure differently. Generally speaking, though, a major hurricane like Laura will result in most offshore production of oil and gas being shut in; imports of crude oil being curtailed; and a good number of refineries being taken offline. There’s a natural balancing in all that — less crude available for a few days, less crude demanded by refineries — so it’s quite possible that the crude oil side of the market does not get thrown wildly out of whack. (Of course, there may be shortfalls of gasoline, diesel, and other petroleum products.)
However, NGLs can be a bit more complicated. With Laura heading to the general vicinity of Mont Belvieu (star in Figure 1 map), it’s possible that the fractionators there will be shut down — the same is true for petrochemical plants, refineries, and export terminals in the area that receive most of the output of those fractionators. (More than half of the U.S.’s steam-cracker capacity, with NGL feedstock demand of more than 1 MMb/d, is located within Laura’s projected path, and we hear from our friends at IIR Energy that seven steam crackers — two Sasol units, two Westlake Petrochemicals units, plus plants operated by Indorama, Chevron Phillips Chemical, Ineos, and Motiva Enterprises — have been taken offline in advance of Laura’s arrival. We understand that a few other crackers were already shut down for other reasons.) But what about the mixed NGLs (or “y-grade”) that are run through the fractionators? Most y-grade is piped into Mont Belvieu from the Permian, the Eagle Ford, the Bakken, the Niobrara, SCOOP/STACK, and other basins in the Midcontinent. Ideally, during a hurricane, that volume would just move into storage until everything starts back up again. But there’s a potential problem with that.
Figure 1. Hurricane Laura’s Projected Path, Mont Belvieu and NGL Pipelines. Source: RBN
[The map above shows the location of Laura’s eye and the hurricane’s projected path as of Tuesday afternoon, 8/25/2020. For the most up-to-date projected path and cone of uncertainty, click here to view RBN’s interactive MIDI map platform. The MIDI map also details Mont Belvieu’s fractionation complex and major connecting NGL pipelines.]
NGL groupies and regular readers of our blogs know that fractionators separate y-grade into so-called “purity” products: ethane, propane, normal butane, isobutane, and natural gasoline. As we said in our Magical Mystery Tour blog series a couple of years ago, Mont Belvieu is home to the largest concentration of NGL storage and fractionation facilities in the world; in all, there is about 260 MMbbl of underground salt cavern storage capacity at the hub, as well as about 3 MMb/d of fractionation capacity. Most important to our discussion today, moving y-grade and purity products into and out of the salt caverns depends on brine ponds and the “brine displacement” method, both of which can be problematic when the rain turns torrential and really accumulates.
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The injections and withdrawals work like this. Each salt cavern is always filled to its brim with some combination of brine (salt-saturated water) and some hydrocarbon product — in other words, a well whose volume is 20%-filled by brine will be 80% filled by, say, y-grade (or ethane, propane etc.). Because brine has a greater density than liquid hydrocarbons, the y-grade or purity product “floats” on top of the brine. Put simply, the piping in a typical storage cavern consists of a larger-diameter pipe that extends from the surface to just past the top of the cavern, and a smaller-diameter pipe installed concentrically within the larger pipe — this skinnier pipe extends from the surface to just above the bottom of the cavern. When liquid hydrocarbons are pumped into the top of the cavern through the annulus (from the Latin for “l(fā)ittle ring”) — the space between the small pipe and the large pipe — brine is forced out from the cavern's bottom via the smaller-diameter pipe into a brine pond on the surface. The process for withdrawing liquid hydrocarbons is the exact opposite: salt-saturated water is pumped from a brine pond into the bottom of the cavern via the small-diameter pipe, increasing the volume of brine within the cavern and “forcing” the y-grade or purity product out of the top of the cavern via the annulus.
Brine Ponds at Mont Belvieu
Brine ponds may look like nothing more than super-big swimming pools (see photo above), but they are a perennial source of problems for salt dome storage operators. Heavy rains (like those that tend to come along with hurricanes) can flood them and dilute the brine, potentially making the pond temporarily unusable. And without brine to pump into the wells — or a place to pump brine out into — injections and withdrawals of NGLs can grind to a halt. That brings us back to Hurricane Laura, which may well bring flooding rains. The Mont Belvieu hub depends on the ability to inject and withdraw y-grade and purity products — take that ability away, even for a few days, and things get very difficult due simply to the ponderous volumes that build up along the NGL value chain. The biggest issue, as we’ll get to in a second, would be an inability to inject y-grade into caverns as it flows into Mont Belvieu on pipelines.
In one sense, a temporary shutdown of storage withdrawals, fractionation, and storage injections at Mont Belvieu might not seem like a big deal. After all, many of the steam crackers that depend on steady flows of ethane, propane, and other purity-product feedstocks would be offline anyway because of the hurricane. So would the ethane and LPG export terminals. However, that puts tremendous pressure on the fractionators that sit in the middle of the NGL value chain, with y-grade still pouring in but few remaining outlets. In that sense, the problems may extend far beyond Mont Belvieu. Hundreds of miles from the NGL hub, natural gas processing plants in the Permian, the Eagle Ford, and other production basins presumably would still be busy doing what they do — separating the associated gas that emerges from wells into mixed NGLs and pipeline-quality natural gas. And hour after hour, the y-grade coming out of those processing plants is still being piped to Mont Belvieu with the expectation that it can be injected into salt caverns there until the frac operators there need it. (We’re covering the piping of NGLs in The Long and Winding Road blog series.)
In an absolute worst-case scenario for integrated NGL players — one we certainly hope doesn’t play out over the next few days — the operators of fracs and NGL salt caverns in Mont Belvieu may be forced into a force majeure situation in which they would need to tell the operators of gas processing plants in the Permian and other production areas supplying the hub that they need to ramp down their send-out of y-grade. That would mean processing and transporting less associated gas. If that were to happen, it would have a domino effect on production; that is, producers could conceivably be told to temporarily curtail production at wells until operations at Mont Belvieu returns to normal. Again, this is far from a sure thing. But as we’ve seen many times, the infrastructure that transports and processes crude oil, natural gas, and NGLs is highly interdependent. And the supply chain from well to end-user is only as strong as its weakest link. All that said, we wish all our readers and friends along the Texas-Louisiana coast good luck as they make final preparations for Laura’s landfall.
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The song "Laura" was written by David Raksin, with lyrics by Johnny Mercer. Raksin wrote the melancholic melody to be used in Otto Preminger's 1944 film of the same name, starring Gene Tierney and Dana Andrews. Raksin had a short time to come up with the music and said he was inspired by a "Dear John" letter he received from his wife on the weekend he wrote the song. The lyrics were written later by Johnny Mercer after the song became popular due to the movie. "Laura" has been recorded by over 400 artists over the years, including Woody Herman, Dave Brubeck, Julie London, Carly Simon, and Frank Sinatra.
Frank Sinatra's version of the song was recorded at Capitol Studio A in Hollywood in April 1957. It appears as the fifth song on Sinatra's 13th studio album, Where Are You?, which was released in September 1957. It was the first Capitol album Frank recorded without the services of Nelson Riddle, opting for the services of Gordon Jenkins instead. Personnel on the record were: Frank Sinatra (vocals), Gordon Jenkins (arranger, conductor).
Frank Sinatra was an American singer and actor. He has sold more than 150 million records worldwide, making him one of the best-selling music artists of all time. Sinatra has released 59 studio albums, two live albums, eight compilation albums, and 297 singles. He starred in 61 motion pictures, had his own television show in the 1950s, and appeared in numerous other television programs. He has won one Academy Award, 11 Grammy Awards, four Golden Globe Awards, and has three stars on the Hollywood Walk of Fame. He is the recipient of the Peabody Award, Cecil B. DeMille Award, Kennedy Center Medal of Honor Award, Presidential Medal of Freedom, and NAACP Lifetime Achievement Award. Sinatra has an asteroid named after him, and every year on his birthday, the Empire State Building in New York lights up with blue lights in honor of "Ol' Blue Eyes," Sinatra's nickname. He died in Los Angeles in May 1998 at the age of 82.
