Harvey Closures Could Threaten to Strand Permian Basin Oil
More than 500 miles from the flooding in Houston, oil fields in the Permian Basin are dry – but that doesn’t mean that they won’t feel the impact of Hurricane Harvey.
Rob Thummel, managing director at Tortoise Capital Advisors, says that while oil production is business as usual in most of West Texas, the storm has halted critical parts of the industry’s infrastructure.
The Longhorn and BridgeTex pipelines, which carry more than 600,000 barrels of oil per day from the Permian Basin to the Gulf Coast, have been temporarily shut down. “It’s hard for Permian Basin oil producers to get their oil to the Gulf because these pipelines currently aren’t operating,” says Thummel. But even if these pipelines were still running, and crude oil could still get to the Gulf Coast, it wouldn't have anywhere to go since many storage facilities are still underwater.
Another issue is export. According to Thummel, roughly 700,000 gallons of crude oil per day is exported from Houston to other parts of the world – and much of it originates in the Permian Basin. But the Houston Ship Channel, where massive oil tankers launch from, is also shut down for the time being.
While Thummel thinks the industry will be back up and running again soon, if these closures continue for too long, Permian Basin oil producers could find their product stranded with nowhere to go. “For that situation to happen, you would have to see the U.S. refinery complex out for months. You would have to see the Houston Ship Channel closed for months. You would have to see Gulf Coast storage facilities closed for months,” said Thummel. “I think the probability of that consequence is very low at this point.” For now, the oil and gas industry must wait for the waters to recede in order to assess Harvey’s damage.