Tropical Storm Isaac threatens energy production in Gulf

Tropical Storm Isaac is bearing down on the U.S. Gulf Coast -- and whether or not it becomes Hurricane Isaac, the storm is already impacting energy production across the Gulf of Mexico.

Satellite image of Tropical Storm Isaac, courtesy of the U.S. National Oceanic and Atmospheric Administration (NOAA).

Isaac is currently about 300 miles south of the mouth of the Mississippi River and is expected to become a hurricane before reaching the northern Gulf Coast late Tuesday.  Concern over human and environmental safety has led oil and gas production and drilling companies to pull their personnel off remote structures in the Gulf.  According to the federal Bureau of Safety and Environmental Enforcement or BSEE, personnel have been evacuated from 346 production platforms across the Gulf of Mexico -- more than half of the 596 manned platforms in the Gulf.  Personnel have also been evacuated from 41 out of the 76 exploration and drilling rigs currently operating in the Gulf.

When production platforms and drilling rigs are evacuated, companies are required to close safety valves located below the surface of the ocean floor to prevent the release of oil or gas. This "shut-in" process is designed to protect the environment, but it has obvious consequences for the production of energy resources like oil and gas.  The BSEE estimates that 1,076,642 barrels of oil production per day has been shut-in as a result of Isaac (about 78.02 percent of the current daily oil production in the Gulf of Mexico), as has 2,165.94 million cubic feet per day of natural gas production (about 48.13 percent of the current daily natural gas production in the Gulf).

Provided the storm leaves Gulf production and drilling assets unharmed, these platforms and rigs may resume operations after the storm has passed (and after they have passed inspection).  But the disruption to offshore petroleum and natural gas production will already have affected the markets, driving short-term prices upward.

Particularly if it intensifies into Hurricane Isaac, Tropical Storm Isaac may also damage onshore energy assets, ranging from local electric distribution lines to major transmission lines, and from distributed generation projects like rooftop solar panels to utility-scale nuclear or other power plants.  Wind, rain, flooding, and a significant storm surge of 6 to 12 feet are all expected for southeast Louisiana, Mississippi, and Alabama.

NOAA forecasts call for the storm to have passed New Orleans by Thursday, by which time the extent of any damage may begin to be apparent -- and the process of restoration and recovery will begin.