September 7, 2021
Defying Ida: Prospects for Disaster Recovery for Oil and Gas
As I write this blog, Louisiana is in the earliest stages of recovering from Hurricane Ida. I have spent the past few days trying to reach family, friends, and colleagues to confirm that they are safe, and to check on their homes. My home flooded during Hurricane Harvey, as did the campus where I worked, and trying to sift through damage on all sides is incredibly daunting.
I am deeply thankful that, despite the devastation, loss of life has been minimal. One hundred percent of the people I have spoken with who live in Terrebone and La Fourche parishes , however, have sustained damage to their homes. Getting back to work isn’t going to happen fast–people will need to secure basic personal safety and necessities like shelter.
After every hurricane I’ve witnessed both personally and professionally, working in disaster response, I am always amazed at how quickly people shift from shock and awe to rolling up their sleeves and getting to work. The people of Louisiana are resilient, and I expect we’ll see many shining examples in the coming weeks, despite lack of power, spotty cell service, boil notices, and heat. Don’t even get me started on mosquitoes.
I was in New Orleans the day the levees broke under the wrath of Hurricane Katrina. As someone who managed supply chain during that entire storm season and many before and since, I can tell you that it will likely be several weeks before the recovery efforts can truly begin.
Think of disaster response in two phases: first, remediation and recovery, and secondly build-back. Remediation involves clearing debris, restoring infrastructure, drying out, and stopping further damage. Recovery and build-back is what comes next, and has the goal of putting things back the way they were.
Only once remediation efforts are well underway we will know the impacts Ida will have on the energy industry in the Gulf of Mexico.
Planning in the Face of Nature’s Fury
As Dwight Eisenhower once said, “plans are useless, but planning is indispensable”. Oil and gas companies, especially those in the Gulf, deal with storms regularly and have well-developed protocols.
The chaotic effects of hurricanes, however, make it impossible to have precise recovery plans. Most offshore operations follow the United States Coast Guard’s Incident Management structure. That structure has prescribed response steps to ensure that all details are well covered and compliant. Oil companies are well rehearsed in those steps.
People First
In the path of a storm, the priority for oil and gas companies is always the evacuation of people, both onshore and offshore. Of course, evacuation of onshore personnel is a bit more straightforward.
Consider that each offshore platform may be staffed by a few hundred people, and with thousands working offshore throughout the Gulf. As you can imagine, evacuation is an epic undertaking.
Protecting Property Second
As a storm approaches, the second priority is to secure as many assets as possible while the evacuation is underway. Plants and refineries are shut down; production offshore is shut in. And then, it’s just time to wait and see.
Dealing with the Aftermath
Despite every precaution, damage is inevitable. Flyovers start getting underway, but damage assessment is a moving train.
Infrastructure damage, especially lack of power and obstructed roads, will slow the start of recovery efforts. The same people that were airlifted to safety before the storm are the ones who need to be brought back offshore to do the painstaking work of checking equipment and assessing the damage—and they need passable roads and potable water to do this work. Many of the offshore workforce live in Louisiana and will have sustained damage to their homes, so re-manning and bringing production back online will be a complex process.
In the case of Hurricane Ida, the oil and gas industry in the Gulf has taken two major blows. Port Fourchon, site of the largest privately-owned oil terminal, was where Ida made landfall with wind speeds of over 150 mph. Because it services over 90% of the oil production in the Gulf of Mexico and almost 15% of the oil production in the United States, a crippled Port Fourchon is a major loss. Nearby, the city of Houma is vital to offshore operations, and it too was devastated.
The Good News
If there is a silver lining in the aftermath of Ida for oil and gas, it’s that downstream facilities (refining and processing plants) weren’t as heavily impacted as upstream (extraction). Many of them will be up and running again in a couple of weeks.
After past storms like Katrina and Harvey, I advised my family and friends to fill up their tanks in advance of the storm. Scarcity and rising prices are always a concern during storm season. While production may not be hit as hard immediately post-Ida, analysts are again predicting gasoline price increases. Though prices may increase, scarcity does not seem to be a concern—the situation could be so much worse.
The Imperative of Investment Recovery
Because of their massive scale of operations, oil and gas companies are self-insured. Investment recovery, or the sale of assets after major disaster events, becomes an essential activity to recoup losses.
Most oil and gas assets are designed to withstand the effects of seawater, so the wildcard with hurricanes in the Gulf is the wind, which can be strong enough to inflict damage to structures. The extent of the damage can also vary with the type of offshore activity:
- Major oilfield platforms
- Drilling rigs
- Shelf properties
- Other vessels, like boats and barges
Once essential team members assess the damage, the next decision companies face is whether to repair, sell, or divest.
Onshore, the location, preservation and maintenance yards also have an astounding amount of cleanup to do. Their concerns include space, custody, and control of materials. In some instances, they may ask materials owners to move their assets so that the service provider or vendor site can complete their recovery efforts.
Since relocation of materials is expensive—it costs money, time, and often heavy lifting equipment to collect and move these assets—it may not be cost effective for owners to retain ownership of their property. Storage costs near Port Fourchon are very high, so sometimes it makes the most sense to sell or scrap.
Louisiana Will Rebuild and Recover
Our hearts are with our brothers and sisters in Louisiana. I have a “spill baby”, now 10 years old, who along with my other two children, has grown up hearing stories about my work in the areas that Ida just laid waste. I took my family to visit the region earlier this summer, staying in Houma, driving all over Terrebonne and LaFourche Parishes, before spending a weekend in New Orleans.
My love for Louisiana is personal and deep. I cannot wait to watch her rise from the ashes.