INSIGHT: Companies will have to learn from the cost of Harvey

01 September 2017 17:09 Source:ICIS News

Coastguard photo of flyover of Houston Ports after Harvey

By Nigel Davis

LONDON (ICIS)--The photograph is from a US Coastguard flyover of the Texas ports of Houston, Freeport and Galveston this week looking for spills. Now, seven days after Hurricane Harvey came ashore and slowly dumped unprecedented volumes of water onto the Houston area and along the coastline into Louisiana, the ports are beginning to open.

Refineries and chemical plants remain shut but will resume operations as infrastructure returns to some semblance of normality. Unexpected incidents – such as the explosions and fires at the Arkema organic peroxides plant in Crosby, northeast of Houston – notwithstanding, production and output will be ramped up.

It is still a question of when and it remains difficult to determine the time needed for rail and road connections to clear. Employees have to be in a position too, to get to work. Many have been deeply affected even stranded by floods.

Terminals at Port Houston are expected to be re-open on Friday. Railroad companies are restoring services hit by the hurricane and tropical storm.

In an update on Thursday, ExxonMobil said impact assessments were underway at its Baytown complex, which had been shut down. The nearby Mont Belvieu plastics plant was also shut down; the company’s Beaumont refinery and chemicals plants had completed safe and systematic shutdowns while the company’s refining and chemicals plants in Baton Rouge, Louisiana, were operating as normal.

It is clear that it will not be possible to assess market conditions for a myriad of products until it is known whether plants were damaged by the storm and subsequent flooding or whether they have just been affected by restricted logistics.

The flooding in certain locations was severe and as the waters recede, the damage will become clearer. The construction of new facilities across the US Gulf Coast region are certainly expected to be hit.

Companies rightly put their employees’ safety and well-being first. Those firms operating in the affected areas have sought to track the whereabouts of workers.

Shell’s CEO Ben van Beurden heaped praise on staff who helped ensure the safe evacuations and shutdowns of rigs and refining and chemical operations, those who stayed behind to keep the plants safe and those who stepped out to help others.

It is good practice to give praise where praise is due, particularly after a natural disaster such as a hurricane. “Planning for hurricanes, tropical storms and floods is one thing,” van Beurden said. “The last few days have been something else.”

It is that “something else” which will be need to be assessed over the coming days and weeks.

The US Department of Energy said that, as of 12:30 EDT on Thursday, 13.5% of US Gulf of Mexico oil production and 17.6% of natural gas production in federally administered areas was shut in.

At 15:00 EDT the same day, ten refineries in the US Gulf Coast region were shut down according to public reports. Their combined capacity is equivalent 31.7% of US Gulf Coast capacity and 17.6% of total US refining capacity.

ICIS analysis indicates that 47% of US ethylene capacity was affected, 37% of US benzene and 31% of US polyethylene (PE). It tracked outages as the impact of the storm became significantly worse than any could have expected.

“And even now with the sun coming back out and freeways beginning to emerge again from the water, the challenges keep on coming,” van Beurden said, referring to the resilience of Shell’s workforce in Mumbai as the city was hit by devastating monsoon floods.

Texas is the largest chemicals producing state in the US and Louisiana the fourth largest, although the proportions of petrochemicals produced in that part of the world are much greater.

According to the American Chemistry Council (ACC), Texas chemicals shipments – the value of products leaving the factory gate – are $129bn and Louisiana chemicals shipments are $51bn. Harvey has affected a total of $155bn of chemical shipments, about 20% of the US total.

The ACC’s CEO, Cal Dooley, on Thursday highlighted some of the issues that could come to dog the industry in the wake of the storm given the perceived vulnerability of some if not all chemical and refining facilities.

“Chemical facilities are designed and built with major storms in mind,” he said. A shutdown in the face of an approaching storm brings into play special regulations and emission limits that apply during shutdowns, start-ups and malfunctions. Flaring is an approved way to safely relieve pressure and considered as industry ‘best practice’," he added.

Nevertheless, the extreme and unique challenges presented by Harvey have warranted an unprecedented response effort, including that by local industry.

“The top priority in any situation is the safety and well-being of employees and the surrounding residents,” Dooley said. “An abundance of caution has been and will continue to be taken in these instances to minimise any potential risks.”

As the recovery continues in Texas and Louisiana, companies will have to monitor and evaluate the developing situation. They will also have to see what additional measures might be required to deal with extreme weather events in future.

Their ‘licence to operate’ is governed by local acceptance as well as local, state and federal rules.

“In the coming weeks we will evaluate all learnings from this unprecedented hurricane and the resulting flooding, to assess if there are additional procedures and process safety efforts that could further inform and enhance the safety performance of our operations in the future.” Dooley said.

By Nigel Davis