Hurricanes Harvey and Irma have impacted the E & P industry in three ways: by directly crippling production in some cases, by taking major refineries off-line and by lowering demand.
First Hit: Supplies
With Harvey, the Texas Railroad Commission declared that 500,000 bpd of Eagle Ford production had to be shut down.
When producers were able to get their systems up and running after Harvey, they found that takeaway capacity was limited. Eagle Ford Shale producers found right after Harvey that while they could pump, Gulf Coast refineries were unable to receive and process it. This required a slowdown.
Figures by Goldman Sachs suggest that as far as Eagle Ford production is concerned, there was a loss of production of as much as 200,000 bpd in the initial period; all put together, output from Texan drillers fell by as much as 300,000 bpd.
Next Up: Demand
With both Harvey and Irma, impact on the oil industry has come in another, underappreciated way: to demand. With 500,000 cars ruined in Texas and widespread power outages requiring the shutdown of many of Florida’s gas-fired power stations, there has been an understandable drop in demand.
The Upside
As Irma began to make landfall in Florida, it caused oil prices to sag on fears of a long-term dent in demand. Yet that didn’t actually happen. With damage far lighter than forecast, there hasn’t been as much loss of demand as originally thought.
Texan oil drilling is projected to rise in October. Drillers in the Permian basin and in six other shale formations are expected to raise production by 79,000 bpd, according to the U.S. Energy Department. With particularly deep oil production cuts announced by Iraq, oil prices in New York have risen past the $50 point.
Demand for the spares and the high-end equipment that drillers use is a reliable indicator of the health of the drilling industry. Sigma Drilling Technologies, a manufacturer of advanced pulsation control systems and technologies such as a pulsation dampener bladder replacement, is experiencing robust demand.
The U.S. drilling industry has bounced back. Make sure your drilling business is ready – call (281) 656-9298 or fill out our contact form to learn what Sigma’s technology can do for you.
