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Thursday, 07 September 2017 11:22

Harvey – blow against the EU’s energy security … Featured

Harvey – blow against the EU’s energy security …

While the US Federal Government is assessing damages caused by a category 4 hurricane Harvey which swept over Texas and Louisiana, a 5 category hurricane Irma hit the Caribbean islands and the south of the United States yesterday and today. The raged force is expected to hit south of Florida on Saturday, Huffpost reports. 

 

Harvey

About 27 trillion gallons of rain water fell on Texas and Louisiana. Assessing the scale of the flood, ABC agency has calculated that this amount of water would suffice to supply such megacity as New York for 50 years.  According to the indicators of the meters of the National Weather Center, a record amount of rainfall, caused by the storms throughout the whole history of USA and reaching 51.88 inches, has been registered. Besides, 34,575 people abandoned their houses and settled in temporary shelters. 224,127 clients in Texas lost power. 58 cities of Texas published declarations about an emergency situation, 506 high-speed highways were closed or flooded. Problems have been fixed at 10 chemical enterprises and gas processing plants, including a fire at the chemical plant Arkema located in the suburbs of Houston. Besides, US Coast Guards National Response Center received over 30 calls due to the spill of gas oil, oil spots and emission of chemical substances as a result of Harvey.

The Washington Post has calculated that the flood caused by this hurricane happens in the USA once in 1000 years, which is extremely rare. From 30 up to 40 thousand houses were destroyed. 2,882 animals were saved.

According to a preliminary data, the financial damage will exceed $10bln.

While Harvey still rages in Texas, the US National Harricane Center (NHC) data as of September 6 says that Irma hurricane has covered the British and the US Virgin islands, Antigua and Puerto Rico. The governor of Puerto Rico called 3.4 mln US citizens to abandon an area of the severe storm, calling it unprecedented. An emergency situation has also been announced in 67 dwelling settlements of Florida. 

 

Consequences for the oil-gas sector

US upstream and downstream sectors got the major strike of the nature force   

According to the EIA data, the total oil production in the USA reached 8.853mln barrels per day in 2016. Out of the total volume of oil production in the USA, the production in the three affected states (Texas, Louisiana and Florida) totaled 3.867mln barrels per day which made about 41% of the US production (mainly in Texas) and accordingly about 6% of the global oil production in 2016.

Reports from offshore oil and gas operators complied by the US Bureau of Safety and Environmental Enforcement indicate that 18.94% of US Gulf of Mexico oil production, or 331,370 b/d, remains shut in as of midday Aug. 28 following evacuations.

That level is down from 21.64% at midday Aug. 27 and an event peak of around a quarter of total US gulf output on Aug. 26. Prior to the storm, government agencies had total US gulf production at around 1.75 million b/d.

BSEE also estimates 18.12% of US gulf natural gas production, or 583.39 MMcfd, remains shut in. As of midday Aug. 27, 25.71% of gas output was shut. Personnel are evacuated from 98 production platforms, 13.3% of the 737 manned platforms in the US gulf.

Taking into account that only Saudi Arabia (13.4% of global oil production in 2016) and Russia (12.6%) produce oil more than USA (12.4% of global oil production), it is also more than Canada (5%) and Iran (5%) produce, the unprecedentedly high threat to the market remained clearly undervalued by it, at least the data for this week testifies that. Oil cheapened weakly during the Asian trading held this Wednesday, and the price of WTI (benchmark West Texas oil) has dropped to a minimum within more than a month, World Media writes.

On the one hand it tells about the remained oversupply of oil at the markets and substantial reserve capacities of the producing countries, accumulated over the past two crisis years. On the other hand, it seems like oil is no longer going to be a global resource definitely affecting the world energy security.

Therefore, it is necessary to pay attention to one detail, which was left without attention of the world media. Hurricane Harvey has just hit the terminal Sabine Pass, where LNG is produced, and also touched Corpus Christi from where Cheniere company supplies liquefied gas to the EU.

The first LNG consignment reached the Lithuanian port of Klaipeda on August 21. Despite the fact that the Company stated that Sabine Pass had only “minimum cosmetic damages” and LNG production was not stopped during the storm, risks still remain. Moreover, the US State Department’s press secretary Heather Nauert stated the other day that US placed a priority on European energy security. According to her, the US State Department welcomes the shipment which is one of more than a dozen already sent to Europe this year from Cheniere Energy’s terminal in Sabine Pass, Louisiana.

Apart from this, “In addition to supporting European energy security, the shipments will support American jobs here at home. Secretary Tillerson has emphasized that we will continue to work to expand energy choices in Europe so that countries are not dependent on a single or dominant source for their energy”, the Press Secretary concluded.

Earlier in June, the White House also stated that USA can become a new exporter of energy resources by 2020 and plans to enter the global LNG market. As the document says, LNG export from the USA during 2016-2040 can raise federal budget revenues by $118bln.

Thus, it seems line Harvey is nothing else by blow of the nature over the US plans in Europe. It also gives more relevance to the pipeline supplies to EU from new sources like the Southern Gas Corridor – gas supplies from Shah Deniz field.

In addition to minimizing the risks of impact of such force-majeure situations on their oil-gas facilities, it seems like USA will have to reconsider its climate policy which currently does not stand up to scrutiny. 

It bears reminding that early in June President Donald Trump declared about the withdrawal of USA from the Paris climate agreement, hailing criticism on the UN Green Climate Fund (GCF) established for lending aid to the developing countries in mitigating the consequences of climate change and adaptation to them.

According to Tramp, this fund will cost the USA billions of dollars in addition to the aid that USA already provides to poor countries.

As BBC reports, the Paris climate agreement, worked out in December 2015, has for the first time in history combined the efforts of the global powers in moderation of climate changes. The agreement was approved by 195 countries, which is why the observers called it a historical agreement.

It replaced the Kyoto agreement which used to be in force from 1997 and established quotas on greenhouse gas emissions only for several developed countries. However, USA has abandoned this agreement, while a number of other countries did not fulfill the agreements,

What are the key provisions of the agreement?

To prevent an average temperature on the earth to go over 2˚С in relation to the indicators of the pre-industrial era, and even try to lower it down to 1.5˚С.

To start limiting emission of greenhouse gases from 2050 to 2100, caused by a man-made industrial, down to a level that trees, a soil and the world ocean can process in a natural way.

Every five years to reconsider upwards the contribution of every separate country to the reduction of harmful emissions into the atmosphere.

Developed countries have to allocate financial means to the special climate fund in order to help much poorer states to fight the consequences of the climate changes ( for instance, calamities or the the growth of the world ocean level) and shift to use of renewable source of energy.

The agreement gained force in November 2016.

 

 

Natalya Aliyeva, Editor-in-Chief, Caspian Energy

 

 

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