Updated: Sep 14, 2020
As I sat there, located in the south-east of Trinidad and Tobago, surrounded by gusty winds and heavy rainfall, someone asked me "How do storms and hurricanes affect the energy sector?"
Now I know what you're thinking, "Well people not gonna be able to work.......DUHHHH!!!" While you may be right Captain Obvious, there are many more effects, both direct and indirect.
Since Trinidad and Tobago (in recent history and to my knowledge, cause I'm a tad bit young) has not been affected immensely by a hurricane or high magnitude storm, I intend to use other countries and their experiences as case studies, to give you an inkling as to what may happen to us if ever God decides to stop be a Trini.
I also hope to take an international approach, instead of solely a local one, to illustrate how hurricanes and other adverse weather systems can affect the global oil and gas markets.
1. Shut-down in Operations
The first obvious effect would be the shutting down of platforms. Since platforms are located offshore (as shown in the picture below), if harsh weather conditions, which include heavy rainfall and dangerous winds, are expected, companies usually shut down any ongoing work on the platform and evacuate, if possible, any non-essential personnel. Those who remain are referred to as the "skeleton crew" which comprises of basically one member of each discipline, amounting to approximately 15 people in total (give or take a few).
2. Damage to infrastructure
This is another obvious effect of harsh weather conditions. Platforms and vessels located in the ocean are prone to damage from rough sea conditions and gusty winds. Onshore facilities and plants may also be affected by heavy rainfall and dangerous winds. Buildings and light poles may always be destroyed during these periods.
One example is Petrotrin's Point-a-Pierre facility which is prone to flooding when heavy rainfall occurs. It is reported that this is due to the removal of the mangroves that were found close to the facility. These mangroves would have prevented the flooding.
An international example would be when Hurricanes Rita and Katrina hit the United States in 2005, 115 platforms were destroyed, 52 were damaged along with 535 segments of pipelines.
3. Disruption in distribution
Not only do storms affect oil and gas, but they also affect electricity transmission. Abnormal wind and rain patterns, as experienced with storms and rain, can cause damage and extended power outages on the largely Overhead and Transmission Distribution Systems. Fallen trees, debris and lightning may act as obstacles in the attempts to restore power.
4. Halt in Production
If weather systems are extremely dangerous, there would be a shut down of plants. If plants shut down, there would be no production of commodities such as methanol, ammonia and natural gas, which would affect the following problem.
5. Decrease in Supply = Increase in Demand = Increase in Price
If as mentioned before, there is a halt in production, there would be a decrease in supply, which would result in an increase in demand.
An example of this happening is when gas stations are forced to shut down to brace for the oncoming storm, people would flock to their local gas stations to fill up their tanks, to avoid having to suffer from the shortage of gas.
6. Energy Price Volatility
Along with causing millions of dollars in property damage, hurricanes and storms also create volatility in financial markets, especially regarding energy prices. The evacuation of the platforms causes a disruption in the supply of oil and gas into the market, which then causes the price to increase (as mentioned before with the supply and demand relationships).
For example, when Hurricanes Katrina and Rita hit the United States in 2005, they both cause record spikes in the cost of gasoline and natural gas. This was as a result of the hurricanes hitting the oil-producing areas in the Gulf of Mexico.
That being said, I hope everyone was safe during the last couple of days and I hope your families and homes were not severely affected.
So now that we're aware of some of the potential effects hurricanes, storms and harsh weather countries on not only our energy sector but our economy and country, on the whole, I ask you:
Can our economy and country recover from a natural disaster?