Energy companies and port operators along the U.S. Gulf Coast took steps on Wednesday to resume operations after Tropical Storm Gordon shut more than 9 percent of the region’s oil and gas output.
Gordon never became a hurricane as forecast and weakened into a depression on Wednesday, just hours after making landfall near the Alabama-Mississippi border, helping to keep production and refining operations running unimpeded at most energy facilities in the Gulf and along the Louisiana coast.
Coast Guard inspectors flew over ports in Mississippi and Alabama to evaluate the facilities, which remained closed on Wednesday morning to most traffic, Petty Officer 3rd Class Alexandria Preston said.
In New Orleans, pilots began moving cargo ships through the mouth of the Mississippi River after the storm, said Matt Gresham, a spokesman for the Port of New Orleans.
“We had no impacts from the storm and operations resumed as normal this morning,” said Gresham.
The lock connecting the Mississippi River to the intracoastal waterway that stretches to Texas and Florida was opened and pilots began escorting ships out of the area, he said.
U.S. crude futures prices slipped more than 1 percent as Gulf production constraints appeared temporary and global trade disputes came into the forefront. U.S. crude futures CLc1 were off $1 at $68.85 per barrel in afternoon trade.
In all, company shut-ins lopped 315,992 barrels of oil and nearly 500 million cubic feet of natural gas from Gulf output in the last two days, according to Wednesday’s estimate by the U.S. Bureau of Safety and Environmental Enforcement.
The bureau, which regulates offshore drilling, said 9.4 percent of oil production and 10.4 percent of natural gas output was halted by the storm’s path through the U.S. Gulf of Mexico. Workers were evacuated from 48 production platforms, it said in an updated statement on Wednesday.
Offshore oil production accounts for 17 percent of total U.S. oil production and 5 percent of the nation’s natural gas production.
Companies including Exxon Mobil Corp, Chevron Corp, Talos Energy Inc and Anadarko Petroleum had evacuated offshore platforms ahead of the storm.
By Wednesday afternoon, Chevron said it has begun to restaff and restore production at its Petronius platform.
Anadarko also said it plans to begin moving workers back to two offshore sites and will restart production as quickly as possible.
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Headline crude prices for the week beginning 11 March 2019 – Brent: US$66/b; WTI: US$56/b
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In 2017, Norway’s Government Pension Fund Global – also known as the Oil Fund – proposed a complete divestment of oil and gas shares from its massive portfolio. Last week, the Norwegian government partially approved that request, allowing the Fund to exclude 134 upstream companies from the wealth fund. Players like Anadarko Petroleum, Chesapeake Energy, CNOOC, Premier Oil, Soco International and Tullow Oil will now no longer receive any investment from the Fund. That might seem like an inconsequential move, but it isn’t. With over US$1 trillion in assets – the Fund is the largest sovereign wealth fund in the world – it is a major market-shifting move.
Estimates suggest that the government directive will require the Oil Fund to sell some US$7.5 billion in stocks over an undefined period. Shares in the affected companies plunged after the announcement. The reaction is understandable. The Oil Fund holds over 1.3% of all global stocks and shares, including 2.3% of all European stocks. It holds stakes as large as of 2.4% of Royal Dutch Shell and 2.3% of BP, and has long been seen as a major investor and stabilising force in the energy sector.
It is this impression that the Fund is trying to change. Established in 1990 to invest surplus revenues of the booming Norwegian petroleum sector, prudent management has seen its value grow to some US$200,000 per Norwegian citizen today. Its value exceeds all other sovereign wealth funds, including those of China and Singapore. Energy shares – specifically oil and gas firms – have long been a major target for investment due to high returns and bumper dividends. But in 2017, the Fund recommended phasing out oil exploration from its ‘investment universe’. At the time, this was interpreted as yielding to pressure from environmental lobbies, but the Fund has made it clear that the move is for economic reasons.
Put simply, the Fund wants to move away from ‘putting all its eggs in one basket’. Income from Norway’s vast upstream industry – it is the largest producing country in Western Europe – funds the country’s welfare state and pays into the Fund. It has ethical standards – avoiding, for example, investment in tobacco firms – but has concluded that devoting a significant amount of its assets to oil and gas savings presents a double risk. During the good times, when crude prices are high and energy stocks booming, it is a boon. But during a downturn or a crash, it is a major risk. With typical Scandinavian restraint and prudence, the Fund has decided that it is best to minimise that risk by pouring its money into areas that run counter-cyclical to the energy industry.
However, the retreat is just partial. Exempt from the divestment will be oil and gas firms with significant renewable energy divisions – which include supermajors like Shell, BP and Total. This is touted as allowing the Fund to ride the crest of the renewable energy wave, but also manages to neatly fit into the image that Norway wants to project: balancing a major industry with being a responsible environmental steward. It’s the same reason why Equinor – in which the Fund holds a 67% stake – changed its name from Statoil, to project a broader spectrum of business away from oil into emerging energies like wind and solar. Because, as the Fund’s objective states, one day the oil will run out. But its value will carry on for future generations.
The Norway Oil Fund in a Nutshell