Harvey Wreaks Havoc on Houston, Petrochemical Industry

By mid-day Sunday, Aug. 27, nearly 20 inches of rainfall had been dumped by tropical storm Harvey as its movement was slowing to a crawl 35 miles west-northwest of Victoria, Texas. Moreover, Harvey was expected to produce additional rain accumulations of 15 to 25 inches through next Friday, Sept. 1, and isolated maximum amounts of 50 inches. Already, 70,000 customers of Center Point Energy were reported to have no electicity.

Courtesy of PetroChemWire (PCW), here is a look at the closings of ports, Gulf Coast chemical and recycling plant shutdowns, and refinery shutdowns/curtailments.

On Friday, August 25, before the heavy rains came, IHS Markit offered commentary on the potential impact of Hurricane Harvey:

Impact on Refineries, Chemical Facilities, Dave Witte, Senior Vice President, Oil, Midstream, Downstream & Chemicals:

The rain is the differentiator with this storm. It is so slow moving with the rotation remaining over the USGC to refuel and draw in moisture. Estimates are between 20-40” in just 3-4 days; these are record numbers.

Widespread flooding in Houston is expected, which could impact refineries and chemical facilities and result in power outages that could last a week. More importantly, the supply chain will be impacted, as logistics in and out of Houston by rail, truck and the Port of Houston will be affected as will the ability of the workforce to recover and run these facilities.

Last years’ floods in Baton Rouge could serve as a proxy but in a much more populous area and larger concentration of the energy and chemical industry.

Impact on U.S. Economy, Patrick Newport, Executive Director, U.S. Economics:

At this writing, Hurricane Harvey is roaring towards the Texas Coast, a category 3 storm expected to strengthen into the strongest storm to hit the US mainland in over 10 years. Should it stall over parts of Texas, as weather forecasters now expect, the storm could turn into one of the most destructive storms ever.

Its impact on third quarter economic growth, though, is not likely to be significant for two reasons. First, the storm will stifle economic activity in only two states, Texas and Louisiana, over a short period of time. Second, GDP, the yardstick used to measure growth, measures production, not destruction. Hurricanes discourage some types of production—people cannot work during the storm and in its aftermath, for example. But homes will need to be rebuilt or repaired after the storm—this will add to GDP.

The impact of the storm on third quarter US GDP growth will be minimal.

Impact on Texas Economy, Karl Kuykendall, Manager, US Regional Economics:

The worst of the hurricane is projected to hit the Corpus Christi and Victoria metropolitan statistical areas (MSAs), which combine for 2% of Texas GDP. Heavy rain and flooding risks span into portions of the Houston, San Antonio, and Austin MSAs where potential disruptions are greater. Houston accounts for 31% of Texas GDP, San Antonio 7%, and Austin 8%.