After a quiet start to the hurricane season in the Atlantic Ocean, supply chain risk managers are now on high alert as a tropical storm system in the Gulf of Mexico prepares to potentially develop into Hurricane Barry over the coming weekend, making it the first Atlantic hurricane of the season. The storm is likely to produce strong winds and a significant amount of rainfall that may cause widespread flooding and related damages from Houston, Texas to Mobile, Alabama. As of this writing on July 11, petrochemical companies including Shell and Chevron have started to shut down their rigs in the Gulf of Mexico while the key container port of Mobile has started to enact ‘tropical storm preparation’ status.
Significant flooding has already been reported in New Orleans as the passing storm caused heavy rainfall and flooded streets in the city center. According to forecasts, there is a high probability that the Mississippi River in the New Orleans area will crest over the average levee height of 20 feet (6 meters) on July 13. Some areas in the state have thus already issued evacuation orders for residents and a Hurricane Watch is in effect from the mouth of the Mississippi River to Cameron near Lake Charles.
Onshore and offshore petrochemical operations at risk
The storm system is expected to first develop into a tropical storm on July 11 before intensifying into a Category 1 hurricane on July 12. Current forecasts expect the hurricane to make landfall near the Louisiana-Texas border, an area that is home to petrochemical facilities around Lake Charles and Port Arthur. The latter hosts the largest refinery in the US by capacity which is run by Motiva Enterprises, a subsidiary of Saudi Aramco. Several petrochemical companies such as BASF, Huntsman, Phillips 66, and Lucite International are located in the area and produce building blocks for downstream manufacturing industries such as automotive and engineering. Out in the Gulf of Mexico, oil and gas companies have started to enact precautions, shutting down production and evacuating staff. About 32 percent of crude oil production and 18 percent of gas production have already been taken offline in the Gulf of Mexico.
Petrochemical facilities and logistics hubs along the Gulf Coast in Texas and Louisiana; Source: Resilience360
Container ports of New Orleans, Mobile may shut down
Tropical Storm Barry may also disrupt port operations, even before making landfall. APM Terminals in the Port of Mobile advised customers on July 10 that it has been closely watching the storm and has started to activate ‘tropical storm preparation’ status, indicating that winds above 39 mph (62 kph) are expected within 72 hours. Further ports in the storm’s wider path are the Port of New Orleans and the Port of Port Arthur, together with its ship channel which connects the petrochemical industry to the Gulf of Mexico.
Outlook and recommendations
As the path and intensity of tropical storms are difficult to predict, customers are advised keep abreast of the latest developments and adjust contingency plans for logistics or manufacturing operations accordingly. As part of a proactive approach, identifying key suppliers in the projected path of the storm and stocking up essential materials can help companies react faster to disasters and avoid any production outages.
In case of extended port closures due to infrastructure damages and flooded port areas, customers can expect longer shipping times in the coming week as shipping lines will likely omit port calls and divert vessels. This is likely to cause berth and yard congestion and delay cargo into or out of New Orleans and Mobile for several days. Customers are advised to monitor further developments on Resilience360.