In 2009, there were just three Atlantic storms that earned the hurricane monikers — Bill, Fred, and Ida. None of these storms made landfall in the US as hurricanes. The predictions from Colorado State University researchers are not so sanguine for 2010.

They forecast eight hurricanes in the Atlantic Basin in 2010, four of which could be a major storm (Category 3 or higher). There is a 58% chance that one of the major storms will enter the Gulf of Mexico, and the probability that one of those will hit the Gulf coast from the Florida Panhandle to Brownsville, Texas is 44%. For the past hundred years, that probability has been 30%, so this year’s chances are way up.

Last year’s mild hurricane season is attributed to “moderate” El Nino effects in the Atlantic that are expected to be “neutral” this year. That change, coupled with a “strong anomalous warming of the tropical Atlantic”, lead to this year’s forecasted increase in storms.

The Gulf coast of the US, from the Florida Panhandle to Brownsville, is home to more than 3,500 active platforms, 98% of which work in less than 200 feet of water. The density of oil and gas rigs is highest off the Louisiana coast, and, in addition to the platforms, there are gathering systems and pipelines spider-webbed throughout.

The largest semi-submersible platform in the world, Thunder Horse, operated and 75%-owned by BP plc (NYSE:BP) and 25%-owned by Exxon Mobil Corp. (NYSE:XOM), is located 150 miles southeast of New Orleans in more than 6,000 feet of water. The platform produces about 250,000 b/d of oil and 200 million cubic feet per day of natural gas.

In 2005, Hurricane Dennis hit this platform and a 6-inch water pipe in the ballast system failed, causing the platform to list severely.

The platform was righted about a week later, and was struck full-on by Hurricane Katrina six weeks later. Katrina did no damage to the platform. Thunder Horse was not in operation at the time, but its start-up was delayed until June 2008, partly as a result of storm damage.

Remarkably, given the miles of pipeline and number of production platforms and the 1.3 million b/d produced in the Gulf, only a relatively tiny amount of oil has been spilled as a result of these storms.

Storms are even a greater threat to US refineries, about half of which are located in the Gulf coast area. Valero Corp. (NYSE:VLO), Marathon Oil Corp. (NYSE:MRO), ConocoPhillips Corp. (NYSE:COP), and Motiva, a 50-50 joint venture between Royal Dutch Shell plc (NYSE:RDSA) and a division of Saudi Aramco, all own or operate refineries in along the Gulf coast of Texas and Louisiana. Capacity at Texas refineries exceeds 4.7 million b/d, and capacity of Louisiana refineries total about 3 million b/d.

When refineries are shut down to prevent in advance of a hurricane, it can take up to two weeks to get the plant up and running again. Following Hurricanes Ike in 2008, which shut down 20% of the US refinery capacity, gasoline shortages occurred throughout the southeast US.

The most vulnerable part of the oil & gas infrastructure in the Gulf is the pipeline system. There are more than 33,000 miles of pipelines that gather and transport crude oil and natural gas to onshore processing facilities. Katrina and Rita combined to shut-in 64 pipelines that were 20-inches or larger in diameter, and more than 450 pipelines were damaged by the two storms. It takes weeks or months to inspect and repair that system, virtually all of which is underwater.

The production platforms themselves have held up well in the big storms of recent years. Katrina and Rita together only destroyed one platform, and it was one built on an old design.

Following the storms of 2005, the offshore industry began pre-placement of repair equipment that is intended to get repairs started sooner and production ramped up quickly. That helped somewhat during the 2008 hurricane season, but the problem of course is that it’s impossible to have the right equipment everywhere.

The predicted 2010 hurricane season which runs from June 1 through November 30 could rival the 2005 season, if the Colorado State forecasters are correct. If that forecast turns out to be correct, the fragile economic recovery could be knocked down again, and oil prices, already rising steadily, could take off even more.

Paul Ausick

Here is a photo of Buffalo Bayou taken from the overpass of Sheperd between Memorial Drive and Allen Parkway.  This 2X zoom photo faces downtown with a new high rise development there and downtown’s buildings are on the right.  Normally this is a small Bayou unless we get heavy rains.  Today it is large enough to be called Buffalo Lake.  There won’t be any joggers or people riding bikes down there for quite a bit of time.

This is a second photo of the same, just a bit more centered.  Again from the overpass of Sheperd between Memorial Drive and Allen Parkway facing downtown.

This Buffalo Bayou photo should show you the context of just how high it is.  This one faces away from Downtown Houston on Waugh Drive facing west to Sheperd.  It truly is Buffalo Lake today.

This one pretty much says it all. "IKE B GONE!"

This was taken right by West University.  Those aren’t branches next to the house.  Those are upturned tree roots.

If you hate oil companies or if you feel gouged, this one won’t exactly break your heart.  They’ll probably miss a couple days of high gasoline prices to sell here.  That is a Shell gas station and convenience store located on Richmond between Sheperd and Montrose.

River Oaks, neighborhood of the wealthy….  River Oaks has bigger lots than most neighborhoods and because it is an older area it has very large and very old trees.  Many trees didn’t make it and this will give you an idea for the size of it.

Another big tree to show the size, with this one also in River Oaks.  Here is the real sad thing about what happened in River Oaks.  These images only capture a fraction of the destruction that occurred to the neighborhood.  Perhaps the only good news is that most homes were not seriously damaged unless it was from a tree falling into them.

Cleveland Park at Memorial and Jackson Hill.  This photo is of another fallen tree in a park right by my house between Memorial Park and Downtown Houston.  The size would not easily stand out except for one thing.  That metal fence it to a tennis court.  That fence is also about 14 feet high.

Here is a stop sign over in Houston’s Heights section.  They are immune from floods for the most part, but winds still took this monster tree down.  We’d tell you which intersection that was, except there was no intersection market anywhere.  That blew away too.

Now here is the funny part of this entire situation.  Actually, it isn’t funny at all but important for the infrastructure.  These are only a handful of the pictures we took and most off of the drive-around smartphone camera pictures just don’t show you the depth or breadth of things.  I have seen total wipe out photos of West Beach in Galveston.  But as far as Houston is concerned, the city is going to recover.  The biggest damage was to the electric system and it is very likely that there may be people without power even in 7 to 10 days.  Most the infrastructure itself "looks" intact, although certain office buildings like the JPMorgan tower may be missing more windows than it isn’t and that is going to take weeks to properly fix.  There are many broken windows and there are many buildings we saw that have tree damage or other issues.  The Houston water supply is now out in most areas or has no pressure as a major water pump station was damaged, leaving questions to whether or not it is safe to drink the water or to use for any cleaning. Telephone landlines and cable lines are down in many places and some traffic lights are non-operational or just destroyed.  But at least the Inner Loop had far less damage than you might have expected.  The major building projects that were not completed weren’t destroyed and for the most part looked unscathed.

We may follow up with some more photos tomorrow, but we like to focus primarily on stocks and economic issues affecting you and your money. Going through this hurricane was not an easy task even if we did have it far easier than many others.

JON C. OGG
September 13, 2008