Gas plant explosion in Mississippi could significantly impact oil and gas supply

Image: Facebook/Briana Brown

At least two oil and natural gas platforms in the Gulf of Mexico have halted production and a gas pipeline was shut after an explosion at an Enterprise Products Partners LP plant that processes fuel in the region.

Enterprise shut the gas-processing plant in Pascagoula, Mississippi, after a fire, which was eventually extinguished around 5 p.m. local time Tuesday, company spokesman Rick Rainey said by e-mail. The Destin pipeline, a joint venture of BP Plc and Enbridge Inc. that sends gas to Enterprise’s plant from platforms in the Gulf of Mexico, said it was forced to halt service as the Pascagoula complex remains down for “a full damage assessment.” LLOG Exploration shut its Delta House platform. Murphy Oil Corp. closed its Thunder Hawk one.

The blast threatens to raise oil and gas prices by curbing supplies from the Gulf of Mexico, which last year accounted for 16 percent of the nation’s crude output and almost 5 percent of gas based on U.S. government data. While the Gulf’s share of America’s energy supply diminished amid the shale boom, the government forecasts record offshore oil output this year and next as new production comes online.

Production Cuts

The pipeline disruption has the potential to “significantly” curtail Gulf of Mexico crude supply should offshore platforms fail to find another place to send their gas, Dominic Haywood, an analyst at Energy Aspects Ltd., said in a note Tuesday. The 10 platforms produced a combined 270,000 barrels a day in February, he said. BP Plc’s Na Kika and Thunder Horse platforms are particularly at risk because they lack alternatives for gas.

Thunder Horse crude’s discount to West Texas Intermediate, the U.S. benchmark, narrowed 35 cents to $1.20 a barrel Tuesday, according to data compiled by Bloomberg. Gas futures on the New York Mercantile Exchange rose as much as 8 percent to $2.93 per million British thermal units, the highest since August.

Destin Pipeline said in an e-mailed notice Tuesday that it was seeking to offer an alternative route for shippers using a system known as VKGS starting in the later half of Wednesday. The temporary route may only last for two to five days as liquids that can’t be delivered to VKGS fill up Destin’s main line, the company said.

Production Platforms

LLOG Exploration shut its Delta House platform that is connected to Destin, spokesman Rick Fowler said in an e-mail. Murphy Oil shut the Thunder Hawk platform that normally sends gas to Pascagoula, spokeswoman Kelly Whitley said, also by e-mail. It’s looking for an alternative processor and expects “minimal disruptions” to operations, she said. BP didn’t immediately respond to requests for comment.

The Pascagoula plant can process 1.5 billion cubic feet of natural gas a day but was averaging about 400 million cubic feet a day, Enterprise said in a statement.

Officials received reports of two explosions at the plant, Earl Etheridge, director of emergency services for Jackson County, Mississippi, said Tuesday by phone. Firefighters were probably going to spray water on equipment to cool it for the rest of the day, he said.

© 2016 Bloomberg L.P

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