FILE PHOTO: The Shell Norco manufacturing facility is flooded after Hurricane Ida pummeled Norco, Louisiana, U.S., Aug. 30, 2021. REUTERS/Devika Krishna Kumar/File Photo

Shell Declares Force Majeure on Gulf Deliveries After Ida

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September 9, 2021

By Devika Krishna Kumar and Florence Tan

Sept 9 (Reuters) – Royal Dutch Shell Plc, one of the largest operators in the Gulf of Mexico, on Thursday declared force majeure on some oil deliveries due to damage from Hurricane Ida, which has crippled U.S. offshore oil production.

More than three-quarters of the U.S. Gulf of Mexico’s offshore oil output remained shut following Ida. Crude buyers said the full restart of production remained unclear due to extensive damage to various facilities. The hurricane was one of the most devastating for offshore producers since back-to-back storms in 2005 cut output for months.

Shell has a majority stake in the Mars offshore field in the Gulf of Mexico, where it was still assessing damage that has kept production offline for nearly two weeks.

“Crews are working to complete a comprehensive assessment of the damage and to the degree possible, assess how long production from our Mars corridor assets will be impacted,” company spokesperson Curtis Smith said in a statement.

Force majeure is a legal provision used by companies during unforeseen events such as hurricanes when they cannot meet contractual obligations.

Shell is one of the largest U.S. Gulf producers, with output of approximately 150 million barrels of oil equivalent per year. U.S. offshore crude production totaled more than 600 million barrels in 2020, according to U.S. Energy Department figures.

Asian buyers including China and South Korea have stepped up purchases of Gulf-produced crude in recent months, and now face lengthy delays before shipments arrive as oil companies assess damage from Ida.

China’s Unipec, the trading arm of Asia’s top oil refiner Sinopec, is expecting late September and early October deliveries of Mars crude, the Gulf sour benchmark, to be disrupted, trade sources said.

The Louisiana Offshore Oil Port, the largest deepwater export terminal for loading crude oil, also remained offline as of Thursday. U.S. oil exports sank in the most recent week, falling to 2.3 million barrels per day, a fall of 700,000 bpd, as a result of the shut ins.

Shell has started to send personnel to its Appomattox platform in the gulf while damage assessments are continuing at its West Delta-143 (WD-143) offshore facilities.

Those facilities serve as the transfer station for all production from Shell’s assets in the Mars corridor in the Gulf of Mexico to onshore crude and natural gas terminals. (Reporting by Devika Krishna Kumar in New York, Ron Bousso in London and Florence Tan in Singapore; Editing by David Gaffen, Chizu Nomiyama, David Evans and David Gregorio)

(c) Copyright Thomson Reuters 2021.

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