The Threats to the Oil and Gas Industry in the Gulf of Mexico

Threat intelligence company Intelligence Fusion explores three of the main operational threats to the Oil and Gas industry’s activity in the Gulf of Mexico.

Article by Vincent Fevrier | Intelligence Manager

The Gulf of Mexico is an ocean basin surrounded by the United States, Mexico, and Cuba, with connections to the Atlantic Ocean and the Caribbean Sea via the Florida Straits and the Yucatan Channel. The Gulf of Mexico is known for its importance in the oil and gas industry for its significant offshore production.

The U.S. Energy Information Administration has stated that oil production in the Gulf accounts of 15% of total U.S. crude oil production, while offshore natural gas production in the Gulf accounts for 5% of total U.S. dry production. Platforms are primarily located off the coasts of Texas, Louisiana and Mississippi, and supporting facilities are also located in coastal cities in those states.

Map depicting oil and gas platforms (brown dots) active in Federal Waters in the Gulf of Mexico, along with petroleum refineries (squares with barrels) and natural gas processing plants (squares with blue flame). [Source: U.S. Energy Information Administration]

While the United States is the largest oil and gas producer in the Gulf, Mexico also has significant assets and investment in deep water and shallow water drilling to help support its onshore drilling assets. In September 2021, President Andres Manuel Lopez Obrador raised the national oil and gas company’s (PEMEX) spending plan for 2022 to help boost oil production. The significant number of assets in the Gulf of Mexico and their associated onshore operations face several threats, often due to location and security situation in the nearby country.

Extreme Weather Events

One of the most significant threats faced by the oil and gas industry in the Gulf of Mexico is extreme weather events, most importantly, hurricanes. The Atlantic hurricane season starts in June and goes through November. Hurricanes are fuelled by a number of factors including sea surface temperatures, which can heavily be impacted by climate change.

Map of hazards in North America that Intelligence Fusion has recorded, minus incidents of disease relating to Covid-19. Incidents above were found using the extensive filtering options on the Intelligence Fusion platform, allowing you to search for hazards in North America, but excluding major and minor disease incident types. [Source: Intelligence Fusion Platform]

The 2020 hurricane season was record breaking, with 31 named storms, 14 hurricanes, 7 major hurricanes and 11 of the named storms striking the U.S. coastline. The season is estimated to have cost over USD 51 billion in damages. In 2021, forecasters expected a similar active season — with at the time of writing the 2021 season having 20 named storms, seven hurricanes and four major hurricanes. It is now tied for the third most active season in recorded history.

With thousands of oil and gas platforms located in the Gulf of Mexico, these platforms are often at risk due to their locations and the paths of hurricanes often striking the coasts of Texas, Louisiana, and Mississippi. Whilst platforms can resist significant wind speeds and high swells, precaution often leads oil and gas companies to shut down operations and evacuate personnel prior to significant hurricanes. The down time of the platform and the time it takes to restart operations post-hurricane costs companies significant amounts of money.

Paths of recent hurricanes in 2021 through the Gulf of Mexico. At least 2 hurricanes, Claudette and Ida went through the middle of the cluster of platforms south of Louisiana. [Source: US Energy Information Administration]

In August-September 2021, Hurricane Ida struck Louisiana after going through the Gulf of Mexico after having first come through northern South America and the Caribbean, and became the second-most damaging and intense hurricane in the state since Hurricane Katrina in 2005. Oil and gas production in the Gulf of Mexico was significantly impacted during the hurricane, with 288 platforms evacuated prior to the storm. Post-hurricane, the industry struggled to restart operations due to damage to onshore terminals and base sites, issues with bringing workers back offshore, and some damage on some platforms.

Map representing the National Risk Index which is calculated by the Federal Emergency Management Agency (FEMA). The index looks at the risk of a variety of hazards to each county. The risk in several counties like Harris and Jefferson counties in Texas, Orleans Parish in Louisiana, or Mobile and Jackson counties in Mississippi ranges from Relatively High to Very High. These same counties contain significant amounts of onshore oil and gas infrastructure. [Source: FEMA.gov]

Hurricanes such as Ida also showcase the threat to onshore infrastructure around the Gulf of Mexico. A downed transmission line in the Mississippi River due to Ida, led to limited access to four refineries west of New Orleans, while Port Fourchon, Louisiana, which is a logistics hub for the industry, was left without power and water due to damage. Without the vital onshore infrastructure, the output of offshore assets is significantly impacted. With climate change playing a role in stronger storms and longer periods of extreme weather, mitigating the risks and impacts of these events becomes costly for companies operating in the industry.

Maritime Criminality Off Mexico

The threat to oil and gas infrastructure in Mexico has been known for some time, particularly on land. Cartels have been involved in fuel trafficking and fuel theft via illegal pipeline taps for years, particularly in the states of central Mexico where there are a high number of pipelines and several refineries. The activities of criminal elements have been costly to the state-owned company PEMEX, and the activities have also cost the lives of both workers and law enforcement who have attempted to stop them.

The threat to offshore oil and gas platforms and assets, however, has been severely underreported by authorities and the company. While only a few dozen attacks have been reported, some reports suggest the number to be in the hundreds. A spate of robberies and attacks on oil assets in the Bay of Campeche in April 2020 led to the U.S. Maritime Administration to issue an alert days later about the maritime threat in the Bay. Months later, in June 2020, The U.S. State Department issued a warning about the threat posed by pirates for maritime vessels and oil installations in the southern Gulf of Mexico. In July 2021, the International Transport Workers Federation (ITF) in Mexico called for authorities to do more to stop criminal acts at sea, as well as demanding technology to be used to monitor ships and platforms.

For the time being, while attacks have involved firearms and gunfire at times, it appears that criminals have been content with only stealing personal belongings and equipment from offshore supply ships, drilling and production platforms, and other assets rather than kidnapping crew for ransom like we’ve seen in other maritime regions of the world. We’ve also seen the theft of oil from infrastructure offshore in recent times. With the Covid-19 pandemic having had a significant impact economically, it is possible that attacks will increase again in the near future, especially as some have reported the re-deployment of some security assets to urban centres. Additionally, the attacks on oil infrastructure in the Bay of Campeche have led some to believe that there are also insider threats, and that individuals within PEMEX or former PEMEX employees have helped criminal elements conduct these attacks. This comes from the suspects seeming to know how long it takes for the authorities to respond to distress calls, and for how quickly the suspects are able to dismantle some of the equipment onboard platforms.

Selection of incidents targeting the oil and gas industry in the Bay of Campeche. Incidents primarily occur off the coast of the states of Campeche, Tabasco, and Veracruz. Incident are shown using the ‘Draw Area’ function on the Intelligence Fusion platform, allowing you to draw polygons of any shape and size to pull out incidents in certain locations. [Source: Intelligence Fusion Platform]

While the threat has primarily impacted PEMEX and some multinational contractors, Mexico’s ambitions to boost production to stem the loses of recent years may see an increase in foreign companies operating in and around Mexico’s coast, which in turn would lead to greater scrutiny on the threat of maritime criminality. The United States may also look to stem the problem before it reaches U.S. waters.

Reputational and Other Threats

On the 20th of April 2010, the Deepwater Horizon oil rig, belonging to BP plc., exploded off the coast of Louisiana, leading to 11 deaths, 17 injuries, and an 87-day oil spill which led to approximately 134 million gallons of oil spilt in the Gulf of Mexico. The environmental impact was significant, as well as the economic impact to local industries relying on the Gulf of Mexico. The incident also led to the largest corporate settlement in U.S. history. The incident came at great cost financially, but also reputationally for the company, impacting the company’s ability to gain future projects in the Gulf of Mexico.

The environmental impacts of the oil and gas industry lead to great scrutiny from environmental organisations and other social justice groups and can lead to significant levels of activism targeting companies. Protests outside headquarters, shareholders meetings, financial institutions funding the projects, and local community meetings have previously been reported, but some groups also take direct action to attempt to stop activities by companies.

In 2019, 12 activists from Greenpeace were arrested after they used ropes to dangle from the Fred Hartman Bridge, blocking the Houston Ship Channel and stopping tanker ship traffic to and from five major oil refineries and chemical and oil export terminals for 18 hours. Recent years have shown environmental activists becoming more active, and with the use of social media, infractions and the impacts of oil and gas companies can be shared to a wider audience and amplified, in turn damaging the reputation of companies.

Map showcasing protest activity by environmental activists across the world, recorded by Intelligence Fusion. North America has had protests recorded due to specific oil and gas projects like the Line 3 project in Minnesota or the Bayou Bridge Pipeline project in Louisiana, including both direct action activities targeting the construction works, as well as protests at financial institutions funding these projects. [Source: Intelligence Fusion Platform]

Additionally, a lack of timely action by governments in responding to the climate crisis has the potential to lead groups to take more direct action in stopping oil and gas activities. Extinction Rebellion protested in several European countries over August-September 2021, which included some actions directly blocking oil refinery access from both land and waterways. These types of activities could increase around the Gulf of Mexico, leading to delays and increased operational costs to companies in the region.

With ever-changing threats, it is important for oil and gas companies to be up-to-date on the current and future challenges they may be facing in order to mitigate those risks. As a threat intelligence solution, Intelligence Fusion provides timely, accurate, geolocated and actionable threat data which allows you to understand the criminal, environmental, political, and social trends in the country or countries you operate in. Our platform is fully customisable in order to meet the needs of the modern operation centre and your business, and we can even build out an entirely bespoke platform for your company thanks to our in-house development team. Through our methodology, we aim to fully understand your operations in order to gather the incidents tailored to your intelligence needs. This allows you to better protect your people, assets and reputation.

If you’re interested in learning more or seeing the platform in action, click here to arrange a demo with a member of our team.

Vincent Fevrier

Intelligence Manager

Originally published at https://www.intelligencefusion.co.uk.