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Musings: Oil Industry On Alert - Active Hurricane Season Forecast

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Musings: Oil Industry On Alert - Active Hurricane Season Forecast

This opinion piece presents the opinions of the author.
It does not necessarily reflect the views of Rigzone.

Earlier this month, the tropical storm forecasting team of Philip J. Klotzbach and William M. Gray, professors in the Department of Atmospheric Science at Colorado State University (CSU), released their first forecast for the upcoming hurricane season. They are calling for the season to experience "enhanced activity compared with the 1981-2010 climatology," meaning it will be an active storm season. Furthermore, the forecasters "anticipate an above-average probability for major hurricanes making landfall along the United States coastline and in the Caribbean." In other words, be prepared.

Based on the work the tropical storm forecasting team has done in conjunction with the GeoGraphics Laboratory at Bridgewater State University in Massachusetts, the model predicts that there is a 72% probability of a major hurricane making landfall along the entire U.S. coastline compared to a 52% average for the past century. For the U.S. East Coast including the Florida Peninsula, the probability of landfall is 48% versus a 31% historic record. For the Gulf Coast from the Florida Peninsula to Brownsville, Texas, the probability is 47% compared to a 30% record. The model also estimates that the Caribbean has a 61% probability versus 42% historically of experiencing a major hurricane landfall. These higher than historic probabilities will have the U.S. petroleum industry on alert during the upcoming season although even with a very low probability it only takes one storm to create serious disruption and economic hardship.

The CSU forecasters are using a relatively new April forecasting model that employs four predictors they have found to have an above-average predictive value. This is the third year the forecasters have used this model, which is built on data from 1982-2010. The model incorporates the most recent and reliable data available, which the forecasters believe helps improve the model's predictive ability. They said these four predictors helped the model to correlate with the Net Tropical Cyclone Activity (NTC) at 0.79 when all years studied are included. A drop-one cross-validation analysis yields a correlation with the NTC of 0.68. This is a more realistic view of the skill the model will have in future years. The forecasters say that this model correctly predicted above- or below-average seasons in 22 out of 31 hindcast years, a 71% average. The model's predictions have had a smaller error than climatology in 19 of 31 years for a 61% average.
The predictors used in the model include the average sea surface temperature (SST) in the Atlantic basin in the January to March period, the sea level pressure (SLP) for March in the central Atlantic Basin and the February to March SLP in the Pacific Ocean region off South America, and the European Centre for Medium-Range Weather Forecast (ECMWF) of the SLP in the Pacific Ocean along the Equator.

Musings: Oil Industry On Alert - Active Hurricane Season Forecast

The CSU forecast calls for 18 named tropical storms during the season with nine hurricanes and four of them becoming intense (major) hurricanes, meaning they are storms in the intensity range of 3-4-5. They believe that 2013's activity will be similar to the 2011, 2010 and 2009 years with the exception of the number of intense hurricanes last year. This year's activity would also compare with 2008, but not as intense as 2005 when there were 26 named storms and seven intense ones and 2004 with 14 named storms and six intense hurricanes. The comparison of the April forecast with the most recent six years is displayed in Exhibit 14.

Musings: Oil Industry On Alert - Active Hurricane Season Forecast

The reason for the above-average forecast this season for tropical storms, hurricanes and intense hurricanes is because the meteorological projections call for the combination of an anomalously warm tropical Atlantic basin and a relatively low likelihood of the formation of an El Niño. To modify the forecast from the output of the model, the forecasters look to analog years. In selecting the analog years, the forecasters look for those years with similar meteorological conditions as projected for this season. None of the analog years had a significant El Niño during the peak of the hurricane season, which is the condition anticipated this year. The forecasters are anticipating that 2013 will have more activity than the average of the five analog years selected – 1915, 1952, 1966, 1996 and 2004.

Musings: Oil Industry On Alert - Active Hurricane Season Forecast

The next forecast update will be produced at the beginning of June and it will be interesting to see what modifications are made. The development of El Niño could alter the forecast meaningfully, but the likelihood is that this year will be more active – consistent with the more active tropical storm phase for the Atlantic basin. If the CSU forecast on landfall potential proves correct, the energy industry will need to be vigilant and is likely to have several episodes when offshore operations will need to be shut down and crews evacuated. That will mean the Gulf will produce less oil and gas this summer than potentially anticipated now by operators and forecasters. All of these possibilities need to be considered when making projections about how the domestic energy business will play out in 2013.

G. Allen Brooks works as the Managing Director at PPHB LP. Reprinted with permission of PPHB.

WHAT DO YOU THINK?

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