--- In firstname.lastname@example.org
, Tim Jones <deforest@a...>
Industry sees 'significant and protracted' storm impact
OIL AND GAS
Thursday, September 1, 2005 -- UPDATED 3:35 PM
Daniel Cusick and Ben Geman, Greenwire reporters
Confirming the offshore oil and gas industry's worst fears, the
Guard reported yesterday the loss during Hurricane Katrina of at
least 20 platforms or drilling rigs from production sites in the
of Mexico -- a fact that shook energy markets already reeling from
supply and distribution problems.
"They just aren't there, so that means they are either off station
they are underwater," said Petty Officer Bobby Nash, a Coast Guard
spokesman in Alexandria, La. The tally of lost platforms and rigs is
based on fly-overs by the Navy, Coast Guard reserve, commercial
pilots and offshore firms.
Officials this morning said reconnaissance aircraft would continue
fly over the eastern and central gulf to assess damage to oil and
infrastructure, which another Coast Guard spokesman described as
Meanwhile, the Minerals Management Service reported that 92 percent
of the Gulf of Mexico's 1.5 million barrels of daily oil output
remained shut in as of yesterday as crews continued to re-man
platforms and inventory damage.
In addition to platforms that sank or simply floated away,
potentially hundreds of structures could be rendered inoperable due
to topside damage, structural instability, or the severing of
The missing and damaged platforms are but one element of broader
infrastructure damage and power outages that together make the storm
the greatest challenge the sector has faced, American Petroleum
Institute officials said at a briefing yesterday. A key concern,
officials said, is the shutdown of refineries.
Worries about shuttered refineries fueled a fourth consecutive day
surging gasoline futures on the New York Mercantile Exchange. Prices
have risen 25 percent this week, with unleaded gas for October
delivery trading this morning at $2.42 per gallon, an increase of
more than 16 cents. Gas is now selling at well above $3 a gallon at
the pump in most parts of the country.
Traders were less worried about lost production platforms in the
gulf. Oil prices fell today for the second day in a row, with Nymex
crude futures down 39 cents to $68.55 a barrel.
BP reports seven lost platforms
Of the 20 lost platforms, seven belonged to BP, company spokeswoman
Ayana McIntosh-Lee said. Virtually all of BP's lost platforms were
the shallow gulf just east of Grand Isle, La., and only five were
producing oil and gas. Two other BP platforms were found be listing
after the storm.
McIntosh-Lee described the missing fixed-leg platforms as "toppled"
and not visible from the air. "Until we get crews out there and
divers in the water, we can't say exactly what happened," she said.
"We just know that when we conducted our overflights, they weren't
where they were supposed to be."
But even with the five lost production units, BP was breathing
after learning that all of its deepwater units, including the
Horse platform which was listing badly in July after Hurricane
Dennis, came through the storm with relatively little damage.
BP's deepwater production accounts for roughly 350,000 barrels per
day equivalent of oil, out of a total 400,000 bpd that the company
moves fromthe Gulf of Mexico.
The missing shallow-water platforms account for about 1,000 bpd of
land 2.4 million cubic feet of gas per day, she said. The listing
platforms produce about 1,050 bpd of oil and 5 million cubic feet of
Shell yesterday described its Mars oil and gas production platform,
one of the largest in the shallow gulf, as "significantly damaged."
Other Shell production sites with confirmed damage include West
143 and Cognac.
Other major gulf producers, including ExxonMobil and Chevron,
withheld information about damage until further assessments could be
"It is becoming increasingly evident that that the impact of this
devastating storm on oil and natural gas operations will be
significant and protracted," said API President Red Cavaney.
'Lasting impact' on refineries and distribution system?
While news about the condition of offshore facilities was bleak, the
industry's onshore operations began to see some recovery. Shell said
its Geismar Chemical plant in Louisiana started two units, while
power had been restored to one of two refineries shut down by the
storm. The Motiva Convent Refinery, with a capacity of 235,000
barrels per day of production, was operating, officials said, while
the 227,000-bpd Motiva refinery remained closed.
Valero's St. Charles refinery continued without power yesterday as
workers pumped a remaining 18 inches water from the facility. While
Valero had not requested oil from the Strategic Petroleum Reserve,
said the release of SPR crude, combined with an easing of U.S. EPA
standards for air emissions (See related story), would aid in
The storm has knocked roughly 11 percent of the nation's refining
capacity offline, API economist John Felmy said, with another eight
percent running at reduced capacity. Refiners with reduced runs
include ExxonMobil's 493,500 barrel-per-day refinery in Baton Rouge,
according to a
of Energy update. The storm shut down nine refineries and several
others are affected by crude supply disruptions.
"Unlike 2004's Hurricane Ivan, which affected oil production
facilities and had a lasting impact on crude oil production in the
Gulf of Mexico, it appears that Hurricane Katrina may have a more
lasting impact on refinery production and the distribution system,"
DOE's Energy Information Administration said yesterday in a report
"However, that the news is varied, with some refineries likely able
to restart their operations within the next 1 to 2 weeks, while
others will likely be down for a more extended period, possibly
several months," EIA added.
Refineries have struggled with flooding and power outages from the
massive storm, and cannot simply re-start them by flipping a switch.
There was one bit of encouraging news today: Marathon Oil announced
its 245,000-barrel a day refinery in Garyville, La., could resume
fuel production in three to five days.
Another key piece of infrastructure, the Louisiana Offshore Oil
Terminal sustained no major structural damage from Katrina, and the
primary pipeline used to carry oil from the terminal to onshore
refineries was re-powered yesterday, said Tommy Martinez, executive
director of the Louisiana Offshore Terminal Authority. A second
pipeline that routes oil between the LOOP facility and underground
salt domes for storage remains without power.
"We should be back on line when we get some energy to that line,"
Martinez said this morning. "I pray for the day, but hopefully it
will be tomorrow."
Shell's Capline, a key crude oil pipeline in the region, has resumed
operations at a reduced rate, the company said yesterday. "This is
the most significant impact a storm has ever had on a pipeline
system," said a spokesman for the Association of Oil Pipelines.
The Colonial Pipeline, a main artery for refined products, said
yesterday it is restarting two main lines to provide up to 35
of capacity, and will continue installing distributed generation
equipment. But the power outages will continue hindering the
-- interim measures will allow only up to 60 percent of capacity,
Industry, lawmaker call for wider access
Storm damage prompted calls from industry and Rep. Joe Barton
(R-Texas) for production from restricted areas (see related story).
"If we ever needed a lesson in understating our energy policy
activity is not complete, we need only look at the circumstances
here," Cavaney said in an interview yesterday. "Shouldn't we maybe
look at diversifying supply here in the continental U.S.?"
He said it is important to look at wider outer continental shelf
access, citing interest by Virginia officials in winning authority
"opt-out" of the federal offshore leasing bans. He also cited the
need to open the Arctic National Wildlife Refuge.
Cavaney said in the briefing he was pleased with the decision to
release oil from the SPR. He also praised other federal steps,
EPA decision to waive certain environmental standards for gasoline
and diesel. EPA yesterday called the waivers needed to "ensure that
fuel is available throughout the country to address public health
issues and emergency vehicle supply needs."
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Posted by Tim
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