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Fwd: GREENWIRE Article: Industry sees significant and protracted storm impact

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  • Pat Neuman
    ... wrote: Industry sees significant and protracted storm impact GREENWIRE OIL AND GAS
    Message 1 of 1 , Sep 1, 2005
      --- In fuelcell-energy@yahoogroups.com, Tim Jones <deforest@a...>
      Industry sees 'significant and protracted' storm impact
      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
      subsurface pipelines.

      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
      gas daily.

      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
      the storm.

      "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,
      company said.

      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
      --- End forwarded message ---
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