Oil industry tallies up damage from Gustav

September 2, 2008 10:33:10 AM PDT
Oil companies, rig and pipeline owners and refiners spread out across the Gulf Coast to look for damage from Hurricane Gustav on Tuesday, and some were already putting equipment and people back in place to resume operations. Early indications were that Gustav caused little damage to onshore and offshore facilities, though the full impact likely won't be known for a couple of days.

"Preliminarily, we don't know of any major damages at this time," John Rodi, deputy regional director of the U.S. Minerals Management Service, said Tuesday.

The approach of Gustav had been one of the last remaining pillars of support for oil prices, which tumbled Tuesday by more than $6 a barrel on the New York Mercantile Exchange, a decline of 26 percent from record highs of more than $147 in July.

Many companies were flying over offshore sites in airplanes Tuesday morning, checking for any obvious damage. One of the next steps will be getting people aboard the offshore facilities for more detailed inspections, including checks of subsea equipment.

Rodi, whose agency oversees offshore activity, said it was too early to say when production might resume, though some companies already were gearing up Tuesday. One of the tasks is getting the thousands of offshore workers evacuated last week back to their positions.

In a note to clients Tuesday morning, analysts at Tudor Pickering Holt & Co. said absent any serious damage, production should be back to near full capacity by week's end at the latest. It also said pipelines in the region, which were mangled during hurricanes Katrina and Rita, aren't "going to be nearly as messy as 2005."

One major unknown remained Tuesday - the fate of the Louisiana Offshore Oil Port, which shut down over the weekend.

Gustav appeared to roll directly over the facility, which handles about 12 percent of the nation's crude imports and is tied by pipeline to about half the nation's refining capacity, much of it along the Mississippi River from the New Orleans area north to Baton Rouge.

Any prolonged closure of LOOP, as it's called, could severely disrupt crude imports and their shipment to refineries. LOOP is located about 18 miles south of Grand Isle, La.

Technicians were expected to assess any damage Tuesday, but managers said it was premature to comment.

ConocoPhillips said remote monitoring of its Magnolia production platform about 165 miles off the Louisiana coast indicated it had not sustained significant damage.

"As weather conditions permit, we'll conduct a fly-over of the platform and south Louisiana assets to further assess their conditions," ConocoPhillips said in a statement.

The Houston-based oil giant also has two refineries in Louisiana - one near New Orleans, one near Lake Charles - and they both remained shut down.

Royal Dutch Shell said it would send a small number of staff Tuesday morning to installations in the Gulf that were out of the hurricane's path, though it noted it could take three to five days to resume full production in the Gulf.

In the days preceding Gustav, oil companies shut down virtually all oil and natural gas production in the Gulf, and the storm's threat halted about 15 percent of the nation's refining capacity based in the region.

The U.S. Gulf Coast is home to nearly half the nation's refining capacity, while offshore, the Gulf accounts for about 25 percent of domestic oil production and 15 percent of natural gas output.

Like ConocoPhillips, Anadarko Petroleum Corp., the largest independent deep-water producer in the Gulf of Mexico, said remote monitoring also indicated its offshore assets remained in placed as Gustav passed through the region Monday.

Exxon Mobil Corp. said Tuesday it couldn't say when it would restart its Louisiana refineries in Chalmette and Baton Rouge, both of which were shut down as Gustav's approach.

Valero Energy Corp. said late Monday an initial assessment of its St. Charles, La., refinery, which turns 250,000 barrels a day of crude oil into gasoline and other fuels, found "no significant structural damage," although it was too soon to say when the plant's operations would restart.

Transocean Inc., the world's largest offshore drilling contractor, said Monday afternoon it appeared its three moored, semisubmersible rigs in the Gulf remained anchored in position during the storm.

Transocean said eight other rigs that used thrusters to move out of the storm's path also were safe and were moving back to their drilling locations Monday evening.


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