Just hours after Katrina, a category 4 hurricane, roared ashore 70 miles south-southeast of New Orleans on Aug. 29, analysts were speculating whether the storm's residual damage might be as bad as the highly destructive Hurricane Ivan nearly a year earlier.
There were no immediate reports of damage by Katrina to Gulf Coast production facilities or refineries, although Transocean Inc. reported its moored Deepwater Nautilus semisubmersible rig had drifted off location during the storm.
Still, Katrina's path took it "through a greater portion of the Gulf of Mexico oil and gas patch" than did Ivan, said analysts in the Houston office of Raymond James & Associates Inc. "Specifically, Hurricane Ivan skirted the eastern part of the Gulf of Mexico production area, affecting primarily the deepwater production areas. Katrina, however, has taken a more westerly path and looks to have impacted the central gulf region, which is closer to the heart of the producing area."
The analysts said, "While on the surface Hurricane Katrina's impact looks like it could be more significant than Hurricane Ivan's impact last year, a better picture of infrastructure damage and production curtailments from the storm will be available within a few days."
Ivan entered the gulf on Sept. 13, 2004, and destroyed 7 offshore platforms, damaged 24 others, and wrecked segments of 102 pipelines before making landfall near the Louisiana-Mississippi border on Sept. 16. Nearly 5 months later on Feb. 14, with repairs still under way, officials at the US Minerals Management Service estimated that Ivan forced operators to shut in a cumulative 43.8 million bbl of oil and 172 bcf of natural gas, the biggest storm-related production curtailment in the gulf's history.
Ivan also forced the evacuation of 69 rigs, 60% of the units working in the gulf at that time, and 575 production platforms, 75% of the gulf's total.
MMS estimated that Ivan produced a 52-ft significant wave height (equivalent to a theoretical 90-ft maximum wave height), the highest ever reported in the Gulf of Mexico, according to National Oceanic and Atmospheric Administration (NOAA) records. MMS said waves higher than 52 ft were likely although not measured in that storm, with damage to some platforms suggesting wave crests of at least 60-65 ft (equivalent to a wave height of at least 90 ft) above sea level.
Meteorologists and commodity market traders underestimated Katrina on Aug. 26, when the then much-weaker storm was moving slowly toward southeast Florida. The MMS regional office in New Orleans reported only 12 production platforms and 9 drilling rigs in the Gulf of Mexico were evacuated, with no production shut in at that time.
Prices for crude and petroleum products plummeted on futures markets in New York and London since Katrina apparently posed no serious threat to oil and gas production in the Gulf of Mexico. The October contract for benchmark US light, sweet crude plunged by $1.36 to $66.13/bbl that day on the New York Mercantile Exchange.
But after crossing Florida and entering the gulf, Katrina quickly grew into a category 5 hurricane as it headed toward the central gulf. Offshore operators stepped up evacuations and began shutting in production over the weekend. By Aug. 28, the MMS regional office had moved to its emergency facility in Houston as the result of emergency evacuation of low-lying New Orleans.
As of Aug. 29, MMS said, 615 offshore platforms and 96 rigs were evacuated, with 1.4 million b/d of oil and 8.3 bcfd of natural gas shut in. Cumulative production lost to Katrina through that date totaled 3.1 million bbl of oil and 15.4 bcf of natural gas.
Even before MMS reported that information, however, the October crude contract jumped to a record $70.80/bbl in overnight electronic trading Aug. 29 on NYMEXthe biggest one-time gain for a front-month contract in 29 months.
Only a week before the US Labor Day holiday, which marks the official end of the summer driving season, industry sources estimated as much as 1.5 million b/d of refining capacity may have been shut down by the storm. "Valero Energy Corp. evacuated all but a few workers at its 260,000 b/d St. Charles refinery on [Aug. 27]. ConocoPhillips shut its 247,000 b/d Alliance refinery; Murphy Oil Corp. shut down its 120,000 b/d Meraux, La., refinery; and ExxonMobil planned to shut down its 183,000 b/d refinery in Chalmette, La," said James K. Wicklund in the Houston office of Banc of America Securities.
Some observers say gulf production still hasn't fully recovered from Ivan's damage. If Katrina proves to be as destructive, it will reduce energy supplies and increase prices.
(Online Aug. 26, 2005; author's e-mail: firstname.lastname@example.org)