The Louisiana Offshore Oil Port was operating nearly at capacity Sept. 5, awaiting restoration of power to the Clovelly, La., storage facility. LOOP shut down operations Aug. 27 before Hurricane Katrina made landfall at the mouth of the Mississippi River, but it subsequently made deliveries from storage to ExxonMobil Corp.'s Baton Rouge refinery.
"Resumption of LOOP's operations will be critical as many of the refineries [that it serves] will not be able to receive crude supplies by tanker from the Mississippi River until storm related damage can be repaired," said analysts at Purvin & Gertz Inc., Houston, in a Sept. 2 report. Traffic along the Mississippi, including crude shipments to many refineries is expected to remain at a standstill for "many, many days," said the US Coast Guard.
Sources report that a large number of barges broke loose from their moorings and sank in the Mississippi during the hurricane. Moreover, because of physical changes inflicted by flooding and silting along the lower Mississippi, said Purvin & Gertz, "The ship channel is not recognizable in some stretches. The US Army Corps of Engineers must remap the channel before it can open for tanker traffic."
The company noted, "At present the Corps is resource-constrained and preoccupied in trying to address the New Orleans levee breaches that have catastrophically flooded the city. The timing to reopen the river to ship traffic is a major unknown at this time."
A pipeline controlled by LOOP connects with the Capline pipeline system in St. James, La., which carries crude from the Gulf Coast to Midwest refineries. Capline returned to service Sept. 1 at a reduced rate and by Sept. 5 was operated at about 80% of capacity. Plantation Pipe Line Co. and Colonial Pipeline Co. reopened at reduced capacity two major product pipelines from the Gulf Coast to the East Coast and were back to full service by Sept. 3.
The combined capacity of these pipelines is 2.6 million b/d. "The logistics of transporting multiple grades [of product] to marketing outlets is also being simplified by the elimination of some product specifications that are imposed by the US Environmental Protection Agency," the Purvin & Gertz analysts noted.
Before Katrina struck, the crude refining capacity along that area of the Gulf Coast totaled 2.4 million b/d, primarily in "large, highly complex facilities" capable of upgrading the lowest quality crudes. That capacity typically is filled 64% by imported crude and 36% domestic. Purvin & Gertz estimated the quality mix of that crude at 36% light sweet, 34% light sour, and 30% heavy sour. "The implication is that restoration of domestic light sweet production will be necessary to prevent continued widening of the light-heavy differential," analysts said.
"Current estimates are that 90% of this [refining] capacity has been seriously impacted or shut down by Katrina, with no definite timetable for restart in most cases," Purvin & Gertz reported. "Without this US Gulf Coast production [of refined products], drawdown of existing inventories and increased foreign imports will be required to maintain adequate finished product supply in the US market, at least until production is restored."
As a result, the US government for the first time in at least a decade asked European governments on Sept. 2 to release some of their emergency gasoline reserves. On that same date, IEA and the European Union Commission unanimously approved a measure to release 2 million b/d of oil from strategic storage for 30 days. Member countries would contribute emergency oil stocks to help offset US loss of 1.5 million b/d of oil production and 2 million b/d of refining capacity damaged by Katrina. About half of the released strategic oil would be crude from the US Strategic Petroleum Reserve and much of the rest product from Europe.
That move "will help a number of refiners . . . who face logistical problems in getting crude after the hurricane and who are sufficiently close to links to the facilities to have easy delivery," said analyst Paul Horsnell of Barclay's Capital, London "For all other refiners, getting the crude is not the problem."
He said, "What Katrina has done is to make an already tight gasoline situation far more serious, to potentially take heating oil out of a situation of ample supply at least back towards normality and maybe further, and to exacerbate the growing division between tight products and ample crude."
(Online Sept. 6, 2005; author's e-mail: email@example.com)