IHS: Past hurricane damage, disruptions less than expected

By OGJ editors
HOUSTON, June 10 -- Despite massive damage from Hurricanes Katrina and Rita in 2005, the average impact on oil and gas production from hurricanes over a 45-year period was relatively modest and the disruption of production was typically short-lived, said officials at Engelwood, Colo.-based information firm IHS Inc.

Based on IHS production data from 1960 through 2005, including Katrina, Rita, and four other major hurricanes in the last decade, an average Gulf of Mexico hurricane season would likely disrupt only 1.4% of annual oil production and 1.3% of annual gas production, the firm said. "While Hurricanes Katrina and Rita were an exception, historically, our data shows the overall impact to be much less than most people might expect," said Steve Trammel, an IHS senior product manager.

Focus on planning
Trammel attributes the historically low impact on production to industry planning. "The oil and gas companies are very focused on the safety of their personnel," he said. "Operators make the decision to pull crews off rigs well before a storm moves into the gulf. Therefore, most disruptions to production are caused by suspension of operations as a safety precaution in the event that an approaching hurricane does threaten offshore production. As a result, average hurricane disruptions are short-lived with full production reestablished within a month," he said.

Hurricane Katrina, a Category 5 storm, achieved 175 mph winds before it dropped to Category 3 and struck Louisiana Aug. 29, 2005, making it the most destructive storm in terms of economic impact ever to hit the US. Hurricane Rita struck the Texas coast Sept. 24, 2005, as a Category 3 storm having achieved sustained winds of 180 mph. Some 3,050 or 75% of offshore platforms, 22,000 miles or 67% of pipelines, and two thirds of the Gulf Coast refineries were in the overlapping paths. Their combined force inflicted record damage on Gulf Coast facilities and production, pushing oil and gas prices to record levels by January 2006 and increasing fears of energy supply shortages.

Yet all personnel were safely evacuated from a total of 748 manned platforms (93% of the manned platforms at that time) and 101 working rigs (75% of the rigs operating in the gulf at that time). There were no oil spills from production wells on federal leases in the gulf and only minimal leakage from platform equipment and damaged pipelines. There was no evidence any of that leakage reached shore or impacted birds or mammals.

By mid-December 2005, the cumulative oil shut in by the two storms totaled 101.7 million bbl, 18.5% of annual gulf oil production. Shut-in natural gas production totaled 526.2 bcf, 14.4% of yearly gulf gas output.

Of the other four major hurricanes in the Gulf of Mexico, most of the production shut in by Hurricanes Opal (1995), Georges (1998), and Lili (2002) was restored within a month, said Trammel, although Hurricane Ivan (2004) disrupted 471 million bbl of oil production and 140 bcf of gas production.

Expected 2008 activity
The US National Oceanic and Atmospheric Administration's Climate Prediction Center expects considerable hurricane activity in the Atlantic Basin in 2008 with a 90% chance of an above-normal season. The center's outlook is for a 60-70% chance of 12-16 named storms, including 6-9 hurricanes and 2-5 major hurricanes (in category 3, 4, or 5 on the Saffir-Simpson scale). The center defines an average season as yielding 11 named storms, including 6 hurricanes and 2 major storms.

In response to the increase in major hurricanes striking the gulf in recent years, Trammel said, the petroleum industry has improved evacuation plans as well as shut-in and restart procedures to ensure safety and to mitigate leaks and production loss.

"Within economic limits," he said, "offshore structures are being engineered to withstand Category 5 hurricanes. In addition, the US Minerals Management Service has mandated new design specs for offshore facilities and has issued a series of notices to lessees and operators for rig fitness requirements, platform tie-downs, and ocean current monitoring, which are all tied to hurricane season."

Current gulf production and infrastructure are more widespread than in the past. Consequently, there is greater risk that hurricanes entering the gulf will damage and curtail the critical exploration and production activities.

IHS production data show the US gulf produced 476 million bbl of oil, or 25% of total US production, and 2.8 tcf ft of gas, about 12% of the US total during 2007. Moreover, the deepwater gulf continues to yield world-class oil and gas discoveries. IHS data indicate gulf discoveries yielded 8.5 billion boe during 2000-07. As a result, the US gulf was the seventh leading world source for discoveries during this period. Currently, there are 3,639 producing oil wells in the US sector of the gulf, and 3,788 gas wells, according to IHS data.

Noted improvements
Improvements and upgrades instituted by the MMS in cooperation with industry groups and the American Petroleum Institute after Katrina and Rita included:

-- Installation of global positioning system locators and black box information storage systems on offshore rigs for monitoring on-site conditions after evacuation of personnel and to track the rig if it drifts from its position.

-- Guidance for assessing existing structures for vulnerabilities and applying modifications to minimize damage.

-- Site-assessment guidance for identifying the best seafloor and soil conditions for jack up rigs and determining where a particular jack up rig can be located during hurricane season.

MMS suggested drilling contractors increase the number of mooring lines on offshore structures and required installation of high-strength anchors. In most cases, the required number of mooring lines for mobile drilling units increased 50% from 8 to 12, and in some cases 100% from 8 to 16. MMS also issued guidance to improve tie-down procedures to minimize damage during hurricanes.

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