Oil and gas production ramped up in the Gulf of Mexico and some Gulf Coast refineries resumed operation last week in the wake of Hurricane Katrina.
Markets also anticipated the release of crude and petroleum products stockpiled by the 26 members of the Paris-based International Energy Agency, in cooperation with the European Union. The two groups agreed Sept. 2 to supply 60 million bbl of crude and refined products to world markets over 30 days, “allowing market mechanisms to provide the most efficient method of directing the oil where it is needed,” IEA officials said.
Additional supplies, aid
The “initial response” of 2.1 million b/d will be “94% stockdraw, 3% demand restraint, and 3% increased indigenous production,” said IEA officials on Sept. 7. The bulk of that contribution-52%-will be supplied by North America, with the US accounting for 44.2% and Canada for 4.6%.
The US Department of Energy earlier announced plans to sell 30 million bbl of crude from the Strategic Petroleum Reserve (SPR), with bids due by Sept. 9 and delivery dates to winners in October unless a buyer can take delivery earlier.
The proportion of the contribution from any single IEA member is based on that nation’s oil consumption as a portion of the group’s total oil consumption, officials said. Other major contributors will be Japan 12.2%, Germany 6%, South Korea 4.8%, France 4.6%, Italy 4.1%, the UK 3.6%, and Spain 3.5%.
The IEA stockdraw will be 1,289,000 b/d of crude and 683,000 b/d of products, including 369,000 b/d of gasoline, 276,000 b/d of middle distillates, and 38,000 b/d of fuel oil. “Outside the US, the largest stockdraw contribution will be 545,000 b/d of finished products from Europe, consisting of 317,000 b/d motor gasoline, 190,000 b/d middle distillates, and 38,000 b/d fuel oil,” officials reported.
Meanwhile, the Venezuelan embassy in Washington, DC, said Sept. 7 that Petroleos de Venezuela SA (PDVSA) will supply more than 960,000 bbl of additional gasoline to the US in four shipments this month. That gasoline, taken from storage and diverted from other customers, will be sent to and distributed by PDVSA’s US subsidiary Citgo Petroleum Corp. in addition to previously scheduled shipments of 1.2 million bbl in September. Venezuela is not a member of IEA. Kuwait earlier pledged a $500 million aid package to the US to help deal with the devastation caused by the hurricane.
That aid is to include “both humanitarian and petroleum supplies, in particular gasoline,” officials said, but it first must be approved by a special session of Kuwait’s parliament, now in summer recess.
Industry recovering
As of Sept. 6, the US Minerals Management Service said crews had not yet returned to 27 mobile rigs and 192 offshore platforms in the Gulf of Mexico. As a result, 870,374 b/d of oil and 4.16 bcfd of natural gas production remained shut in. That’s equivalent to more than 58% of crude and 41.6% of the natural gas normally produced from the gulf. Production losses during the period of Aug. 26-Sept. 6 totaled 12.75 million bbl of crude and 67.6 bcf of natural gas.
Katrina was the fourth storm to disrupt oil and gas production in the gulf this year. Hurricane Dennis disrupted production of 5.29 million bbl of oil and 23.3 bcf of gas; Tropical Storm Cindy, 312,127 bbl of oil and 1.7 bcf of gas; and Hurricane Emily, 240,024 bbl of oil and 1.58 bcf of natural gas.
“The offshore rig industry actually emerged in fairly good shape with minor damage on several rigs and severe damage on six rigs” from Hurricane Katrina, said analysts at Jefferies & Co. Inc. “In all, it appears that roughly 16 rigs out of 132 active rigs (excluding platform rigs) in the gulf incurred some sort of notable damage as a result of the storm with as many as 6 likely to be total constructive losses.”
Rowan Cos. Inc.’s Rowan New Orleans jack up capsized. Diamond Offshore Drilling Inc.’s Ocean Warwick jack up also is likely a constructive loss, “as well as four platform rigs,” analysts said. Transocean Inc.’s Deepwater Nautilus semisubmersible rig “incurred significant damage to its mooring system and subsea well control system” and “could be down at least 3 months,” said Jefferies analysts.
The Louisiana Offshore Oil Port is now working at 75% of its maximum capacity, with two of three births open, officials reported last week. Utility workers said they would soon supply electrical power to LOOP’s tank facility, giving the port access to the special crudes that refiners are requesting. Seven tankers are awaiting access to LOOP, and the port was expected to be back to normal operation by Sept. 11, DOE officials reported.
DOE’s Office of Electricity Delivery and Energy Reliability reported that of 10 Gulf coast refineries shut down by Katrina, three were in various stages of restarting by the afternoon of Sept. 6. A fourth, Motiva Enterprises LLC’s 226,500 b/d refinery at Norco, La., sustained limited damage and was thought to be able to restart at midweek. Other facilities still had no power or remained subject to damage assessment (Table 1).
Meanwhile, some pipeline systems had returned to full or partial operating capacity, DOE officials reported Sept. 6.
Colonial Pipeline Co.’s 5,500-mile pipeline system was reported operating at 100% capacity on Sept. 5 after electrical power was restored to its facilities. Colonial Pipeline, based in Alpharetta, Ga., delivers 100 million gal/day of gasoline, heating oil, aviation fuel, and other products throughout the southern and eastern US.
Plantation Pipe Line Co., Houston, said Sept. 7 that its mainlines were operating at full capacity with a throughput of 620,000 b/d after electric power was restored to its primary pump stations. The Plantation system consists of 3,100 miles of pipeline serving 120 terminals. It transports gasoline, diesel, and jet fuel to major metropolitan areas in the Southeastern US.
Refining capacity
In testimony Sept. 6 before the Senate Committee on Energy and Natural Resources, Bob Slaughter, president of the National Petrochemical & Refiners Association, said, “Although some of the affected refineries may restart and return to capacity or near-capacity levels this week, there are indications that several facilities may be out of service for a longer period.”
Motiva’s 235,000 b/d refinery in Convent, La., was reported to have restarted and “may be fully operational in a few days,” DOE officials said Sept. 5.
Marathon Petroleum Co. LLC’s 245,000 b/d refinery in Garyville, La., was one of the first refineries to restart and was expected to be fully operational by Sept. 6, DOE reported. Marathon’s 222,000 Catlettsburg, Ky., refinery previously was operating at reduced capacity but was expected to return to full capacity Sept. 6 (Table 2).
Valero Energy Corp. said Sept. 6 that its two newly acquired refineries in Memphis, Tenn., and Lima, Ohio, as well as its 80,000 b/d Krotz Springs, La., refinery, “all returned to normal operations this weekend” after DOE earlier approved the company’s request for the loan of 1.5 million bbl of SPR crude. As for its 185,000 b/d St. Charles, La., refinery, Valero reported, “Utilities have been recommissioned, and we are now anticipating a midweek start-up.”
DOE reported no power and major damage to ConocoPhillips’ 247,000 b/d facility at Belle Chasse, La.; no power and water damage to ExxonMobil Corp.’s 187,000 b/d Chalmette, La., refinery; and major damage but power restored at Chevron Corp.’s 325,000 b/d Pascagoula, Miss., unit. Murphy Oil Corp.’s 125,000 b/d refinery at Meraux, La., was still without power Sept. 5; however, DOE said workers were assessing damage and had repaired a leaking crude oil tank while water was receding.
Officials at DOE said Sept. 7 that Shell Chemical LP’s 55,000 b/d refinery at St. Rose, La., remained shutdown and that Shell’s 80,000 b/d Saraland, Ala., facility was running, but at a reduced rate.
ConocoPhillips’ 239,400 b/d Lake Charles, La., refinery was said to be returning to full capacity Sept. 5, while ExxonMobil’s 493,500 b/d Baton Rouge refinery is now fully operational with crude borrowed from SPR.
Katrina approached within 200 miles but inflicted no damage nor disrupted operations of the Gulf Gateway Energy Bridge deepwater LNG port or the regasification vessel Excellence, which was discharging natural gas into the Sea Robin and Blue Water pipeline systems at the time of the storm, said Excelerate Energy LLC, The Woodlands, Tex.
