Oil and natural gas production is slowly returning from the Gulf of Mexico following Hurricane Katrina, but it could take at least until the end of 2005 before onshore transportation and distribution is fully restored, US Minerals Management Service Director Johnnie Burton said Sept. 16.
Onshore damage possibly could be more extensive than the storm’s effects on offshore oil and gas production in the Gulf, although this is still being evaluated, Burton told reporters at a briefing at the Department of the Interior’s headquarters.
Burton emphasized that MMS is directly responsible only for offshore activities, but added that it is working closely with the Department of Transportation and other federal agencies involved in restoring onshore facilities and systems.
It has reported to the US Coast Guard and other DOT agencies, for example, that Highway 23 in Louisiana remains submerged with several boats stranded on it, and that a key oil terminal at Venice, La., nearby remains cut off, Burton said.
“We think that about 35% of the oil normally produced in the Gulf of Mexico remains shut-in because it can’t go anywhere,” Burton said. “I would guess that, realistically, it will not be possible to move oil and gas fully to markets before yearend.”
Restoration plateaus
At the hurricane’s peak, companies had shut in 95% of the oil and 85% of the gas they produced. Enough production has been restored since shut-ins represented only 56.14% of oil and 34.11% of gas on Sept. 15. Burton warned, however, that additional restoration could take longer.
When a hurricane approaches, producers shut in not only operations directly in its anticipated path but also platforms and rigs for some distance on either side in case the storm changes course, she explained.
“There was a lot of movement at the margins in the first few days after the storm,” Burton said, adding, “Then the companies began to look at rigs directly in the hurricane’s path. That’s where we are now.”
Producers now have to examine and test underwater production systems, according to Burton. It could take 30-40 days more before affected installations could come back into full operation, she said.
Even then, however, there will still be obstacles. “In our initial assessments, we’re seeing a lot of damage to onshore infrastructure,” the MMS director said. “There is one badly damaged junction, for example, that normally handles 250,000 b/d of oil. People are having a dickens of a time finding boats and equipment to restore connections.”
Hurricane Katrina was exceptionally severe, she pointed out. One operator reported that its offshore platform recorded winds between 180 and 190 mph, with gusts up to 220 mph at the storm’s peak. Onshore damage was so severe that both the MMS and individual companies concentrated on evacuating victims initially with whatever aircraft and marine vessels they could find, Burton said. “The emphasis was on people, not platforms. The spirit of these people is amazing,” she said.
Withstood heavy force
“But we also need to take heart that this storm showed these offshore structures can withstand tremendous force and not cause environmental damage,” Burton continued. “There has been pollution, but this came from an oil holding vessel that capsized. All of the platforms’ underwater and surface valves were closed, and they held.”
Producers now must decide whether they are going to make other arrangements for getting their oil to markets or wait for pipelines, terminals, and refineries to be repaired, she said. MMS planned to issue a second Notice to Lessees Sept. 16 with more detailed guidance on evaluating damage and restoring production, she said.
An oil producer deciding to use tankers to get production ashore will have to apply to the MMS for a permit to do so, but Burton said the process already is in place and a permit could be issued in 2-3 days. The administration of President George W. Bush already has suspended the Jones Act provision requiring American-flagged vessels to be used exclusively in transporting crude oil between US ports.
Producers also might have to consider whether to flare or reinject associated gas to produce oil from their platforms in the Gulf. “They haven’t yet, but we expect them to,” said Burton. “We’ll look at it case-by-case, weighing whether producing oil outweighs conserving gas.”
The decision won’t be easy, she noted, adding, “The price of natural gas is through the roof. Do you really think that a company isn’t going to do everything possible to get it to market?”. ✦
