Oil and gas companies were still assessing damage last week, but initial indications were that Hurricane Rita, which hit the US Gulf Coast Sept. 24, was much less destructive than Hurricane Katrina, which came ashore near New Orleans Aug. 29.
Although earlier rated as a Category 5 hurricane and the third worst ever to threaten the US while still in the Gulf of Mexico, Rita deteriorated to a Category 3 storm by the time it made landfall near the Texas-Louisiana border.
“The good news is that Rita seems to have missed any vital organs,” said David Wyss, chief economist at Standard & Poor’s, the investment research unit of McGraw-Hill Cos., in a Sept. 28 telephone conference. “The bad news is that Rita disrupted the recovery that was going from Katrina.”
The US Minerals Management Service reported a peak of 666 platforms and 92 rigs evacuated in the Gulf of Mexico on Sept. 25, including 83 platforms and 2 rigs to which crews had not returned after Katrina. Offshore production shut in on that date amounted to 1.5 million b/d of crude and 8 bcfd of natural gas-virtually all of the crude and 80.5% of the natural gas normally produced in the US sector of the Gulf of Mexico. By comparison, at its peak Katrina shut in 95% of the oil and 85% of the gas production in the gulf, much of which had not been restored before Rita struck 3 weeks later.
By Sept. 28, MMS still listed 593 platforms and 64 rigs as evacuated, with shut-in production essentially unchanged. Cumulative production lost to Rita and Katrina from Aug. 26 through Sept. 28 totaled 37.9 million bbl of crude and 180.6 bcf of natural gas.
Rita was the fifth storm to disrupt gulf production 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.
Energy markets affected
In addition to curtailed production, many observers thought Rita would lower US energy stocks across the board. Highways out of Galveston and nearby Houston were packed with vehicles Sept. 21-22 with the mandatory evacuation of 1.3 million people in the Galveston-Houston areas, while other refugees fled coastal areas from Corpus Christi, Tex., to Lake Charles, La.
With thousands of evacuees stuck along Houston area highways after running out of gasoline, the Environmental Protection Agency issued a reformulated gasoline waiver for Houston and Galveston, allowing distribution and sale of conventional gasoline in that urban area Sept. 21-26.
Researchers at Rice University’s Baker Institute for Public Policy said demand for gasoline in the Houston area doubled during the massive evacuation ahead of the storm.
“For this time of year, normal consumption of gasoline in Houston and the surrounding area is about 22 million gal/day. For the days leading up to Hurricane Rita’s Sept. 24 landfall, the evacuation of some 3 million people pushed gasoline demand to an estimated 45 million gal/day,” the researchers reported. “All else being equal, this increased demand would push national consumption of gasoline during that period to levels comparable to those for the traditionally heavy-driving week of Labor Day, or about 10% higher than usual for this time of year.”
The extra demand triggered by Rita will put additional strain on US gasoline distribution in coming weeks and push up retail prices, the researchers predicted. But fears that the national average pump price will exceed $5/gal “might be largely overstated,” they said.
Valero Energy Corp. earlier reported its retail sales jumped by 87% for the week as Gulf Coast residents rushed to get fuel ahead of the storm.
The Energy Information Administration reported commercial US crude inventories, excluding those in the Strategic Petroleum Reserve, dropped by 2.4 million bbl to 305.7 million bbl in the week ended Sept. 23, just hours before Rita made landfall. However, gasoline stocks jumped by 4.4 million bbl to 199.8 million bbl in that period, while distillate fuels dipped by 500,000 bbl to 133.6 million bbl, led by a drop in heating oil.
Input of crude into US refineries fell by 709,000 b/d to 14.6 million b/d during the week as many units shut down in preparation for Hurricane Rita. With refineries operating at 86.7% of capacity, US production of both gasoline and distillates declined. Imports of crude into the US diminished by 139,000 b/d to 9.5 million b/d because of the storm.
Refineries closed
Four Gulf Coast refineries with a combined capacity of 900,000 b/d-Chevron Corp. in Pascagoula, Miss.; ConocoPhillips, Belle Chasse, La.; ExxonMobil Corp., Chalmette, La.; and Murphy Oil Corp., Meraux, La.-are still disabled by Hurricane Katrina. Sixteen other refineries shut down in preparation for Hurricane Rita.
Among the refineries and related facilities that shut down ahead of the storm were: Citgo Petroleum Corp., Lake Charles, La., 310,000 b/d; ConocoPhillips, Lake Charles, 250,000 b/d; Calcasieu Refining Co., Lake Charles, 32,000 b/d; Excel Paralubes Funding Corp., Lake Charles, 220,000 b/d; ExxonMobil Corp., Beaumont, Tex., 350,000 b/d; Motiva Enterprises LLC, Port Arthur, Tex., 275,000 b/d; Total SA, Port Arthur, 175,000 b/d; and Valero, Port Arthur, 250,000 b/d.
Also shut down were Shell Oil Co., Deer Park, Tex., 333,700 b/d; Lyondell-Citgo Refining LP, Houston, 270,200 b/d; Astra Oil Co. Inc., a subsidiary of Transcor, Pasadena, Tex., 100,000 b/d; Valero, Houston, 83,000 b/d; ExxonMobil Corp., Baytown, Tex., 557,000 b/d; BP PLC, Texas City, Tex., 437,000 b/d; Valero, Texas City, 209,950 b/d; Marathon Oil Corp., Texas City, 72,000 b/d; ConocoPhillips, Sweeny, Tex., 229,000 b/d; and privately held Flint Hills Resources, Corpus Christi, Tex., 288,00 b/d.
Valero reported its 340,000 b/d Corpus Christi and 98,000 b/d Three Rivers, Tex., refineries operated at slightly reduced rates due to feedstock and product storage issues.
On Sept. 27, DOE said 8 of those facilities “have restarted or are attempting to restart. Besides the four Katrina-related outages, all of the refineries that remained offline following Hurricane Rita were in the Port Arthur and Lake Charles refining centers, with the exception of one refinery in Texas City.
The idle refineries in Port Arthur and Lake Charles “are either expected to remain shut down for at least 2 weeks or else it is unclear when they will restart,” DOE said. “In addition to the four refineries that remain shut down following Hurricane Katrina, the total amount of refinery capacity completely shut down amounts to more than 2 million b/d. This accounts for well more than 1 million b/d of gasoline, about 800,000 b/d of distillate fuel, and over 300,000 b/d of jet fuel that is not being produced as long as these refineries remain shutdown.”
S&P expects all refineries knocked out by the hurricanes to be back on line by yearend. The impact on Gulf Coast crude production is less important because the US can make up that loss through imports and SPR supplies, said Wyss.
Motiva’s Port Arthur refinery sustained wind damage, “including downed power lines and cooling-water tower damage,” but no flooding.
Valero initially reported “significant damage” to two cooling towers and a flare stack but no flooding at its Port Arthur plant. In a later update, it reported extensive electrical power-pole damage and extensive insulation damage. “Power is not expected to be restored to the area for about 1 month,” said a company representative. “However, we are beginning to implement the needed repairs and are capable of generating about 80% of our own power at our Port Arthur refinery, so we continue to expect to restart this refinery within 2 to 4 weeks.”
ConocoPhillips’ Lake Charles refinery was without electrical power but not flooded, while its 215,650 b/d Sweeny, Tex., refinery was undamaged by the storm and was in the process of restarting. ConocoPhillips also reported no visual damage to its offshore facilities in the Gulf of Mexico and no serious damage to other onshore facilities.
Excel Paralubes’s base oil refinery in Lake Charles sustained minimal structural damage with storm-related flooding only in the loading docks. The extent of damage will be known only when floodwaters recede, officials said. The major concern at midweek was the lack of electric power in the area. It has been estimated that power may not be restored for 2-3 weeks.
Transportation disrupted
Explorer Pipeline, Tulsa, shut down its mainline products system Sept. 22 and suspended deliveries to Houston, Dallas, Tulsa, St. Louis, and Chicago. The pipeline historically has filled 10% of demand for liquid fuels in the Midwest.
In Houston, Colonial Pipeline Co. continued to make product deliveries from inventories at tank farms, “thereby limiting the impact on stub-line deliveries to marketing terminals,” said company officials. However, they said periodic shutdowns of Colonial’s mainlines originating in Houston would occur “as Colonial awaits resupply by operating refineries.”
TEPPCO Partners LP said the Seaway Crude Pipeline terminal in Baytown and four lines from Texas City, Houston, Red Bluff, and Baytown were shut down, as well as TEPPCO’s product pipeline from Houston to El Dorado. Dixie Pipeline Co.’s propane operations at Mt. Belvieu, Tex., also closed.
Tennessee Gas Pipeline reported supply losses of 900 MMcfd, not including 650 MMcfd still shut in as a result of Hurricane Katrina. The company confirmed to the DOE a leak on its 524G-100 line from Bay Marchand to Leeville, La. Inspections of the Grand Chenier area revealed moderate damage to a Starks, La., area compressor and the Johnson Bayou Dehydration Plant.
Sabine Pipeline, operator of the Henry Hub, La., pipeline interconnection, imposed force majeure because power was out in most areas of its system. As a result, the New York Mercantile Exchange declared force majeure for deliveries under the September contract for the rest of the month. NYMEX gave traders the ability to mutually agree to execute an alternative delivery procedure.
The biggest US import terminal, Louisiana Offshore Oil Port off New Orleans, suspended its offshore operations. The Strategic Petroleum Reserve shut down its sites and evacuated employees at Big Hill and Bryan Mound in Texas and West Hackberry, La. Its Bayou Choctaw site farther east in Louisiana continued operating but under an alert.
The Lake Charles, La., LNG facilities of Trunkline LNG Co., a unit of Panhandle Energy, also shut down.
Assessing damage
Like many in the industry, Wyss at S&P was primarily concerned about offshore pipelines and natural gas production. “The real question is whether there is damage to the undersea pipelines,” he said. That was a major problem after Hurricane Ivan hit the Gulf of Mexico in 2004.
US natural gas supplies should be “okay” for a mild winter, although consumers could pay 50% more for natural gas in December than they did last December, Wyss said. However, he said, “If we have a really bad winter, well, it could get pretty cold inside the house as well.”
More than a dozen Gulf Coast gas-processing plants were offline because of flooding, lack of supplies, inability to move stored liquids, or safety precautions, DOE officials said. With most Gulf Coast gas production and processing shut down, most natural gas pipelines in the affected areas were running with losses of supply going into their systems.
Stone Energy Corp. in Lafayette, La., reported a flyover of its offshore properties showed that the South Marsh Island 108 D platform and Vermilion Block 255 A and B platforms were lost to the latest hurricane. The company was evaluating alternatives for the lost platforms, including utilizing existing platforms.
Newfield Exploration Co. reported three production platforms lost to Hurricane Rita, South Marsh Island 49 B, East Cameron 151 C, and East Cameron 286 B. Combined net production from the three facilities was 5.6 MMcfd of gas equivalent.
Gulfport Energy Corp., Oklahoma City, reported damage in both its Hackberry field in Cameron Parish and its West Cote Blanche field in St. Mary Parish, La.
El Paso Corp. was assessing damage and beginning to repair onshore and offshore facilities and pipelines in Texas and Louisiana. It also was reassessing possible new damage in parishes south of New Orleans and offshore facilities in the Gulf of Mexico that were affected by Hurricane Katrina.
GlobalSantaFe Corp. located two missing jack up rigs, the GSF Adriatic VII and GSF High Island III, in shallow waters off Louisiana, some 80 miles from their drilling sites. The rigs appeared to have sustained severe damage, officials said.
Grey Wolf Inc. said workers had not been able to return to three of its rigs in Cameron and Vermillion Parishes in southern Louisiana because of flooding. However, the rigs had been viewed from the air and appeared intact.
Chevron Corp., operator with 50% interest in Typhoon gas and oil field, reported its Typhoon tension leg platform (located in 2,000 ft of water in the Green Canyon area 165 miles south-southwest of New Orleans) was severed from its mooring and suffered severe damage during the storm. However, the unit was later located and secured, officials said. BHP Billiton holds the other 50% interest in the field.
Magellan Midstream Partners LP, Tulsa, reported only minor damage to its five marine terminals in the Texas and Louisiana Gulf Coast region, and continued to assess dock damage at the Marrero, La., facility resulting from last month’s Hurricane Katrina
SPR reported no apparent damage to its Bryan Mound, Tex., and Bayou Choctaw, La., sites. However, the Big Hill, Tex., site received some minor damage. Roads to it and the West Hackberry, La., sites were flooded, preventing entry, official said.
US Coast Guard reopened ports of New Orleans and Houston and other waterways in and around Texas, Louisiana, and the Gulf of Mexico with some restrictions on traffic. Intracoastal Waterway was open from mile marker 20 eastward.✦