Industry tries to cope with terrorism aftermath

Sept. 24, 2001
The US oil and gas industry continues to cope with the aftermath of the Sept. 11 terrorist attacks on New York City and Washington, DC.

The US oil and gas industry continues to cope with the aftermath of the Sept. 11 terrorist attacks on New York City and Washington, DC.

Heightened concern over possible further terrorist attacks is forcing some adjustments in offshore, pipeline, and refining operations in response to new security measures and other developments.

Intelligence analysts have said that much of the nation's critical energy infrastructure is a potential target for terrorist attacks.

Meanwhile, some of the logistical bottlenecks these new security measures are creating are likely to squeeze critical fuel supplies, making refined products markets even more volatile.

Offshore slowdown

Helicopter flights to drilling rigs and platforms in the Gulf of Mexico resumed Sept. 13 under stringent new rules that are overloading the Federal Aviation Administration and slowing industry operations.

Grounded by the nationwide federal no-fly ban following the terrorist attacks, Gulf Coast helicopter contractors re sumed offshore flights under new re quirements that pilots file flight plans with FAA for each mission. Pilots previously filed flight plans only within their corporate offices.

When they file their new flight plans, pilots also must obtain and enter a "discrete" transponder code for each craft on each flight to identify it on FAA radar during that flight.

They then have a 30 min window in which to get airborne. Aircraft not displaying the proper code soon will be subjected to a "fly-by" by US military fighters operating along the Gulf Coast, pilots said.

"FAA officials started out requiring that we get a new transponder code for each leg of the flight. Every time we set an aircraft down on an offshore platform, we were supposed to call in first for a new code before we could take off again," said an executive with one of the three biggest offshore helicopter companies.

"But they quickly found out that wasn't going to work, because they were getting more calls than they could handle," said the source.

He said transponder codes previously were issued to a helicopter company for the use of all of its aircraft. "If for some reason an aircraft wasn't showing the code, if the transponder was turned off or something, the fighters would fly by and give it a look," he said.

The industry executive said he doubts the FAA can long maintain its new safety procedure.

"The problem is that the federal government has no concept of the volume of air traffic there is out in the gulf. They should know, but they don't," he said.

The helicopter companies don't track their business by the number of stops or even the number of trips offshore but by the number of hours of flying time. That can run into hundreds of hours per day for the 550 helicopters operating up to 200 miles off the Texas and Louisiana coasts.

"The FAA just doesn't have the people and the wherewithal to handle that volume of air traffic in this manner," said the industry executive. "All 550 helicopters want to take off at dawn, and they've got only two or three lines to call in to get your transponder codes."

An official at one FAA flight service center on the Gulf Coast told OGJ Online that his section was "barely coping" with offshore flights Sept. 13. "We just don't have enough phone lines. There's a lot of traffic out there in the gulf," he said.

"Hopefully, all of this will be over soon," the FAA employee said. "A couple of more days like this, and we'll all just quit."

The industry executive said the new FAA procedure would be even more overloaded if a hurricane threatens hundreds of offshore facilities in the central or western gulf.

The helicopter fleet then would be making even more flights to evacuate crews in the path of the storm. "FAA said they would give us permission to fly then," the executive said.

Meanwhile, drilling contractors and offshore operators said they've managed to cope with the short ban on gulf flights. "A lot of our people just stayed over and worked longer shifts," said a drilling company executive.

Pipeline concerns

Responding to heightened concern over possible terrorist attacks, industry officials sought to assure the public that pipelines are secure and operating normally.

"The American public should rest assured that oil pipeline operators nationwide have heightened security measures and increased surveillance of sensitive locations for the purpose of ensuring the security and safe operation of this nation's oil pipeline system," said Ben Cooper, executive director of the Association Of Oil Pipe Lines.

Oil pipelines carry more than two thirds of US oil supplies, Cooper said, and the security of that system is industry's "top" priority.

In some cases, pipelines have been temporarily shut down while operators reviewed security risks. None have been detected, but operators are fully prepared to act if shutdowns are necessary in the future, Cooper said. He said all oil pipelines were operating under normal conditions.

He added that the oil pipeline industry is in contact with the Department of Transportation's Office of Pipeline Safety.

Pipeline operators will be complying with DOT directives to protect pipelines and to develop longer-term plans for protecting their systems, Cooper said.

"While oil pipelines have emergency security measures to address natural disasters or other catastrophic events such as terrorism, these measures are being reviewed in light of recent tragic events. As part of this process, we are surveying our members to gather information on specific steps they are taking to enhance protection against possible terrorist activities," he said.

Pending before Congress is a bill that seeks to boost the safety of the country's oil and gas pipelines through more federal government oversight. It is unclear whether that bill will be considered alone this session or attached to other pending legislation before lawmakers leave later this fall.

Refiners scramble

With the virtual elimination of commercial air travel in the US for much of the week following the terrorist attacks, refiners are scrambling to either store or blend into other products more than 1 million b/d of unused jet fuel, industry representatives said Sept. 14.

No one knows for sure how much surplus jet fuel may be stacking up. Commercial airlines burned an average 1.3 million b/d of fuel in 2000, compared with an average consumption of 150,000 b/d of a separate category of jet fuel by the US military.

Increased patrols by military aircraft since the terrorist attacks may greatly increase the consumption of military jet fuel, but not enough to offset the lack of demand for commercial jet fuel, said Kenneth D. Miller, senior principal at Purvin & Gertz Inc., a Houston-based energy industry consulting firm.

"Refiners can't blend that much jet fuel into No. 2 heating oil, but the last thing that the industry or government wants to see is a cutback in refinery runs," said Larry Goldstein, president of Petroleum Industry Research Foundation Inc. in New York.

As a result, he said, "There are serious containment issues" for the surplus jet fuel being produced.

Officials of Colonial Pipeline Co., Atlanta, said they've cautioned refiners to reevaluate nominations for the amounts of jet fuel to be moved this month and to make sure they have plenty of storage available at the other end of the pipeline if the demand for commercial jet fuel doesn't snap back soon.

The cost of that storage can be prohibitively high, averaging a daily price of 25¢/bbl, one refiner told OGJ Online.

Plantation Pipeline, 51% owned by operator Kinder Morgan Energy Partners LP, said it also is working with refiners to adjust fuel shipments to meet curtailed demand.

Some of the commercial jet fuel can be blended into diesel, another distillate product for which demand is likely to increase as some would-be air cargoes are moved by truck instead. But much of the jet fuel can't comply with the low-sulfur restrictions for diesel, said Miller.

How tight the storage capacity for jet fuel may prove "will depend on how quickly the airlines can get up and running again," Goldstein said. "They opened up Kennedy airport [Sept. 13] and then closed it down again. It won't help if airports open and close, open and close."

Even when commercial airlines resume daily operations, they're not expected to get back to the previously normal number of flights for a long time.

Fuel shortages

Stringent new safety restrictions and inspections of marine vessels to prevent terrorist attacks are tying up barge and tanker traffic in several East Coast ports and could cause shortages of gasoline and heating oil in some US markets, an industry executive charged Sept. 14.

Even as industry officials reassure US consumers of adequate supplies of oil and refined products, marine shipments to East Coast markets are blocked by precautionary restrictions imposed primarily by local port authorities since the terrorist attacks, said Goldstein.

"New York Port was closed for 48 hr. It's got loaded vessels still backed up, waiting to get in," Goldstein told OGJ Online. "The Port of Boston has been allowing vessels to unload only during daylight hours, which means only a couple of fuel cargoes each day."

In some ports, he said, two inspectors are now required to board and search each vessel, where no search was mandated in the past.

As a result, several shipments of gasoline and fuel oil are stacking up. "We're trying to convince them to at least make the searches while the vessels are under way," Goldstein told OGJ Online.

The market area around Bangor, Me., faces the most immediate threat of a potential fuel shortage. "But we've got problems all up and down the East Coast," said Goldstein.

The danger is real, he said, but no one has said much about it for fear of triggering panic purchasing that would make the matter worse.

"Americans wouldn't understand shortages and high fuel prices at this time. There really isn't a shortage of fuel, but we're just having problems getting it where it needs to go," said Goldstein.

"I've spent the last 2 days with the White House, the Department of Energy, refiners, and port officials over this. The good news is that we've finally got the government's attention on this potential problem," he said.