Sam Fletcher
Senior Writer
HOUSTON, Sept. 21 -- Energy prices continued to climb Monday amid growing awareness that the loss of Gulf of Mexico oil and natural gas production to Hurricane Ivan may be more than first suspected.
The US Minerals Management Service in New Orleans reported Tuesday that 665,665 b/d of oil and nearly 2.8 bcfd of natural gas production were still shut in 6 days after the hurricane made landfall in Alabama. That is equivalent to 39% of the oil and 22.7% of the natural gas normally produced in the gulf. MMS said the cumulative amount of production shut in since Sept. 13 totaled 8.5 million bbl of oil and 36.1 bcf of natural gas.
Deepwater fields shut in
Moreover, Murphy Oil Corp., El Dorado, Ark., said its Medusa field in more than 2,200 ft of water on Mississippi Canyon Block 582 could be shut in as long as 5 weeks, while Dominion Exploration & Production Inc., a subsidiary of Dominion, Clarksburg, WV, said its Devil's Tower field in 5,610 ft of water on Mississippi Canyon Block 773 may be shut in at least 3 weeks, pending inspections and repairs.
Medusa was producing 34,000 b/d of oil and 34 MMcfd of natural gas prior to the storm. Devil's Tower was producing 20,000 b/d of oil and 16 MMcfd of gas.
Pride International Inc., Houston, said its platform rig 1503E on the Devil's Tower spar sustained damage to its mast and related equipment from Hurricane Ivan. It will take a minimum of 90 days to repair the rig at an estimated cost of $1-2 million, which is less than the insurance deductible, said company officials. The Williams group, which owns and operates the Devil's Tower spar, said inspection by a remotely operated vehicle down to 2,700 ft revealed no damage to the spar. However, underwater inspection is to continue down to 5,600 ft during the week.
Refinery operations curtailed
"The full impact of these [gulf production] shut-ins should be partially offset by 'lost' demand from refining and chemical operations along the Gulf Coast that temporarily shut down due to the storm," said Robert S. Morris, Banc of America Securities LLC, New York. Ivan forced a number of refineries to shut in or reduce operations by 1.9 million b/d, or 11% of total US refining capacity.
Valero Energy Corp.'s 78,000 b/d refinery in Krotz Springs, La., was idled when Ivan curtailed its crude supply. However, the company said Tuesday it had a supply commitment and that start-up procedures were underway. The refinery is expected to be back to its planned rates by Wednesday. Valero's Texas City, Tex., and Lake Charles, La., refineries were back to planned rates Saturday after curtailing operations in advance of the storm.
Although Gulf Coast ports have reopened following the hurricane, heavy seas have delayed or slowed imports of crude and petroleum products. September is the peak of the US hurricane season, and other storms in the Atlantic and Caribbean could interfere with US imports.
MMS earlier reported five mobile offshore rigs were set adrift in the gulf by the storm. All were located, although one was reported to be listing 3 degrees. Four fixed platforms were missing and presumed sunk, while another platform was leaning. MMS said one platform rig aboard a spar was missing and another aboard a second spar was damaged.
Three pipeline leaks were reported, with one resulting in a fire that burned out, said MMS officials. However, they had no reports of injuries, fatalities, or pollution at offshore facilities as a result of the hurricane. As of Tuesday, MMS said crews had not yet returned to 35 platforms and 1 mobile offshore rig in the gulf.
Energy prices
The October contract for benchmark US light, sweet crudes jumped by 76¢ to $46.35/bbl Monday on the New York Mercantile Exchange, while the November contract increased by 60¢ to $46.19/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up by 76¢ to $46.36/bbl.
Gasoline for October delivery gained 0.42¢ to $1.2745/gal Monday on NYMEX. Heating oil for the same month inched up by 0.18¢ to $1.2659/gal. The October natural gas contract increased by 14.1¢ to $5.25/Mcf.
In London, the November contract for North Sea Brent crude was up by 46¢ to $42.91/bbl Monday on the International Petroleum Exchange. Gas oil for October delivery rose by $5.75 to $398.75/tonne. The October natural gas contract increased by 4.9¢ to the equivalent of $4.94/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes gained 70¢ to $40.20/bbl Monday.
Contact Sam Fletcher at [email protected]
