WoodMac: Hurricanes hit 'every link of energy chain'

Oct. 4, 2005
Every link in the energy chain—upstream, processing, pipelines, and the support infrastructure maintaining them—was affected by Hurricanes Katrina and Rita, notes a report released Oct. 3 by Wood Mackenzie in Houston.

Steven Poruban
Senior Editor

HOUSTON, Oct. 4 -- Every link in the energy chain—upstream, processing, pipelines, and the support infrastructure maintaining them—was affected by Hurricanes Katrina and Rita, notes a report released Oct. 3 by Wood Mackenzie in Houston.

After Katrina damaged infrastructure onshore and off, Rita entered the Gulf of Mexico as a Category 5 hurricane, making landfall early Sept. 24 near Sabine Pass as a Category 3 storm.

Hurricane-force winds from Rita mainly affected numerous deepwater gulf producing facilities, including those on Green Canyon and Garden Banks blocks. In shallow waters, Rita struck facilities in the Ship Shoal, Eugene Island, South Marsh, Vermilion, and East and West Cameron areas.

According to WoodMac data, the deepwater gulf production facilities damaged by Katrina included those in the Ursa, Matterhorn, K2, and Medusa production sites. Rita damaged production facilities in the Typhoon project.

Katrina damaged 18 rigs in the gulf, and Rita damaged an additional 15 rigs, WoodMac said. This compares with a total of seven rigs damaged by Hurricane Ivan during last year's storm season.

Onshore concerns
Beyond the disruption to oil and gas production, WoodMac pointed out, Katrina and Rita damaged onshore gas processing plants and refineries more than Ivan did.

Contrary to reports that gas pipeline infrastructure was "somewhat spared" by Katrina and Rita, WoodMac said, "Reality is that is not the case, and as the slower-than-expected recovery status from the combined storms starts to become more obvious, the market will finally get a good glimpse of the months ahead."

Rita damaged a number of specialty processing plants as well as larger facilities, leaving few alternatives available to gas producers.

"With various plants affected, gas quality from upstream production will become an issue for much of the winter season," WoodMac said.

Supply problems this winter "will put additional upward pressure on price, and volatility will be significant," the analyst said. "Everyone will be looking for [first-of-month] gas, protecting their storage, and hoping to stay out of the daily market and its uncertainties."

WoodMac calculated that at the beginning of the heating season about 3 bcfd of gas production may remain shut-in. "Relative to Ivan," it said, "the shallow-water shelf production losses are worse, and the deepwater platform and field damage is on par or worse."

WoodMac said, "The infrastructure issues, related to both processing and personnel, are much worse and will complicate and delay the return of shut-in production, regardless of the upstream damage."

Shut-in production
According to the US Minerals Management Service, cumulative shut-in oil production for Aug. 26-Oct. 3 is slightly more than 45 million bbl, or 8.241% of the annual production of oil from the gulf.

The cumulative shut-in gas production during the same period is about 219.6 bcf, or 6.016% of the annual production of gas from the gulf.

WoodMac senior analyst Eugene Kim told reporters in Houston Oct. 3 that about 3 bcfd of gas production might remain shut in for an indefinite time at the start of the heating season.

Kim also explained that WoodMac's analysis of the impact of the storms continues and that more-detailed damage reports will likely accompany third quarter earnings statements from the supermajors.

Contact Steven Poruban at [email protected].