Storm recovery begins; limited refinery damage seen

Sept. 22, 2008
The US oil and gas industry reported early progress as it began to recover from damage caused by Hurricane Ike, which made landfall over Galveston, Tex., in the early hours of Sept. 13.

The US oil and gas industry reported early progress as it began to recover from damage caused by Hurricane Ike, which made landfall over Galveston, Tex., in the early hours of Sept. 13.

“Clearly, we have experienced damage to a number of our facilities,” American Petroleum Institute Pres. Red Cavaney said. “However, it appears to be less than that associated with Hurricanes Katrina and Rita in 2005.”

Based on aerial inspections by the US Minerals Management Service, industry, and the US Coast Guard through Sept. 15, MMS officials said 28 of the 3,800 offshore oil and gas production platforms in the Gulf of Mexico were destroyed by Hurricane Ike. “Several other platforms have been reported as significantly damaged; information on those facilities is being compiled and will be released in the near term,” officials said Sept. 16. Initial estimates were that the destroyed production platforms produced a total of 11,000 b/d of oil and 82 MMcfd of gas.

“To date, most of the destroyed platforms include older facilities with small levels of production,” said Lars Herbst, regional MMS director for the Gulf of Mexico. “We expect additional reports of damage as the weather allows more flights and operators are able to board the platforms and begin inspections.”

E&P damage reports

Shortly after the storm cleared its path onshore, oil and gas producers in the gulf began to report their damage assessments.

Analysts in the Houston office of Raymond James & Associates Inc. said, “Hurricane Ike appears worse than initially expected, as several jack ups have been damaged, as well as a few semis whose moorings were broken.” MMS officials reported three jack up drilling rigs destroyed and one jack up with extensive damage. Two semisubmersible rigs that had been reported drifting Sept. 13 later were secured by tugs.

MMS said, as of midday Sept. 16, that 425 of the 717 manned production platforms and 50 of the 121 mobile offshore rigs in the gulf were still without crews. MMS reported 95.9% of the oil and 82.3% of the natural gas normally produced from federal leases in the gulf remained shut in. The US sector of Gulf of Mexico accounts for 25% of all the oil and 15% of all the natural gas produced in the US. As of June, daily production from the gulf amounted to 1.3 million bbl of oil and 7 bcf of gas. Since then, gas production from the deepwater Independence Hub facility increased, and in August gas production from the gulf was estimated at 7.4 bcfd.

Other reports of damage in the gulf included:

  • ExxonMobil Corp. reported only limited minor damage to its offshore platforms.
  • ATP Oil & Gas said its Gomez Hub sustained minimal damage. The company’s production at Canyon Express is online, and officials plan to bring the remaining Gulf production back as receiving stations and pipelines permit.
  • Ensco International said it located “all but one” of its jack up rigs that were in the hurricane’s path. The missing rig is Ensco 74, a MLT Super 116-C that was in South Marsh Island Block 149 prior to the storm. The rig is insured for $100 million, and the company has a $50 million per occurrence retention for gulf windstorm damage losses, officials said. Ensco said it has crews aboard 8 of its 13 jack up rigs in the gulf. No damage to those rigs was reported.
  • Noble Corp. reported mooring failures on two of its rigs, the Noble Paul Romano and Noble Amos Runner, that drifted from their original locations. Those rigs have been boarded, and power has been restored, officials said. The mooring system of the Noble Lorris Bouzigard was damaged, but it remained in the area of its primary location. It, too, has been boarded and power has been restored. Tugs were on station to assist with the start-up of each of the rigs.
  • Pride International Inc. said its 250-foot mat slot jack up, The Wyoming, is apparently a total loss, although the rest of its fleet appears to have weathered the storm. Pride had insured the rig for $45 million.
  • Rowan Drilling Co., Houston, reported its Rowan-Anchorage rig may have capsized and sunk during the hurricane. It was insured for $60 million, with a $17.5 million windstorm deductible. It had a carrying value of $4.5 million and had been operating under a well-to-well contract of $60,000/day, Rowan said. In addition, the company said its Sabine Pass facility in Texas would be out of commission for a time after withstanding a storm surge. Its new jack up rig, the Rowan Mississippi, was struck by a vessel while stationed there, but Rowan said the damage is limited. The company’s other rigs in the Gulf Coast area appeared to have suffered minimal damage, pending closer inspection once their crews return.
  • Hercules Offshore Inc. said its Hercules 78 rig, an 85-ft Donhaiser Marine submersible, was moved 600 ft from its pre-storm position. An assessment crew was onboard and a diving vessel will conduct an underwater survey of the rig. The company has start-up crews on most of its active rigs in the gulf.
  • Helmerich & Payne Inc. reported no material damage to any of its drilling rigs or facilities. However, officials remained “uncertain” how the loss of power and “the impact on the labor force” in the Houston and southeast Texas area will affect the company’s rig construction facilities, as well as those of its vendors. They said flooding also could affect Helmerich & Payne’s new-build rig delivery schedule.

Pipeline damage

The US Pipeline and Hazardous Materials Safety Administration had not received reports of major pipeline problems as of Sept. 15, a spokeswoman for the US Department of Transportation agency told OGJ. She said the emphasis prior to the hurricanes was on working with operators to make sure backup power generation was available.

“For the most part, we’ve had a lot of encouraging news. The restoration efforts are moving ahead. Some pipelines have already resumed operations at reduced capacity,” she said.

MMS was making helicopter fly-overs to investigate reports of oil spills and sheens. While too soon for definitive reports, officials said there was one sheen, estimated to be 9 bbl, that was spotted Sept. 15. Subsequent investigations showed the sheen had dissipated.

Reports of pipeline damage included:

  • The 2.4 million b/d Colonial products pipeline serving the East Coast resumed partial operations Sept. 14.
  • Explorer Pipeline Co., the second largest refined products pipeline in the US, regained power at its Pasadena, Tex., point of origin but not at Port Arthur. The pipeline was making deliveries of petroleum products in the Houston area. Officials said they hoped to deliver refined product to points further along on its Lake Charles-to-Chicago pipeline.
  • Shell Pipeline transported crude inland from some eastern Gulf of Mexico production facilities as workers continued assessment of its Central Gulf and western gulf systems. Damage was reported at Shell Pipelines’ Eugene Island 331 intermediate pumping station platform where an underwater survey team was inspecting. The Shell-operated Capline Crude Oil Pipeline System continued to deliver crude from St. James, La., and planned to ramp up rates as additional crude supply becomes available.
  • Work was in progress to mitigate spot flooding and restore electricity at some facilities at the western end of the Houma-to-Houston crude system. The system was not able to move crude from Houma, La. Shell said its finished product storage and delivery systems in the Houston and Port Arthur areas were using portable generators to make limited deliveries from inventory to connecting truck terminals and pipelines.
  • The Louisiana Offshore Oil Port resumed unloading crude oil from tankers Sept. 15 and was making deliveries to customers from its Clovelly storage facility.
  • TEPPCO resumed service on its 30-in. crude oil pipeline to Cushing, Okla., and its 20-in. refined products pipeline. Power has been restored to the Seaway dock and Jones Creek terminal in Freeport, Tex., and those facilities are ready to receive crude shipments when the port reopens.
  • Enterprise Products Partners restarted its NGL and propylene fractionators in Mont Belvieu, Tex., as well as major pipelines on the Texas-Louisiana Gulf Coast. In Louisiana, most processing plants are either operating or waiting to receive natural gas production, officials said.
  • Targa Resources Partners reported only minor disruptions in its gulf operations as a result of market supply issues. Its onshore Louisiana facilities are fully operational, and volumes are expected to ramp up to normal levels in a matter of days.
  • Plains All American said damage to its Gulf Coast facilities appeared minimal.

Refinery damage

On Sept. 16, the US Coast Guard reported 103 vessels waiting outside the Houston Ship Channel, which remained open only to outbound traffic with drafts of less than 12 ft. The ports of Beaumont and Port Arthur were open to vessels with drafts of less than 16 ft. The ports of Freeport, Texas City, and Lake Charles, La., remained closed pending clearance of navigation hazards. The Port of Morgan City, La., remained in operation in spite of extensive flooding from eastern Louisiana through Texas.

The Department of Energy reported 14 refineries with total capacity of 3.57 million b/d remained shut down Sept. 15, while 13 refineries (total capacity of 3 million b/d) were operating at reduced rates. In the Houston area, 5 petroleum products pipelines with a total capacity of 1.18 million b/d were shut down. Another nine pipelines with total capacity of 6.69 million b/d were operating at reduced rates. Officials reported 24 natural gas processing plants (12.2 bcfd total capacity) in Texas, Louisiana, and Alabama remained shut down. As of Sept. 16, 42.1% of Texas and 2.8% of Louisiana remained without electrical power.

Having delivered 380,000 bbl to Marathon Petroleum and Placid Oil, DOE said it would deliver an additional 309,000 bbl of oil from the Strategic Petroleum Reserve to ConocoPhillips’ Wood River refinery and Placid Oil’s Port Allen refinery. DOE has released a total of 939,000 bbl from the SPR this month; Citgo requested 1 million bbl on Sept. 14.

Reports of refinery damage included:

  • Valero Energy Corp. said power was restored to most production units at its 245,000 b/d Texas City refinery, and the company was working to restore power at its 295,000-b/d Port Arthur refinery. Its 130,000-b/d Houston refinery was in the preliminary stages of a multiday restart process. “The plant has power and steam, as well as a limited supply of industrial gases, said company officials. However, production at the main process units is not expected for several more days, and adequate supplies of external industrial gases remain an issue. Valero’s other Gulf Coast refineries remain in operation at planned rates. Its refinery in Ardmore, Okla. remains at reduced rates due to supply issues.
  • Total SA’s 232,000 b/d refinery in Port Arthur remained without power. The company had no estimate on the extent of the damage or when the plant would be brought back up.
  • Shell Oil Co.’s 332,000 b/d Deer Park, Tex., refinery and chemical plant was in the initial phase of restarting operations, with normal operating rates expected in 5-7 days. The Deer Park refinery is jointly owned by Shell and Mexican state oil firm Petroleos Mexicanos.
  • Motiva Enterprises LLC (a Shell-Saudi Aramco joint venture) said minor repairs were underway at its Port Arthur refinery, which was without power Sept. 16. “A priority is establishing generator power to enable movements of gasoline and diesel in inventory to the pipeline distribution system. It is too early to predict when the refinery will resume normal operations,” officials said.
  • Motiva’s Norco, La., refinery was operating at 80% of capacity, limited by dependent resources affected by Hurricanes Gustav and Ike. Its 235,000 b/d Convent, La., refinery was making some blending components but is not yet able to make finished gasoline and other products. Shell’s chemical plant in Mobile was operating normally. Its chemical plant in Geismar, La., was still in start up sequence and supplying limited product from existing inventory.
  • The 288,000 b/d Flint Hills refinery in Corpus Christi restarted but was operating at reduced throughput.
  • ExxonMobil’s 349,000 b/d Beaumont, Tex., refinery remained without electrical power; the company said some units of its Baytown refinery might be up later in the week.
  • ConocoPhillips was restarting its 300,000 b/d Sweeny, Tex., refinery Sept. 15. Its 195,000 b/d Alliance refinery in Belle Chasse, La., shut down more than 2 weeks since Hurricane Gustav, also suffered some flooding from Ike.
  • Marathon Oil said its 76,000 b/d Texas City refinery was without power. GreenHunter Energy Inc. said its biodiesel plant near Houston was expected to be out of service 6-8 weeks pending restoration of electricity and natural gas service. Meanwhile, it’s getting temporary interruptible power from diesel and gasoline-powered generators.

Safety emphasized

API’s Cavaney said refiners will emphasize safety as well as speed in bringing their facilities back into operation. “Typically, a restart can take 3-5 days, depending on the shutdown,” he told reporters.

Crude oil and product inventories along the Gulf Coast were below normal before Ike’s arrival because the area was recovering from Hurricane Gustav, Cavaney said. “Already, there are supplies rerouted from other areas that are coming into the region,” he said.

“We have seen no evidence of leaks from platforms where the shutoff valves apparently worked, as they did with Katrina and Rita,” he said.

Cavaney said that government officials as well as the oil and gas industry apparently applied lessons from Katrina and Rita in responding to Gustav and Ike. “The cooperation from the federal to the local level has been tremendous,” he maintained.