Industry assessing damages in wake of Hurricane Lili

Oil and gas companies operating in the Gulf of Mexico and along the Gulf Coast areas of Louisiana, Texas, and Alabama were surveying facilities for damage in the wake of Hurricane Lili.

By Judy Clark
Associate Editor

HOUSTON, Oct. 4 -- Oil and gas companies operating in the Gulf of Mexico and along the Gulf Coast areas of Louisiana, Texas, and Alabama were surveying facilities late Thursday and early Friday for damage in the wake of Hurricane Lili, and where possible, testing and slowly starting up facilities shut down before the storm's approach.

In all, Lili forced the evacuation and shutdown of 748 production platforms and 96 drilling rigs in federal waters in the central and eastern gulf, the US Minerals Management Service reported Friday. Reporting to MMS were 70 companies that shut in total production of 1,585,015 b/d of oil and 9,931 MMcfd of natural gas, adding to the production shut-in amounts from the previous week's encounter with Tropical Storm Isidore (OGJ Online, Oct. 1, 2002).

The American Petroleum Institute's weekly inventory data showed a crude oil inventory drop of 13.94 million bbl last week, to 275.9 million bbl, when Isidore curtailed production from the gulf and shut the Louisiana Offshore Oil Port (LOOP).

Some refineries were already feeling the supply pinch from the back-to-back storms, which caused production shut ins in the gulf this week.

San Antonio-based Valero Energy Corp.—which had just resumed operations at its Krotz Springs, La., refinery Monday after experiencing a delay in crude shipments due to Isidore—shut the refinery down again Wednesday to wait out Lili. Isidore had caused a 70,000 b/d drop in that refinery's throughput capacity—to 55,000 b/d.

"We expect to restart over the weekend if possible, depending upon damage or loss of outside power supply," said Mary Rose Brown, Valero's senior vice-president, corporate communications.

The company's Texas City, Tex., refinery near Houston, which experienced a 15,000 b/d drop in thoroughput capacity, also has "reduced rates further" due to its inability to get crude deliveries to the refinery because of the shutins from advancing Lili, Brown said. "Our crude unit has been shut back an additional 60,000 b/d," which (totals) 75,000 b/d less than its planned rate, she said. In addition, "(The) Corpus Christi (plant) has reduced crude rates by 10,000 b/d and Houston. . .by 15,000 b/d," Brown said.

LOOP, which is located 18 miles south of Grand Isle, La., was directly in the eye of Lili as it made its way ashore, and the offshore port and onshore St. James, La., terminal have been shut down since Tuesday. LOOP's onshore pipelines also shut down Wednesday night prior to the hurricane's landfall.

Officials from LOOP have completed their inspection of the offshore port and are in the process of restarting marine operations. "We expect to start offloading tankers Friday evening," a LOOP spokesperson said.

Meanwhile, LOOP, which is connected to more than 50% of the US refining capacity via pipelines, is making deliveries from its onshore Clovelly Dome underground storage facilities in Louisiana.

Four of the pipelines serve refineries in Louisiana and along the Gulf Coast. Locap pipeline connects to Shell Oil Co.'s 1.2 million b/d Capline pipeline in St. James, which transports oil to several Midwest refineries. Capline also had been shut down overnight but was restarted (at reduced rates) at 5:30 pm (CST) Thursday, Shell said.

During Capline's shutdown, the US Department of Energy loaned Shell 500,000 bbl of crude oil from the Strategic Petroleum Reserve to keep Shell storage tanks in Louisiana at 75% capacity, protecting them from potential high winds and enabling Shell to continue pumping crude that was already en route upline to refineries in the Memphis area. Shell has already begun to replace some of the borrowed volumes, a DOE spokesperson told OGJ.

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Unlike the vast, blustery Isidore, the more compact and powerful Lili reached Category 4 status in the gulf, with winds of up to 150 mph by 2:00 pm (CDT) Wednesday, prompting the evacuations and shutdown of facilities both along the coast and off Louisiana and East Texas.

Although downgraded to Category 2 status prior to reaching landfall in south-central Louisiana Thursday morning, Lili's maximum sustained winds of 100 mph and even higher gusts may have left more damage in her wake than Isidore, particularly offshore. In addition, damages from the 10-15 ft storm surge, driving rains, and isolated tornados were a possibility. The extent of long-lasting damage to industry production capability, if any, has yet to be determined.

"Until Lili has passed, we will not know the full impact of the storm on our production volumes and operating activities," said Dallas-based independent Remington Oil & Gas Corp. Thursday. "Based on current forecasts, we do not expect to resume offshore operations until Friday or Saturday." The company began its evacuation of offshore drilling and production personnel Tuesday.

Houston-based Newfield Exploration Co., which operates about 140 platforms in the gulf, shut in its production on Wednesday, "the second time in as many weeks," due to the hostile weather. From Sept. 24-29, Newfield had shut in about 1.5 bcfe of net production due to Isidore, the company said.

Newfield began evacuating non-essential personnel in the gulf on Sept.30, and began production shutins Tuesday. It shut in a total of 430 MMcfd of gas and 25,000 b/d of oil. Newfield's net production in the gulf is nearly 265 MMcfd of gas and 13,500 b/d of oil.

Shell Oil Co.'s 425,000 b/d of oil and 1.9 bcfd of natural gas operations in the gulf were shut in and all personnel fully evacuated. However, the company said Thursday that its 120,000 MMcfd Mobile Bay natural gas production would remain online, and "some" of its 150,000 MMcfd western gulf natural gas operations "may be operated remotely."

Shell's staff began returning to their gulf facilities Friday morning. "Following damage assessments and safety checks, production for Shell in the Gulf of Mexico will be gradually increasing over the upcoming weekend," Shell said.

Shell also said its Shell Norco chemical plant and its Motiva Norco refining facilities at Norco, La., are continuing to operate at reduced rates, and its Convent, La., Motiva refinery in St. James Parish, which has been operating at reduced rates, will be returning to normal operations over the next several days.

Ocean Energy Inc., Houston, suspended all drilling activity and shut down production in the gulf Wednesday. "All (Ocean Energy) personnel and associated contract employees (were) evacuated," the company said.

The shutdown impacted production from 21 Ocean Energy-operated platforms in the gulf as well as the company's new deepwater production in the East Breaks complex. The company's total production volumes, including nonoperated production, affected by the closure are more than 60,000 boe/d.

Swift Energy Co., Houston, said it sustained "a minor amount of wind damage" from Isidore and was in the process of re-starting field operations at its Lake Washington, La., field, when the decision was made to again shut down operations before Lili made landfall. The company moved its drilling rig, which had been active since April, to safe harbor and shut in production on Tuesday.

Energy Partners Ltd. (EPL), which also suspended drilling operations and shut in "virtually all" of its oil and gas production in response to Lili, said the net impact on third quarter production volumes from the Isidore shutin was about 100,000 boe. EPL had not yet determined the impact of Lili on its fourth quarter production volumes and operating activities.

Petroleum information from DOE's Energy Information Administration for Wednesday put Isidore's effect on petroleum as a decline in US commercial crude oil inventories (excluding those in the SPR) of 10 million bbl last week. "Commercial crude oil inventories are now at the lowest absolute level since at least 1982, and nearly 34 million bbl below the level last year at this time," EIA said.

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