Katrina impacts substantial, API officials predict

Sept. 5, 2005
Emphasizing that it is too soon to be specific, officials from the American Petroleum Institute predicted Aug.

Emphasizing that it is too soon to be specific, officials from the American Petroleum Institute predicted Aug. 31 that oil and gas impacts in Hurricane Katrina’s wake will be substantial.

“While it is still too early to know the full effects on production and refinery facilities in and along the Gulf of Mexico, it is becoming increasingly evident that the impact of this devastating story on oil and natural gas operations will be significant and protracted,” API Pres. Red Cavaney said.

Comparisons with Hurricane Ivan last year are difficult, he continued, because the September 2004 storm’s total damages are still being calculated. “But my guess is that recovery [following Katrina] will be much longer because of all the flooding,” he said.

As of Aug. 31, the US Minerals Management Service reported that 1,371,814 b/d of Gulf of Mexico oil production, 91.45% of the recent total, and 8.346 bcfd of gas production, 83.46% of the recent gulf total, remained shut in.

Cumulative production losses in the gulf through Aug. 31 following Katrina reached 6,055,220 bbl of oil, or 1.106% of the 547.5 million bbl yearly total, and 34.19 bcf of gas, or 0.937% of the 3.65 tcf yearly total, MMS said.

Offshore drilling contractors said that two jack up rigs were lost and four semisubmersibles broke free of their moorings in the high winds. Crews were evacuated before the storm arrived, and flyovers afterward did not reveal major surface damage, the companies said in separate releases.

Near-shore and coastal producers said flyovers generally showed little damage to their operations, although flooding and damage in surrounding areas could affect restoration of full production. More detailed assessments will be conducted once employees return to the sites, they added.

Concerning operations in deep water, Cavaney noted that Shell Oil Co. said its Mars tension-leg platform had been damaged but that reports from it and other operators indicated no other major surface impacts.

Supply effects

While supply effects could be substantial, Cavaney cautioned that early dire predictions of long-term retail price spikes and supply interruptions may not necessarily materialize. Cavaney cited the Louisiana Offshore Oil Port, where early reports suggested major damage but which now will be able to resume operations once electricity is restored.

He also said that President George W. Bush’s decision to release crude oil from the Strategic Petroleum Reserve would help, although only refineries that could still operate would benefit. Operators of plants that were in Katrina’s path still need to determine impacts from the storm and flooding, he emphasized.

“One refiner has told us that, based on previous experience, steps were taken to minimize potential flooding impacts. For the others, we simply don’t know,” Cavaney said.

But John C. Felmy, API’s chief economist, said Katrina’s near-term effects could include reduced supplies in the eastern half of the US. Gasoline demand normally declines after Labor Day, he said, and inventories are higher than normal at that time, which could mitigate the impact.

“Even before prices went up, the government was predicting higher inventory builds for natural gas, heating oil, and propane for the coming winter months. Our advice to consumers is to prepare the best they can,” he said. Finished product imports could also climb in response to demand, he said.

“Before refiners determine what they can do operationally, they need to get the water out of their facilities,” Cavaney said. “They need to restore their electricity. Before they begin to move product through a pipeline, they need to have pressure. All this will take time.”

Raymond Paul, public affairs director for the Association of Oil Pipelines, said Aug. 31 that the Colonial and Plantation product pipelines, the Capline and LOOP crude oil pipelines, and the Dixie propane pipeline were still out of service following the storm.

Drillers issue updates

Offshore drilling contractors quickly reported effects of Hurricane Katrina as they returned crews, which had been evacuated, to assess damage and resume operations.

Transocean Inc. said its Deepwater Nautilus moored semisubmersible drifted off location but was being tracked by an onboard transponder beacon. Three other moored vessels remained at their sites, and six dynamically positioned vessels were moved out of the storm’s path before it arrived, the Houston company said.

GlobalSantaFe Corp. said that, of its five rigs in Katrina’s path, one-the GSF Arctic I semi-drifted from its original location and was grounded near the mouth of the Mississippi River, two were listing slightly, and two showed no signs of damage during a preliminary aerial inspection.

Noble Corp. said its Jim Thompson semi broke away from its mooring lines off Louisiana on Mississippi Canyon Block 935 and moved 17 miles north-northeast. It said the unit, which was being assisted by an anchor-handling vessel and tugboat, apparently did not suffer material damage, nor did its other semisubmersible, submersible, and jack up rigs.

Rowan Cos. Inc. said it had located all but one of its 22 Gulf of Mexico rigs following the storm. Initial indications were that damage was minor. It did not find the Rowan New Orleans, a LeTourneau 52-class slot jack up rig that it had secured at its prestorm working location in Main Pass Block 185. Rowan said it feared the rig, which was insured for $8.5 million and had an approximately $7.4 million carrying value, capsized off Louisiana. Rowan notified appropriate regulatory agencies.

Immediately following the storm, Diamond Offshore Inc. said it could not locate its Ocean Warwick jack up, which was moored about 12 miles off Louisiana in 200 ft of water on Main Pass Block 299. The rig was later found beached at Dauphin Island, Ala. 60 miles from its prestorm location. The contractor also said its Ocean Voyager semi broke free and moved about 9 miles from its moorings on Mississippi Canyon Block 711.

In Dallas, Ensco International Inc. confirmed that a towline broke and could not be reconnected the morning of Aug. 28 as it was moving its Ensco 7500 deepwater semi out of Katrina’s path. It located the rig, which had been working on Green Canyon Block 652, about 120 miles south of Louisiana on Aug. 30 and found no immediate damage.

Ensco said its jack ups in the gulf appeared free of major damage. It said one its three platform rigs in the gulf, Ensco 29, appeared to have sustained “significant damage.”