Financial Times: Producers count cost of direct hit on hub: "Royal Dutch Shell said its Mars and Cognac platforms were damaged, as well as a large pumping station in the central Gulf of Mexico area.": "Nine Gulf Coast refineries are closed, three under significant amounts of water.": Friday 2 September 2005
By Thomas Catan
Even as it struggles to restart installations paralysed by Hurricane Katrina, the oil industry has begun to count the cost of the first big storm to hit directly the US's main energy hub.
Independent oil producer Apache said on Thursday it had lost eight of its production platforms in the Gulf of Mexico, which together had produced more than 7,000 barrels of oil and 12m cubic feet of gas a day. BP, Europe's largest oil company, said that seven of its platforms were "missing", accounting for about 1,000 barrels of oil production a day.
One of BP's terminals had also sustained "severe damage" after being struck by an unknown large object, the company said. The roof of one of the terminal buildings also flew off in the Force 5 winds and hit a pump.
Royal Dutch Shell said its Mars and Cognac platforms were damaged, as well as a large pumping station in the central Gulf of Mexico area. ExxonMobil, meanwhile, said that about 45,000bpd of oil and 760m cubic feet per day of natural gas were "shut-in" because of closed offshore installations. But early aerial inspections had revealed no serious damage.
All told, the hurricane closed down 91 per cent of daily crude production from the Gulf of Mexico and 83 per cent of natural gas production, according to US government figures. The Gulf of Mexico accounts for about a quarter of US oil and gas production.
Companies were still scrambling on Thursday to assess the damage to their offshore installations after early overflights were hampered by a lack of fuel and pilots.
"The real danger is not top-side damage but damage to pipelines, which will take much longer to assess," said Bruce Evers, an analyst at Investec.
"Clearly, even if there's nothing wrong with your platform, if you're not sure about the pipeline you can't do anything."
The damage to offshore installations may be considerable but it could pale compared with the devastation on the onshore refineries that produce petrol and other vital oil products. The US government's Energy Information Administration (EIA) yesterday warned that while some US oil refineries might be able to restart operations within two weeks, others would take "several months".
"Unlike 2004's Hurricane Ivan, which affected oil production facilities and had a lasting impact on crude oil production in the Gulf of Mexico, it appears that Hurricane Katrina may have a more lasting impact on refinery production and the distribution system," the EIA said.
Nine Gulf Coast refineries are closed, three under significant amounts of water. Those refineries account for 1.8m barrels of refining capacity a day, more than 10 per cent of the US total. A further 10 refineries around the country have been forced to curtail production, according to government figures.
ExxonMobil's refinery at Baton Rouge, for example, has reduced its output because of problems getting crude oil into the installation and shipping products out.
"Unfortunately, none of these problems can be fixed quickly," said Philip Verleger, an independent petroleum economist. "However, the greatest problem may be the loss of manpower."
Thousands of people are feared dead and hundreds of thousands are displaced after most of New Orleans was inundated.
Despite all the bad news, analysts say the losses are likely to be offset by the soaring costs of the products they produce. Because of fears of shortages, the price of petrol and other refined products is outpacing even that of crude oil. Reflecting the bullish outlook for the sector, energy stocks continued to rise yesterday. ExxonMobil, the world's largest publicly traded oil company, rose more than 3 per cent to $61.72.
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