Lloyds List: US counts cost after Katrina wreaks havoc on oil industry: Bush eyes Strategic Petroleum Reserve, writes Rajesh Joshi in New York: Wed Aug 31, 2005
ONE of the most devastating hurricanes in US history has seized up about 13% of the nation's oil refining capacity, severely hit crude production, damaged offshore rigs and crippled one of the world's largest port complexes.
Hurricane Katrina portends an insurance bill of $9bn-$26bn, excluding damage to offshore oil production, according to experts quoted in the business press.
The Lloyd's market was quick to reassure its customers.
'Lloyd's expects to receive significant insurance claims... predominantly in relation to offshore energy installations in the Gulf, property damage and business interruption,' it said.
'Despite the severity of Katrina, the Lloyd's market is well equipped to manage the financial impact of a catastrophe on this scale.'
The storm moved away from the Gulf coast yesterday, leaving citizens and companies alike to assess the damage. The full extent of the damage could take weeks to emerge, officials said, but first reports were ominous.
The US Federal Minerals Management Service said 92% of the US Gulf's daily crude production, or 1.4m barrels a day, and 83% of gas production, or 8.3 bn cu ft, remained shut.
The actual figures could be higher due to under-reporting. The US Gulf produces about 28% of the nation's crude and 20% of natural gas.
President George W Bush indicated a willingness to tap into the US Strategic Petroleum Reserve, the emergency crude stockpile, if needed. Citgo said it would need 500,000 barrels of crude oil from this reserve to keep its Lake Charles refinery operating.
About 16% of US refining capacity is in Louisiana, and 12% in the New Orleans area. At least nine refineries were closed in anticipation of Katrina and a few others operating at reduced capacity, eliminating an estimated 2m barrels a day of US refining capacity out of a total of about 17m barrels.
As oil futures soared there was talk of a 'super spike' in gasoline prices to $2.75-$3 a gallon in the next 10 days. Analysts said restarting refineries was a delicate operation and if a sizeable number of those shut down were not back on stream by tomorrow the price impact of gasoline stock drawdowns could be even more dramatic.
Valero, the biggest US independent refiner, said it could be two weeks before its 185,000 bpd refinery in Norco, Louisiana, was restarted. The refinery was under three feet of water and was said to have sustained minor damage to its cooling tower.
Another concern was offshore rigs. According to the RigZone. com website, more than half of the 231 offshore rigs excluding inland barges working in the US Gulf were in Katrina's path.
A total of 48 rigs, worth about $2.9bn, lay within the most adversely affected areas where winds were at hurricane force in excess of 74 mph. Another 69 rigs, costing about $4bn, were in waters that experienced tropical storm winds of 36 to 74 mph.
Most oil companies yesterday did not have a tally for rig damage, saying they would have to wait until helicopters returned with factual details. However, in what the New York Times called an 'early sign', Royal Dutch Shell revealed that tracking device data from two unspecified rigs showed they had 'shifted out of location'.
Known incidents included the semi-submersible accommodation platform Chumel (13,074 gt, built 1983), which blew loose from its moorings, ploughed through a state docks terminal and then slammed into the Cochrane-Africatown USA bridge in Alabama.
The towline parted on the semi- submersible rig Ensco 7500 while it was under tow away from Katrina on Sunday. The towline could not be reconnected and the rig was evacuated before suspension of helicopter service in advance of the storm. All personnel on board were safe and initial reports did not disclose any apparent rig damage, operator Ensco said.
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