Royal Dutch Shell Group .com

Lloyds List: Texas refineries batten down for Rita: “Shell Oil closed its Houston-area refinery.”: Friday Sept 23, 2005


Rajesh Joshi in New York


HURRICANE Rita, which forecasters believe could make landfall between Corpus Christi and Galveston in Texas at the weekend, has raised the spectre of even more devastation in the beleaguered US refining sector, as the region's refineries account for a quarter of US refining capacity.


Experts are emerging from the woodwork to prepare the American consumer for '$5 a gallon gasoline'. With four Louisiana refineries accounting for 5% of US production still shut down, the pump price is only now slowly retreating from the record $3.25 levels seen in Hurricane Katrina's aftermath.


Other experts have dismissed such talk as hysteria, saying most Texas refineries are above sea level and therefore somewhat harder to flood, and are built to withstand storms. Nevertheless, as oil companies prepared yesterday to shut Texas facilities at least temporarily, some price impact was inevitable and was duly reflected in commodities markets.


More critically, however, the impending arrival of Hurricane Rita has already washed away some of the painstaking gains in oil production made since Hurricane Katrina.


The US Minerals Management Service, a division of the Department of the Interior, said yesterday 73.1% of the total US Gulf crude production of 1.5m barrels per day and 47.1% of the region's gas production of 10bn cu ft per day was shut down as a combined effect of Katrina and Rita.


These percentages stood at 95% and 80% respectively on the day Katrina arrived, but had steadily dropped to 55% and 34% by Monday 19, September. Altogether, the MMS said 5% of the annual crude oil production in the US Gulf and 3.4% of natural gas production has already been lost because of the two storms.


The MMS said 469 out of the 819 staffed platforms and 69 of the 134 rigs in the Gulf of Mexico were evacuated as of yesterday. These figures stood at 84 and two before the Rita precautions were ordered.


The Gulf of Mexico accounts for 28% and 19% respectively of total US crude and natural gas production, and 47% of total US refining capacity of 17m bpd.


This statistic makes the bottleneck even more stark on the gasoline and heating oil fronts, some experts explained. Texas has 26 refineries, mostly along 300 miles from the Louisiana border to Corpus Christi, accounting for more than 25% of US refining capacity.


Hurricane Rita's actual landfall spot would be important in the context of post-storm measures and appraisals, but as of yesterday most refiners were taking no chances.


ExxonMobil's Baytown refinery, said to be the biggest in the US, was open Wednesday, although non-essential workers were sent home. ExxonMobil was to assess the situation in Baytown and its refineries in Beaumont and Baton Rouge, Louisiana, yesterday morning, and make a decision on closure.


Valero Energy Corp had already shut its refineries in Texas City and Houston, and was operating in Corpus Christi with a limited crew. BP was closing its massive Texas City refinery, and Marathon Oil Corp followed suit at its plant nearby. Shell Oil closed its Houston-area refinery.


Even if Hurricane Rita leaves these facilities untouched, it would take up to a week to start these refineries up again, which could put pressure on the US supply of gasoline, jet fuel and diesel, experts said. 


Click here to return to HOME PAGE

Click here to return to Royal Dutch Shell Group .com