THE NEW YORK TIMES: Approaching Storm Slows Oil Output in Gulf of Mexico: “Royal Dutch Shell, the largest oil producer in the gulf, said in a statement that it had evacuated 983 employees and shut down production of 420,000 barrels of oil and 1.345 million cubic feet of natural gas a day.”: Monday 29 August 2005

By SIMON ROMERO

Published: August 29, 2005

HOUSTON: Energy companies rushed to shut down oil rigs and refineries and evacuate employees in the Gulf of Mexico as Hurricane Katrina approached over the weekend, shrinking oil output in the area at a time when markets are already on edge over surging energy prices.

Crude oil futures on the New York Mercantile Exchange climbed as high as $70.80 a barrel on Sunday night as traders factored in the threat to the most important oil-producing region in the United States. That was up $4.67 from the close on Friday. Oil prices have never risen above $70 a barrel, but when adjusted for inflation they are still lower than they were in the early 1980's.

The evacuations, which were mostly completed by Sunday, cut oil production in the Gulf of Mexico by more than 600,000 barrels a day, or more than a third of the area's normal output of 1.5 million barrels a day. Large refining and oil-shipping installations in southern Louisiana, where the hurricane was expected to make landfall early Monday, also shut down over the weekend.

"The oil market is going to be on fire until we figure out exactly what is going on," David Pursell, a principal with Pickering Energy Partners in Houston, said in a telephone interview on Sunday. "There's fear on several fronts, from the capacity of this storm to tear up pipelines on the ocean floor to doing extreme damage to port infrastructure and platforms."

Speculation about a possible release of oil from the government's Strategic Petroleum Reserve led to a drop in oil prices at the end of last week, though traders said talk about such a plan was premature. The Bush administration has been hesitant to release oil from the reserve, which has 700 million barrels of oil, despite calls from Democrats in Congress to do so.

The focus on the reserve is bound to intensify as the hurricane takes its toll. The storm is expected to be the biggest disruption to oil production in the gulf since Hurricane Ivan last year, which reduced the area's yearly output by 7 percent after destroying 7 platforms and damaging more than 100 underwater pipelines. The Gulf of Mexico accounts for about a quarter of the nation's overall domestic oil production.

Gasoline prices for consumers may climb further as refining capacity is stretched by the storm. Chalmette Refinery, which is about 10 miles east of downtown New Orleans and processes 190,000 barrels of oil a day, shut down over the weekend. Calls to officials at Chalmette, a venture between Exxon Mobil and Petróleos de Venezuela, went unanswered on Sunday. Valero Energy said it was shutting down its St. Charles refinery in Louisiana, and Chevron was shutting down a refinery in Pascagoula, Miss., Bloomberg News reported.

Elsewhere, the Louisiana Offshore Oil Port, the nation's largest oil-importing terminal, 19 miles off the coast of Louisiana, stopped receiving crude oil from supertankers on Sunday. Altogether, about 6.5 million barrels of crude oil a day are imported along the Gulf Coast, largely to ports in Louisiana and Texas, while roughly 1.5 million barrels of oil a day are produced in domestic waters in the Gulf of Mexico.

Royal Dutch Shell, the largest oil producer in the gulf, said in a statement that it had evacuated 983 employees and shut down production of 420,000 barrels of oil and 1.345 million cubic feet of natural gas a day.

http://www.nytimes.com/2005/08/29/business/29platforms.html

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