The Wall Street Journal: Katrina May Have Spared Gulf's Offshore Pipelines: "Shell Exploration & Production, a unit of Royal Dutch Shell, said its underwater structures in the Gulf were intact. "Underwater damage assessments at Mars, Ursa, Cognac and West Delta 143 have been completed and there is no damage to underwater facilities," the statement said. "Damage appears to be limited to topsides equipment.": Friday 16 Sept 2005

Hurricane Katrina doesn't appear to have caused the same damage to offshore pipelines as Hurricane Ivan, although the terrible damage ashore bottled up oil and gas production, the U.S. Minerals Management Service said Friday.

MMS Director Johnnie Burton said she estimated that it would take another 30 or 40 days before U.S. Gulf offshore oil and gas production reaches 85% of pre-storm levels. But because of extensive damage to some onshore infrastructure, including terminals, storage facilities, refineries and pipelines, it could take the rest of the year before Gulf supplies to the market reach 90% of previous levels.

"When we look at the total complex system, I would guess that we won't see [levels as high as] 90% of production hitting the market for another three months, maybe by the year's end," Ms. Burton said in a briefing.

According to MMS data released Thursday, shut-in oil production was 842,091 barrels of oil a day, or 56% of total Gulf oil output, while suspended natural-gas volume was 3.41 billion cubic feet a day, or 34% of total gas output in the region. Ms. Burton said production had probably reached a plateau for now as most of the facilities that had not suffered much damage were already back in operation.

The MMS said that the "major hindrances to restoration of energy resources have been damage to onshore infrastructure, such as refineries, processing plants and pipelines; difficult and intermittent communications in the Gulf region; shortage of helicopters, boats, divers and power."

The agency, which is a division of the Interior Department that administers oil and gas production in the federal waters of the Gulf of Mexico, estimated that 35% of the oil production that had been shut in was due to problems with onshore infrastructure. Ms. Burton acknowledged that Royal Dutch Shell PLC's 140,000-barrel-a-day Mars platform had been "hit pretty hard" by Katrina and would take "a while to fix."

Shell Exploration & Production, a unit of Royal Dutch Shell, said its underwater structures in the Gulf were intact. "Underwater damage assessments at Mars, Ursa, Cognac and West Delta 143 have been completed and there is no damage to underwater facilities," the statement said. "Damage appears to be limited to topsides equipment." Underwater structures include risers, tendons, and subsea equipment.

The platforms, however, are still not operational. Mars platform sustained severe damage, with its topside collapsing, and the company said repairs may keep it offline through the end of the year. At WD-143, a flare stack collapsed, according to a person familiar with the situation. Shell's pipeline system in the Eastern part of the Gulf remains shut in and can't be tested until oil spills are cleaned up, that person said.

The MMS said 46 "mostly low-producing" structures were destroyed and 20 suffered extensive damage as Katrina whipped through Louisiana and Mississippi on Aug. 30. Six rigs that are still adrift have been located and remanned and are currently being re-powered, the service said.

"We may restore production within 30 or 40 days but if there is nowhere to go, the oil won't get to market," Ms. Burton said, noting that some key pipelines at junctions where several lines connect had been damaged. The U.S. Gulf of Mexico provides 29% of the country's domestic crude oil production and 19% of the domestic natural gas production.

Four refineries accounting for 5% of U.S. capacity remain shut in the wake of the storm. In addition, the Empire petroleum terminal operated by Chevron Corp. was damaged, bottling up output from Gulf of Mexico producers who are otherwise ready to come back on line.

The storm also inundated the important offshore oil-service port at Venice, La., and did significant damage to natural gas processing plants owned by Dynegy Corp., Enterprise Products Partners and others that have the capacity to handle more than 40% of the Gulf's output.

Hurricane Ivan had also bottled up production, but did so by triggering massive underwater mudslides that tore apart pipelines. Pipeline damage on the same scale doesn't appear to have happened with Katrina, though it's too early to draw firm conclusions, the MMS said.

Ms. Burton said oil companies were exploring ways to get around current infrastructure problems to get more oil and gas to market, including possible use of tankers to replace damaged pipeline and natural gas flaring, normally prohibited in the U.S. because of possible harm to the environment. "The companies are trying to figure out workarounds," she said.

Ms. Burton said she expected requests from companies to flare the gas, which the MMS would consider on a "case-by-case basis" and weigh against possible environmental impacts. She said the MMS could make a decision with two or three days after receiving requests to shuttle crude by tanker.

Also Friday, the MSS advised oil and gas companies not to restaff Gulf facilities damaged by Katrina until they're properly inspected and repaired. Some 82 platforms remained evacuated as of Thursday in the hard-hit New Orleans offshore district, where most of the shut-in production is located, according to MMS data. Two other platforms remain evacuated in the Houma offshore district.

Write to Karen Matusic at karen.matusic@dowjones.com and Katya Kazakina at katya.kazakina@dowjones.com