Hurricane Ivan, which swept through the Gulf of Mexico with a vengeance a month ago, is contributing to a worldwide oil shortfall that has pushed crude prices well over $50 per barrel and caused U.S. production to fall to its lowest point in more than a half-century.
Oil disruptions in the Gulf of Mexico, together with dips in Alaska production due largely to facility maintenance, reduced U.S. production 15 percent in September from last year to 4.85 million barrels per day, the lowest level since August 1949, according to the American Petroleum Institute.
Nigeria, Norway strikes impact prices
Also contributing to high commodity prices was a strike by oil workers in Nigeria and expanded strikes in Norway and continuing violence in the Middle East.
Ivan, which ripped through the U.S. Gulf with 165 mile-an-hour winds and 50-foot waves, also came at a time when record oil demand in the United States and China exceeded production growth.
Most of the shortfall in U.S. production can be blamed on Ivan, said to be the most destructive storm for energy companies since Hurricane Andrew in 1992.
In fact, industry was still suffering from its lingering effects at deadline Oct. 14, with nearly 28 percent or roughly 471,300 barrels of U.S. Gulf oil production still closed in. The region usually produces about 1.7 million barrels of oil per day.
Also shut in was about 1.7 billion cubic feet per day of natural gas, or about 14 percent of the 12.3 billion cubic feet of gas normally produced on a daily basis.
However, perhaps as much as 150,000 barrels of oil per day of U.S. Gulf production could be restored by the end of October, according to the U.S. Minerals Management Service.
Around the clock repairs
“The companies are engaged in around the clock repair operations,” said Chris Oynes, Gulf regional director for MMS.
MMS said most of the damage caused by Ivan was to pipelines and that Gulf operators were approaching MMS with alternative ways to return production while pipeline repairs continue, including the use of shuttle tankers to move production ashore.
“MMS will carefully consider the technical and environmental risks of any proposals filed,” Oynes said.
Of the 4,000 platforms and 33,000 miles of the pipelines in the U.S. Gulf, MMS estimated that 150 platforms and 10,000 miles of pipelines were in the direct path of Ivan’s fury.
“A substantial amount of the deferred production is directly attributable to damage that has occurred along pipeline routes rather than actual structural damage to producing platforms,” MMS concluded.
Pipelines in mud slide areas off the mouth of the Mississippi River, which were buried by as much as 20 to 30 feet of mud, experienced failures and “will take a significant effort to locate and repair,” MMS added.
Only two pipelines back on line
Overall, a dozen large diameter pipelines 10 inches or larger were reported damaged in federal waters. Only two of the pipelines were back on line as of Oct. 14.
Major pipelines damaged by the hurricane were three Tennessee Gas pipelines on Ship Shoal blocks 144, 198 and 77, three Southern Gas pipelines on Main Pass blocks 293 and 289 and 306, an Equilon pipeline on Mississippi Canon Block 474, a BP pipeline on Main Pass Block 225, a Williams pipeline on Mississippi Block 20, two ChevronTexaco pipelines on Grand Isle Block 37 and South Pass Block 49, and a Taylor Energy pipeline on Mississippi Canyon Block 21.
Some platforms destroyed
Ivan also destroyed a number of production platforms in the U.S. Gulf, including three operated by Noble Energy on Main Pass blocks 293, 305 and 306. Also destroyed were platforms operated by ChevronTexaco on Viosca Knoll Block 294, Forest Oil on Main Pass Block 98, and Taylor on Mississippi Canyon Block 20.
Platforms that received major damage were operated by Shell on Main Pass Block 252 and Viosca Knoll Block 956, by ChevronTexaco on Viosca Knoll Block 786, by Total on Viosca Knoll Block 823, by Dominion on Mississippi Canyon Block 773, and by Murphy Oil on Mississippi Canyon Block 582. None of these platforms had resumed production as of Oct. 14, according to MMS.
MMS said five drillings rigs also received major damage. Reportedly, at least a dozen refineries closed or curtailed operations because of Ivan.
More than 19M barrels of oil shut in
Since operators began evacuating and shutting in production ahead of Ivan back on Sept. 11, MMS estimated that more than 19 million barrels of oil and over 82 billion cubic feet of natural gas were shut in as of Oct. 13. Ivan moved through the Gulf on Sept. 16.
Meanwhile, analysts fear that pipeline and facility damage caused by Ivan could push up heating oil and diesel prices to record levels during the upcoming winter months in North America. U.S. stockpiles of heating oil have been running about 6 percent below 2003 levels and have been slow to increase because of the hurricane.
Winter fuel also is reportedly in short supply in other regions of the world. European distillate inventories were roughly 3.4 percent below last year and kerosene supplies in Japan were down 20 percent from 2003.
Record world oil demand growth
According to the International Energy Agency, worldwide oil demand is expected to expand at 2.71 million barrels per day in 2004, the fastest in 24 years. However, IEA expects growth to slow to about 1.45 million barrels per day in 2005 due to high prices.
Saudi Arabia, the United Arab Emirates and Kuwait, which together make up nearly half of OPEC’s oil production, said they are committed to increasing capacity to meet soaring demand.
