Hurricane Katrina, certainly among the worst natural disasters to strike the United States in recent history, also caused widespread facility damage and oil and gas supply disruptions in the Gulf of Mexico and at major oil refineries along the Gulf Coast.
With the worldwide supply of oil already tight, the disaster could not have come at a worse time. Production shortfalls in the Gulf caused oil to soar above $70 per barrel for the first time, and some industry analysts predicted gasoline prices at the pump would soon top $3 per gallon. In fact, retail prices climbed to near $3.50 per gallon in some regions, including Georgia and Tennessee, and reportedly to over $6 per gallon in Atlanta, Ga.
“We’re going to have shortages and prices are going to go up,” legendary oilman T. Boone Pickens told Fox News Aug. 31. “Gasoline is going to be extremely tight for us.”
President George W. Bush, in an effort to ease pressure on escalating crude prices, opened the nation’s 700-million-barrel Strategic Petroleum Reserve to oil-strapped producers in the Gulf, which normally provides about 25 percent of the combined domestic oil and gas supply in the United States.
More than 90 percent shut-in
More than 90 percent of the Gulf’s daily oil production, or 1.356 million barrels, remained shut-in as of Sept. 1, according to the U.S. Minerals Management Service. The cumulative production shut-in from Aug. 26 to Sept. 1 totaled 7.441 million barrels. The Gulf yields 547.5-million barrels of oil per year.
Additionally, nearly 80 percent of the Gulf’s daily natural gas production, or 7.866 billion cubic feet, were closed in as of Sept. 1, MMS said, adding that a total of 42.079 billion cubic feet of gas was shut-in over the six-day period. The Gulf produces about 3.65-trillion cubic feet of gas per year.
However, even if oil and gas production from the Gulf were to resume quickly, it is doubtful Gulf Coast refineries could handle the load anytime soon. That’s because refining capacity nationwide was tight before the hurricane struck.
About 1.9 million barrels per day of Gulf Coast refining capacity was reported off line as of Aug. 30, with many plants down completely and some operating at reduced rates. Among the casualties was Chevron’s huge Pascagoula refinery in Mississippi, located east of storm-wrecked New Orleans.
“If you don’t have a refinery operating, it’s hard to use oil that’s available,” noted Pickens, a former corporate raider and founder of energy investment group BP Capital.
LOOP: limited deliveries
Also closed was the Offshore Louisiana Oil Port, which shut down ahead of the storm. LOOP is a critical system, handling about 1 million barrels per day of foreign oil, or about 10 percent of weekly U.S. imports.
Officials said Sept. 1 that LOOP was resuming some of its crude oil operations with limited deliveries to a storage facility at St. James, La., and to a local refinery. Also, they said LOOP would begin pressure testing a pipeline that connects its marine facility located 20 miles offshore Grand Isle. However, the U.S. Coast Guard said that most ports on the Gulf Coast were closed.
Sixty-eight Gulf producers, in addition to reporting to MMS the amount of daily shut-in production from their operations, also reported that 51.65 percent of the 819 manned platforms and 47.76 percent of 137 drilling rigs operating in the Gulf had been evacuated as of Sept. 1. The sheer number of evacuated facilities confirms the size and power of Katrina, a monstrous Category 5 hurricane just before moving ashore near New Orleans early Aug. 29.
Producers and oilfield service companies were still assessing damage to offshore platforms, rigs and pipelines on Sept. 1. According to one news report, limited access to helicopters and other service equipment at staging areas in storm-torn Louisiana was slowing the assessment process. Producers said it would take them several days to get a clear picture of the damage offshore.
Apache lost eight platforms
Big exploration and production independent Apache said it lost eight production platforms to the hurricane, all located in the relatively shallow waters of the Gulf’s continental shelf at Main Pass 312-JA, South Timbalier 161-A, South Pass 62-A and 62-B, and West Delta 103-A, 104-C and 33-B. Prior to the storm, total production from the eight platforms was reported to be 7,158 barrels of oil and 12.1 million cubic feet of gas per day.
“A detailed inspection of damage to other facilities is under way,” the company said. “Apache personnel have begun the process of restoring production as pipeline and processing facilities become available.”
Pioneer Natural Resources, another large independent producer, said an initial inspection of its production and drilling facilities at the Canyon Station platform and the Devils Tower spar indicated minimal damage from the storm.
“Crews are returning to the facilities to complete the assessment of the condition of the sub-sea systems at both locations,” Pioneer said. “The condition of downstream pipelines and facilities has not yet been fully determined.”
Pioneer-operated production at the Vermillion 397 platform was restarted Aug. 30, Pioneer said, adding that production from Eugene Island 208, East Cameron 322 and South Pelto 13 would be restarted upon authorization from the operators of export pipelines.
Production from the Pioneer-operated Falcon Corridor in the Western Gulf, which represents roughly 60 percent of the company’s Gulf production, was not affected by the storm, the company said.
Newfield Exploration reported losing the company’s “A” platform at Main Pass 138 in the Eastern Gulf. Prior to shutting in production because of the hurricane, the facility was producing 1,500 barrels of oil per day.
“Boats and helicopters are mobilizing to better access damages, identify any environmental impacts and begin the repair process,” Newfield said Aug. 30.
Diamond: two rigs adrift
Diamond Offshore, a major offshore drilling contractor, said it located the second of two drilling rigs that went adrift during the hurricane. The Ocean Warwick jack-up rig grounded on Dauphin Island about 66 miles from its original location some dozen miles offshore Louisiana, the company said, adding that the rig sustained significant damage.
Earlier Diamond reported finding the Ocean Voyager, a semi-submersible rig that broke free from its moorings during the storm about nine miles north of its original location on Mississippi Canyon Block 711. The company said it couldn’t determine whether the rig was damaged.
Transocean, the world’s largest offshore drilling contractor, said a preliminary inspection of the company’s semi-submersible rig Deepwater Nautilus revealed significant damage to the rig’s mooring system and the loss of about 3,200 feet of marine riser and a portion of the unit’s sub-sea well control system. The rig, which drifted off location, was secured by an offshore service vessel roughly 80 miles from its moored position prior to the storm, the company said.
Preliminary inspections of three other moored semi-submersibles, the Transocean Marianas, Transocean Amirante and Falcon 100, showed no damage, Transocean said. Also, the company’s six fifth-generation deepwater floaters were moved off location before the storm’s arrival.
Meanwhile, offshore drilling contractor Ensco International said initial observations of Ensco 29, one of the company’s three Gulf of Mexico platform rigs, indicated that the rig sustained significant damage as a result of the hurricane. The platform is insured for $15 million and carries a net book value of about $7.6 million.
Other preliminary inspections indicate Ensco’s jack-up rigs sustained no significant damage from the storm, the company said, adding that workers reoccupied some rigs. Ensco 7500, the company’s deepwater semi-submersible rig, was reboarded, power restored and was said to be holding position. The rig, listing four degrees following the storm, was trimmed and an inspection launched, the company said.
