Ike damage to US oil sector seen limited so far

HOUSTON, Sept 15 Mon Sep 15, 2008 12:11pm EDT

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HOUSTON, Sept 15 (Reuters) - A big chunk of U.S. energy production shuttered by Hurricane Ike could recover quickly amid early indications the storm caused only minor to moderate damage to platforms and coastal refineries.

The biggest hurdle for the oil industry will likely be restoring power supplies knocked out by the storm, which raked southeast Texas Saturday and idled a quarter of U.S. crude oil and refined fuel production, analysts said.

"Initial indications are that refineries could be back within days and not weeks and that damage wasn't as bad as it could have been offshore," said Sarah Emerson, director of Energy Security Analysis Inc in Boston.

U.S. retail gasoline prices spiked more than 15 cents in the storm's wake to $3.84 a gallon amid fears of supply disruptions, according to the AAA's daily survey of 100,000 service stations.

But crude oil futures dove more than $4 in trading Monday -- a sign retail prices could come back down -- as dealers bet production would rebound and as wider economic troubles dogged the demand outlook. [O/R]

"The sell-off is partly because Hurricane Ike hasn't done significant structural damage to oil facilities, as well as growing concerns about the economy," said David Moore, analyst for Commonwealth Bank of Australia.

TRICKLE OF DAMAGE REPORTS

The U.S. Coast Guard said it received reports of damage to Gulf of Mexico offshore energy installations, the vast majority of which halted production ahead of Ike, but said details were not yet available.

So far, Shell Oil (RDSa.L), the largest oil producer in the Gulf of Mexico, said it found "moderate damage" on some of its oil and gas production platforms but no major structural damage of the kind seen in the wake of hurricanes Katrina and Rita in 2005.

Diamond Offshore Drilling Inc (DO.N) said one of its shallow water rigs was significantly damaged.

There are about 4,000 energy structures in the Gulf of Mexico, according to the U.S. Minerals Management Service.

As of Sunday, some 99.6 percent of the Gulf of Mexico's 1.3 million barrels per day of crude oil production and 91.9 percent of its 7.4 billion cubic feet per day of natural gas production remained shut, according to the MMS.

On the coast, most refineries including the giant Exxon Mobil (XOM.N) plant in Baytown, Texas, reported little or no damage, and officials said the plants escaped heavy flooding.

In the only sign of damage to refineries so far, Shell said its joint-venture Deer Park refinery near Houston required some repairs after the storm.

But even energy facilities that escaped damage could be slowed by electricity transmission problems.

"Even though there is little indication of serious damage, I think it will be difficult to restart these oil refineries because of the power issue," said Chris Jarvis, senior analyst at Caprock Risk Management in Hampton Falls, New Hampshire. "Parts of the power system took a devastating hit."

Ike left more than 2 million customers in Texas without power and the state's utility said the recovery could be slow. Some seven of the state's oil refineries appeared to have no power in Ike's aftermath, according to a Reuters eyewitness. [ID:nN14449700]

Power problems could also slow down restart efforts for the swath of pipelines around the Gulf Coast that shut down due to Ike, experts said.

The Louisiana Offshore Oil Port, which funnels oil from tankers in the Gulf into a pipeline system that feeds coastal refineries, said on Monday it restarted marine offloading but said rates were reduced by a lack of available electricity. (Reporting by Erwin Seba, Bruce Nichols, Eileen O'Grady in Houston, Richard Valdmanis in New York; editing by Jim Marshall)

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