Ike damage to U.S. oil sector seen limited so far

HOUSTON (Reuters) - A big chunk of U.S. energy production shuttered by Hurricane Ike could recover quickly once facilities have electricity and other power supplies, as it appears the storm caused only minor to moderate damage to platforms and coastal refineries.

The U.S. Minerals Management Service said all but a drop of the 1.3 million barrels per day of crude oil extracted from the Gulf of Mexico was shut on Monday and 93 percent of the 7.4 billion cubic feet of natural gas production was closed after Ike swept over the region.

Ike damaged or destroyed 11 offshore production platforms or drilling rigs, but so far there have been no big spills, the U.S. Coast Guard said Monday. The Gulf provides a quarter of U.S. oil production and 15 percent of its natural gas output.

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. refined fuel production, analysts said.

"As with Gustav, power availability (as well as reportedly limited supplies of steam and industrial gases at some plants) will be the main hurdle to clear before facilities can restart," J.P. Morgan wrote in a note.

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.

"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

So far, Shell Oil, 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 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.

On the coast, most refineries including the giant Exxon Mobil 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."