Oil companies check U.S. facilities in Gustav's wake

By Erwin Seba

HOUSTON (Reuters) - Energy companies were checking their oil rigs, refineries and pipelines for damage on Tuesday, a day after Hurricane Gustav slammed the Gulf Coast in the first big threat to U.S. fuel supplies since 2005.

Virtually all energy production in the Gulf of Mexico -- which accounts for a quarter of the nation's oil output -- remained shut down in the wake of the storm and companies said it would be days before they would know how quickly it could be restarted.

While initial checks showed little damage to offshore rigs and platforms, onshore refineries were finding the closure of waterways choking their supply of oil, leading them to consider asking for crude from the nation's emergency supply, according to Louisiana Gov. Bobby Jindal.

"We remain in close communication with the Department of Energy," an Exxon spokeswoman said. "As we assess the impact of Hurricane Gustav we continue to evaluate our supply options."

Refineries were also facing power shortages that could hinder their restart efforts.

The Louisiana Offshore Oil Port, the nation's only deepwater foreign crude tanker port, said their was no date for restarting operations as workers began preliminary checks of onshore and offshore facilities.

All 1.3 million barrels of crude and 95.4 percent of natural gas output from the Gulf remained shut on Tuesday. The area provides 15 percent of the country's natural gas production.

About a third of the nation's refining capacity was either shut or slowed down by the storm and initial checks showed that many of the plants appeared to have sustained little or no damage.

U.S. oil futures dropped more than $7 on Tuesday to below $108 a barrel -- the biggest decline in dollar terms since 1991 -- as dealers bet heavily that Gustav spared the energy industry the lasting damage inflicted by hurricanes in 2005.

"The market is breathing a sigh of relief that Gustav hit much weaker than originally forecast," said Chris Jarvis, senior analyst at Caprock Risk Management in Hampton Falls, New Hampshire. "It would take a really major storm to change the direction in crude oil in the midst of its major correction since July, and Gustav is not it."

The International Energy Agency (IEA) said on Tuesday there was no need to release strategic oil stocks after Hurricane Gustav as damages appeared limited, signalling a possible quick restart of operations shut by the storm.

"There is no big oil supply disruption so there is no need for the IEA to make an action," said Aad van Bohemen, head of the emergency planning and preparation division at the IEA.

The agency, which coordinates emergency measures in times of oil supply disruption, released oil products stocks in 2005 when hurricanes Katrina and Rita wrecked about 100 offshore rigs and flooded several major refineries.

Exxon Mobil, Valero Energy Corp and Marathon Oil Corp said there were no signs of damage at their Gulf Coast oil refineries, while Total told Texas regulators that it was restarting its big plant in Port Arthur.

Exxon, Valero, Marathon, and Alon all said the restarts of their refineries would depend in part on the stability of Entergy Corp's electrical power grid, which has said 825,000 customers are without power across Louisiana.