Oil companies begin shutting Gulf output ahead of Ike

By Erwin Seba

HOUSTON (Reuters) - Energy companies began shutting production on Monday as Hurricane Ike threatened to cross the U.S. offshore oil patch before output shut by Hurricane Gustav last week could be restored.

The one-two punch from Gustav and Ike will likely carve deeply into U.S. energy inventories in the coming weeks, potentially raising fuel prices as the source of a quarter of domestic crude and 15 percent of its natural gas lies dormant for a fresh blow of high winds and waves.

Leading producer Shell (RDSa.L), along with BP BP.L Conoco (COP.N), Anadarko (APC.N), Apache (APA.N) and Marathon (MRO.N) said they were evacuating workers ahead of Ike, which could hit the Gulf Coast by this weekend.

The U.S. Minerals Management Service said 79.4 percent of 1.3 million barrels per day in oil production remained shut on Monday because of Hurricane Gustav.

Natural gas production increased by 5.8 percent with only 64.2 percent remaining shut.

U.S. crude oil futures settled up 11 cents at $106.34 per barrel due to fears about Ike's impact.

Energy companies were working to restore as much production as possible while preparing shutdowns where needed, said a company spokesman.

"It's this balancing act that's going on right now," said Chevron's Mickey Driver.

Offshore producers were trying to avoid complete production shutdowns to allow for faster restarts after Ike passes, said Glenn Cannon, assistant administrator for disaster operations for the U.S. Federal Emergency Management Agency.

Producers could theoretically use systems on their production platforms to operate from a remote location, if they have been pre-qualified to do so, said MMS spokeswoman Eileen Angelico.

"But, remember, during Gustav we had nearly 100 percent of oil production shut in," Angelico said.

Hurricane Ike struck Cuba late Sunday on a track that would take it into the Gulf of Mexico by Wednesday -- slightly more than one week after Hurricane Gustav crossed the same waters and triggered a nearly complete shutdown of the region's energy production.

Three refineries with a combined capacity of 330,000 bpd, amounting to 1.8 pct of U.S. capacity were still completely shut on Monday. At the peak of Gustav's impact, 15 refineries were shut down.

Shutdowns triggered by Gustav have cut nearly 11 million barrels of cumulative U.S. crude oil output so far, the equivalent of about half of what Americans consume in a day, according to data from the Minerals Management Service.

They have also cut between 13 million and 15 million barrels of refined fuel production, according to a Reuters survey.

(Reporting by Erwin Seba, Janet McGurty, Richard Valdmanis and Randall Mikkelsen; Editing by Marguerita Choy)