September 3, 2008 / 5:20 PM / in 11 years

US Gulf refineries at mercy of battered power grid

MERAUX, La., Sept 3 (Reuters) - The normally bustling Murphy Oil Corp (MUR.N) refinery in Meraux, Louisiana, stood in eerie silence on Wednesday, apparently undamaged, but paralyzed by a lack of reliable electricity in the wake of Hurricane Gustav.

The plant is one of 14 refineries — representing about 15 percent of the nation’s fuel supply — shut by the storm. A chunk of that fuel production remains at the mercy of a power system that took a devastating hit.

“We don’t have the damage from wind and flooding, so now we’re just mainly focused on a damaged power grid which could take days or weeks to recover,” said Jim Ritterbusch, president of Ritterbusch & Associates, Galena, Illinois. “This could preclude a real fast recovery.”

Entergy Corp (ETR.N), Louisiana’s largest utility, said Tuesday that five out of a dozen refineries in Louisiana have no electricity due to extensive damage to Entergy’s high-voltage grid from Hurricane Gustav. Entergy did not name the five refineries.

As many as 1.4 million homes and businesses state-wide were without power immediately after the storm, Louisiana Gov. Bobby Jindal said on Tuesday.

While Gustav’s impact on the state was less severe than devastation left three years ago by Hurricane Katrina, its damage to Entergy’s grid was worse, particularly in the Baton Rouge area, an Entergy official said.

Baton Rouge is home to the nation’s second-largest refinery, owned by Exxon Mobil (XOM.N).

Entergy did not give an estimate for the duration of repairs, but said power restoration will be a “delicate balance” of adding load as repairs to the transmission system allow.

The company has been unable to fly helicopters over its transmission system to assess damage fully, though thousands of out-of-state workers are headed toward Louisiana to assist in the restoration.

Refiners Valero Energy Corp (VLO.N), Exxon Mobil (XOM.N), Shell Oil (RDSa.L), and Murphy have said initial indications show little damage to their plants, but they added restarts at some of the facilities will depend on access to reliable power.

Gustav was the first big hit to U.S. energy supplies since 2005, when hurricanes Katrina and Rita wrecked 100 offshore oil rigs and flooded several key refineries, including Murphy’s Meraux plant, idling them for months.

The relative weakness of Gustav has encouraged a steep sell-off in oil prices in recent days, with dealers betting on a quick recovery in oil and refining production. [O/R]

As of Tuesday morning, virtually all of the oil and natural gas production in the Gulf of Mexico was shut along with some 14 refineries along the coast. Another 10 refineries were running at reduced rates. [ID:nN02384354]

Energy companies said detailed damage assessments were ongoing at their installations, but early reports showed no significant structural problems.

The Louisiana Offshore Oil Port, a key conduit for U.S. oil imports, said on Wednesday it expected to restart within the next couple of days. (Additional reporting by Eileen O’Grady, editing by Matthew Lewis)

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