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Gustav-closed oil facilities restore operations

Even as thousands of workers returned to their posts in the oil-rich Gulf of Mexico after Hurricane Gustav's mild blow, other storms traveling across the Atlantic Ocean served as a reminder that the heart of hurricane season is here.
/ Source: The Associated Press

Even as thousands of workers returned to their posts in the oil-rich Gulf of Mexico after Hurricane Gustav's mild blow, other storms traveling across the Atlantic Ocean served as a reminder that the heart of hurricane season is here.

Gustav's punch turned out to be less severe than originally feared — especially when compared to hurricanes Katrina and Rita three years ago — but it still shuttered about 15 percent of the U.S. refining capacity in the region and brought nearly 100 percent of the Gulf's oil and natural gas production to a halt.

Gustav, however, was preceded by a larger disturbance — an economic storm that already was driving down demand for gasoline and, as such, the hurricane did little to move prices at the pump.

Oil companies restored a bit more production Thursday, and some refineries were cranking back up — but everyone kept an eye on three storms lurking in the Atlantic: Hanna, Ike and Josephine. Ike, in particular, appeared to be a possible threat to enter the Gulf sometime next week.

Royal Dutch Shell spokesman Shaun Wiggins said the company was closely monitoring Ike, "but at this time our primary focus is getting our operations and people back online."

The U.S. Minerals Management Service, which oversees offshore activity, said Thursday afternoon about 5 percent of the Gulf's oil production had been restored, and natural gas output stood at about 12.5 percent.

Exxon Mobil Corp. was among the companies that said some production had resumed at platforms that were not in Gustav's path, and that it continued assessments at facilities raked by Gustav.

Most companies have said initial inspections revealed little significant damage.

On the refining end, some of the dozen or so facilities in Louisiana that shut down as Gustav approached were powering back up.

ConocoPhillips said it was restarting its Lake Charles, Louisiana, refinery, though it's expected to take 10 to 14 days to reach normal production levels. Another refinery near New Orleans was without power so it remained shut down, ConocoPhillips said.

Valero Energy Corp. Chairman Bill Klesse said Thursday the company was restarting its refinery in St. Charles, Louisiana, but he said it would be Sunday or early next week before it was processing significant amounts of oil.

Like some other refineries, the Valero restart was contingent on getting power restored and had nothing to do with storm-related damage, he said.

"As with most refineries that I'm aware of, there hasn't been any damage to the facility," Klesse said during a presentation at a Lehman Brothers investor conference.

Klesse noted gasoline inventories "were in pretty decent shape" before Gustav, but the storm's impact on production and refining would reduce stocks significantly.

Analysts have said because the summer driving season largely ended with Labor Day, consumers should not encounter Gustav-related price spikes unless severe disruptions occur as the industry resumes normal operations.

Unlike the nation's energy complex, Gustav has caused massive damage to power lines and other utility infrastructure. Entergy Corp., the largest utility in the region, said the Baton Rouge area has never suffered damage as severe as that caused by Gustav.

Utilities say it could be weeks before full power is resumed.