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Gulf coast energy industry braced for a hit

If predictions for this year's hurricane season come true, it could spell even more trouble for the critical energy infrastructure in the Gulf of Mexico.  As senior correspondent Scott Cohn found out, they're still trying to recover from the last two seasons
/ Source: CNBC

Even on a sunny day out in the Gulf of Mexico on the Chevron oil platform Petronius — which is 100-miles offshore — reminders of hurricanes and their fury are never far away.

Scars — in the form of dented metal sheeting — are testimony to the damage Hurricane Ivan inflicted on Petronius when it pounded the coast two years ago.  

“They were just twisted,” says platform worker Rab Bruce.

Even huge structural beams 4-feet thick were bent by the crushing seas.

“We knew of the damage. We had seen aerial photos of some of it, but when we got on the facility and started looking around, it was just amazing,” says Bruce.

Petronius which produces some 60-thousand barrels of oil per day was out of commission for six months. And ever since, hurricanes — which Petronius workers always trained for — have become frighteningly real.

In the record 2005 hurricane season, Petronius has been evacuated seven times. That meant shutting down all production, getting workers off the platform and then back in time to get production started again. All of this disrupted the flow of oil and each storm prolonged an already slow recovery.

The visible damage looks bad, but it’s far worse underwater.

Below the surface thousands of miles of underwater pipelines are still damaged. Companies like Superior Offshore send out divers to make the repairs, but it's a slow process.

Almost 35,000 miles of pipes run underwater bringing oil and natural gas ashore and as much as a third of the lines may be damaged.

Jim Mermis, the company's president, predicts that it'll take three to five years to finish the job industry wide, and that's possible only if there aren't any more big storms this year.

"There aren't enough people in the world, there isn't enough equipment in the world to concentrate and make all those repairs any quicker than what we're doing right now,” Mermis says.

U.S. refineries hit hard by Katrina and Rita are back again operating near capacity. But that capacity hasn't grown since last year and they're still operating in the same place they were before. In other words, 40 percent of U.S. refining capacity is right on the Gulf — right in the path of the storms.

With storms in the forecast and oil prices near record levels the Gulf Coast energy industry is in many ways a sitting duck.