Initial inspections of the Gulf Coast’s extensive energy complex confirmed Tuesday that Hurricane Gustav was nowhere near as destructive as Katrina and Rita three years ago, but resumption of production and refining may be a few days away, or more.
Oil companies, rig and pipeline owners and refiners spread out across the region to look for damage from Monday’s storm, and some were already putting equipment and people back in place to resume operations. The full impact should be known in the next couple of days.
“Preliminarily, we don’t know of any major damage at this time,” John Rodi, deputy regional director of the U.S. Minerals Management Service, said Tuesday.
The approach of Gustav had been one of the last remaining pillars of support for oil prices, which tumbled $5.75 Tuesday to settle at $109.71 a barrel on the New York Mercantile Exchange, a decline of nearly $40 from July.
Gasoline prices fell too, despite the fact that power outages and other effects from the storm have halted about 16 percent of the nation’s refining capacity based on the Gulf Coast, according to figures from Platts, the energy information arm of McGraw-Hill Cos. It could be several days — perhaps as long as 10 to 12 days in some cases — before those plants are again producing gasoline and other fuels at significant levels.
Gasoline prices fell overnight by less than a penny to a national average of $3.684 for a gallon of regular unleaded, according to the auto club AAA. Meantime, gasoline futures fell 12.78 cents, or 4.47 percent, to $2.7265 a gallon on the New York Mercantile Exchange Tuesday as traders bet Gulf Coast refineries would bounce back and pump prices would continue to weigh on demand.
“If this storm had caused serious damage, you’d see the market reacting very rapidly,” said Eswaran Ramasamy, director of Platts’ U.S. market reporting.
Many companies were flying over offshore sites in airplanes Tuesday, checking for any obvious damage. One of the next steps will be getting people aboard the offshore facilities for more detailed inspections, including checks of subsea equipment.
Newark, Calif.-based Risk Management Solutions estimated Tuesday that damage to offshore oil platforms and rigs, as well as production interruptions of oil and natural gas, could range from $1 billion to $3 billion.
Rodi, whose agency oversees offshore activity, said it was too early to say when production might resume, though some companies already were gearing up Tuesday. One of the tasks is getting the thousands of offshore workers evacuated last week back to their positions.
In a note to clients Tuesday morning, analysts at Tudor Pickering Holt & Co. said absent any serious damage, production should be back to near full capacity by week’s end at the latest. It also said pipelines in the region, which were mangled during hurricanes Katrina and Rita, aren’t “going to be nearly as messy as 2005.”
One major unknown remained Tuesday — the fate of the Louisiana Offshore Oil Port, which shut down over the weekend.
Gustav appeared to roll directly over the facility, which handles about 12 percent of the nation’s crude imports and is tied by pipeline to about half the nation’s refining capacity, much of it along the Mississippi River from the New Orleans area north to Baton Rouge.
Any prolonged closure of LOOP, as it’s called, could severely disrupt crude imports and their shipment to refineries. LOOP is located about 18 miles south of Grand Isle, La.
Phone calls and e-mails to LOOP officials were not returned Tuesday.
ConocoPhillips said remote monitoring of its Magnolia production platform about 165 miles off the Louisiana coast indicated it had not sustained significant damage.
The Houston-based oil giant also has two refineries in Louisiana — one near New Orleans, one near Lake Charles — and they both remained shut down.
Shell said it would send a small number of staff Tuesday to installations in the Gulf, though it noted it could take three to five days to resume full production.
In the days preceding Gustav, oil companies shut down virtually all oil and natural gas production in the Gulf.
The U.S. Gulf Coast is home to nearly half the nation’s refining capacity, while offshore, the Gulf accounts for about 25 percent of domestic oil production and 15 percent of natural gas output.
Anadarko Petroleum Corp., the largest independent deep-water producer in the Gulf of Mexico, said Tuesday afternoon it had completed aerial inspections of four production platforms in the eastern and central Gulf and all appeared to be intact with no visual damage. The company said it planned to return personnel to those facilities later Tuesday for more thorough inspections.
Exxon Mobil Corp. said Tuesday it couldn’t say when it would restart its Louisiana refineries in Chalmette and Baton Rouge, both of which were shut down in recent days.
Valero Energy Corp. said late Monday an initial assessment of its St. Charles, La., refinery, which turns 250,000 barrels a day of crude oil into gasoline and other fuels, found “no significant structural damage,” although it was too soon to say when the plant’s operations would restart.
Energy stocks across the board — producers, drillers, others — took a dive Tuesday, though analysts said the pullback had more to do with broader concerns about the sluggish global economy than anything weather related.
“Economic issues seem to be taking more of the forefront — what’s going on in Europe, Japan, elsewhere,” said Roger Read, an analyst at investment bank Natixis Bleichroeder Inc. “The general macroeconomics concerns seem to be what everybody is focused on.”