Gulf Energy Systems are Recovering from Gustav, Bracing for Ike
September 10, 2008
Oil and natural gas production in the Gulf of Mexico and refining and fuel delivery along the Gulf Coast are gradually recovering from the impacts of Hurricane Gustav, but the approach of Hurricane Ike will complicate recovery efforts and could bring new damage. The Minerals Management Service (MMS) reported on September 9 that 77.5% of Gulf oil production has been shut-in, as well as 64.8% of natural gas production in the Gulf, with 23.3% of the oil production platforms evacuated. According to the September 9 situation report from DOE's Office of Electricity Delivery and Energy Reliability, the Louisiana Offshore Oil Port has been returned to service, allowing the offloading of large oil tankers, and most oil pipelines are operating, although some are running at reduced flow rates. Natural gas delivery faces greater challenges, as three pipelines are still not delivering natural gas from offshore facilities, six natural gas processing plants are unable to operate, four processing plants are able to operate but lack electrical power or natural gas supplies, and 12 processing plants are running at less than full capacity.
On the plus side, the power recovery has been swift for most of Louisiana, as only 9% of the state remained without power as of September 9. As a result, only one refinery remained shut down, representing 247,000 barrels per day of production. Another seven refineries were restarting, while 11 refineries were running at less than full capacity. To help maintain fuel supplies and stabilize markets during the disruption, DOE delivered 250,000 barrels of oil from the Strategic Petroleum Reserve (SPR) to Marathon Petroleum Company's Midwest refineries on September 8, while the U.S. Environmental Protection Agency (EPA) has issued emergency waivers of fuel standards in seven southern states. See the latest status reports from the MMS and DOE, the DOE press release on the SPR deliveries, and the EPA Web page for fuel waivers.
Meanwhile, the entry of Hurricane Ike into the Gulf of Mexico is expected to at least delay recovery efforts and could cause additional damage to oil and gas production facilities. As of the evening of September 9, Hurricane Ike had just passed over the island of Cuba and was headed into the Gulf. The projected path would carry the hurricane south of most oil and natural gas production, with landfall in southern Texas early on September 13, although at this point the forecast path remains highly uncertain. Hurricane Ike weakened to a Category 1 storm over Cuba, but it is expected to strengthen to a Category 3 storm in the Gulf. But despite the threat from Ike, DOE's Energy Information Administration (EIA) reported on September 9 that oil prices have been falling, and the American Automobile Association's Fuel Gauge Report noted falling average fuel prices in the United States. See the latest on Hurricane Ike from the National Hurricane Center, the EIA's latest report on energy market impacts from the hurricanes, and the latest Fuel Gauge Report.