Gustav batters US Gulf shipping facilities

Martyn Wingrove - Monday 1 September 2008

HURRICANE Gustav is lashing into Louisiana as the worst storm so far this year causing damage to the port city’s infrastructure and causing the closure of shipping facilities in the US Gulf.

The centre of the hurricane is passing west of New Orleans towards Morgan City, after making landfall near Cocodrie, with winds of 110 miles per hour causing local damage. There are still fears that Louisiana’s largest city is at risk of flooding, but engineers said the levees were holding so far.

Gustav has caused the closure of shipping lanes, ports, terminals, refineries and majority of the Gulf of Mexico hydrocarbon production platforms, making it the worst storm since Rita and Katrina in 2005.

The Gulf of Mexico oil industry has shut off around 1.3m barrels of oil and 6bn cu ft of gas in daily production and 2.2m barrels of daily refinery capacity as Gustav passed through the US’ main oil producing region. There are fears that insured losses could be as high as $7bn just from damage to the offshore sector alone, and there will be much more from onshore damage.

Gustav has forced operators to close ports, including New Orleans, tanker loading terminal Loop off Louisiana, shipping lanes to ports in Texas and coastal refineries, while oil companies shut down more than 700 platforms and 86 rigs, according to the US government’s Minerals Management Service

Gustav reached the southwest Louisiana coast as a category 2 hurricane, less devastating as anticipated, but with enough power to bring down power lines.

Shipping channels leading to Lake Charles in Louisiana as well as Houston, Beaumont and Port Arthur in Texas have been closed, while several refineries in the area, owned by oil firms ExxonMobil, Marathon, Valero and ConocoPhillips, also halted operations.

Fabrication yards including those in Morgan City were closed as engineering firms hoped their construction work would not be damaged by the storm and owners of the Sabine Pipeline and Henry Hub gas delivery point have closed these facilities.

Oil prices fell by $4 to $112 per barrel in the US as traders were hopeful that oil will be able to flow again from US facilities soon.

Oil companies will begin to fly back offshore workers to their facilities tomorrow so they can evaluate damage to platforms and rigs, so companies will not know what repairs will be needed until later this week.

There are fears that Gustav’s journey through the Gulf of Mexico has resulted in major damage to offshore installations.

“This could be potentially the most dangerous storm for the energy sector we have ever seen. It is going right across the most important areas,” said Caprock Risk Management senior analyst Chris Jarvis.

Analysts at Risk Management Solutions estimate that Gustav could cause damage to several of the region’s hydrocarbon producing systems, including platforms, rigs and pipelines.

“Gustav tracked through a dense region of offshore oil platforms. It caused extreme wave conditions and a combination of wave and wind damage to the platforms may cause insured losses of between $2bn and $7bn. This would result in structural damage and interruptions to oil production as well as unintentional spills,” said RMS analysts.

The hurricane’s path took the eye of the storm through the Mississippi Canyon area and across the West Delta blocks. Almost all of the platforms acorss the Gulf of Mexico were closed down, but operators should be able to restart those in the most western areas off Texas tomorrow.

Platforms in the east and central areas are likely to be the last to come back on-line.

 

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