Dean Only Seen Causing Mild Disruptions to Mexico Oil Ops

MEXICO CITY Aug 21, 2007 (Dow Jones)

As Hurricane Dean heads into Mexico's main oil-producing zone, industry officials are optimistic it will only cause a blip in operations instead of the extensive damage the country remembers from Hurricane Roxanne over a decade ago.

Dean weakened into a Category 1 hurricane Tuesday afternoon after coming ashore in Mexico. The storm was heading inland at 18 miles per hour, with maximum sustained winds of 85 mph, according to the National Hurricane Center.

As of Tuesday afternoon, Mexico was even able to keep one of its oil export ports, Pajaritos, open for operations. Pajaritos is the third-largest oil port in the region, shipping crude to the U.S. Gulf Coast and also unloading gasoline imports from the U.S.

Diamond Drilling (DO) said it hopes to see only minimal or no damage to its three rigs in Mexico's Campeche Sound after Dean was downgraded. Other companies with rigs operating in Mexican waters include Noble Corp. (NBL) and Pride International (PDE). Officials from Diamond and Noble said they have evacuated staff and plan to resume operations as soon as the storm passes. Pride wasn't immediately available for comments.

Petroleos Mexicanos started evacuating staff from offshore operations in the Gulf of Mexico on Sunday and the company has shut in 2.65 million barrels a day of oil production in the Campeche Sound, according to a statement on the company's Web site.

This will cause a blip in monthly production, but unless the storm strengthens and gets stuck in the Gulf of Mexico, damage should be light.

"If it keeps moving quickly everything will be fine," said an executive at an oil service company with operations in Campeche.

However, he warned that if the hurricane slows down and remains stuck in the Gulf, as Roxanne did in 1995, damage could be worse than initially expected.

Pemex hasn't suffered an extensive shutdown since Roxanne. A spokeswoman said the company will announce the status of oil infrastructure and when operations will resume as soon as the storm passes through the area.

The Yucatan peninsula serves as a buffer, taming hurricanes before they reach the oil and natural gas areas west of the Yucatan. Pemex's rigs are also in shallower waters than their cousins on the U.S. side of the Gulf of Mexico, reducing their vulnerability to storm damage.

The waning power of the storm allowed Mexico to leave the Pajaritos port open on Tuesday. The other two oil ports in the area, Dos Bocas and Cayo Arcas, remained closed.

None of the company's oil refineries have been affected by the storm.

Copyright (c) 2007 Dow Jones & Company, Inc.

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