NEW YORK (Dow Jones Newswires), August 29, 2008
Tropical Storm Gustav will have more and bigger offshore energy targets to hit than the 2005 hurricanes did, should the storm stick to its projected path through the central Gulf of Mexico.
In 2005, only two platforms produced more than 100,000 barrels a day; this summer, six are producing at that level or are preparing to do so. Since 2005, oil and gas production has increasingly shifted to deeper water off the coast of Louisiana, with a handful of giant platforms generating volumes once produced by dozens of small, shallow-water facilities.
The industry has had two relatively quiet hurricane seasons since the devastation caused by Hurricanes Katrina and Rita in 2005. The two hurricanes damaged 75% of offshore platforms and resulted in the shutting in of 103 million barrels of oil and 610 billion cubic feet of gas production, according to the U.S. Energy Information Administration.
Drillers and producers have attempted to shore up their infrastructure to prevent similarly widespread damage from the next major hurricane to sweep through the Gulf of Mexico. But with Gustav projected to pass directly through the Gulf's main production zone early next week, potentially as a Category 4 hurricane, there are no guarantees. While the Gulf is layered with thousands of platforms and miles of pipeline, a handful are responsible for the bulk of production, and will be most closely watched in a storm.
"There are a lot of things in the industry that have improved since the '04 and '05 seasons, but at the end of the day, it's going to be a question of how destructive storms are and how powerful they are when they go through the Gulf," said David Dismukes, associate executive director of the Center for Energy Studies at Louisiana State University.
All large producers have said they are evacuating some staff, with a few, including Anadarko Petroleum Corp., announcing that they will completely shut down their offshore operations until after Gustav passes.
BP PLC is in the process of ramping ap production at Thunder Horse, its 250,000 barrels a day platform. At its peak, Thunder Horse will be responsible for about 15% of offshore oil production. Thunder Horse started listing after being hit by Hurricane Dennis in 2005, delaying its start by three years.
BP's platform is the largest of a wave of major new projects to set up in the Gulf in the last year. The British oil major started production at its 200,000 barrel-a-day Atlantis platform in 2007, while Chevron Corp. has installed its 125,000 barrel-a-day Tahiti platform at its offshore location and is preparing to start production later this year. Shell's Perdido platform was recently installed in the Gulf, and will produce 100,000 barrels of oil a day around 2010.
The arrival of the giant platforms masks the fact that oil production has dropped 7% since 2005, to about 1.4 million barrels a day.
Katrina and Rita caused as much damage below the surface as above. The storms broke 17 drilling rigs free from their moorings, and the "wandering rigs" damaged underwater pipelines around the Gulf. Much of the production that was still down months after the hurricanes was lost due to damaged pipelines, not platforms.
BP's Mardi Gras pipeline system links Thunder Horse and Atlantis to shore, while Enterprise Product Partners operates the Cameron Highway pipeline system, which links production from seven deepwater platforms to Texas refineries. Shell operates the Mars and Amberjack pipelines to bring oil from its platforms to Louisiana.
Drillers say they have upgraded mooring systems to reduce the chance of another major hurricane creating more wandering rigs. The industry worked with government regulators to draft stricter requirements for all types of offshore facilities. Pipeline operators are able to do little to protect against underwater mudslides caused by hurricanes, however.
"Noble (and the other drillers) made changes and upgrades to many deepwater units following Katrina and Rita," Noble Corp. spokesman John Breed said in an email. "In our case, we increased the moorings on (three rigs) from 9 to 12 and on (a fourth) from its original design calling for 12 moorings to 16."
But Gustav will be the first test since the 2005 hurricane season for both the drillers and the platform owners.
Copyright (c) 2008 Dow Jones & Company, Inc.
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