As US Gulf Oil, Gas Output Restarts After Ike, Cracks Appear

HOUSTON (Dow Jones Newswires), September 16, 2008

As crude oil and natural gas output in the U.S. Gulf of Mexico began to show signs of life, damage to offshore platforms became more evident.

Chevron Corp., the third-largest producer in the Gulf, said Monday that Hurricane Ike toppled several platforms, although it didn't say which ones. Before the hurricane hit, Chevron was close to starting production at its massive 125,000-barrel-a-day offshore Tahiti project.

Eileen Angelico, spokeswoman for the U.S. Minerals Management Service, a federal agency that oversees oil and gas development in the Gulf of Mexico, said flyovers revealed that at least 10 platforms have been affected by the storm "but that number could grow."

There are 717 manned platforms in the Gulf, most of which are still evacuated following Hurricane Ike. There are also hundreds of unmanned platforms.

The damage wreaked by Ike, which made landfall Saturday in Galveston, Texas, as a Category 2 hurricane, is the worst the Gulf Coast region has seen in three years. While the extent of the damage still pales in comparison to that caused by hurricanes Katrina and Rita in 2005 and Hurricane Ivan in 2004, it may delay the restart of output in the Gulf, home to a quarter of the nation's oil and about 13% of its natural gas production.

The MMS said Monday that virtually all oil output and more than 90% of gas output remain offline due to Ike, which ravaged the Texas coastline and knocked out power to millions of households and refineries.

Oil futures have discounted a long-term supply disruption. Benchmark crude futures fell below $94 in electronic trading following the end of the floor session. Natural gas futures ended flat at $7.374 a million British thermal units.

Independence Hub Restarts
The MMS, which didn't provide additional information about which platforms are affected, said it needs to finish analyzing the data collected and that more details would emerge Tuesday morning.

The positive news of the day came from Anadarko Petroleum Corp., which said Monday it restarted production from its Independence Hub and is performing minor repairs to two other platforms that were damaged by Hurricane Ike.

The Houston-based independent oil and gas company operates eight platforms in the Gulf of Mexico - including the Independence Hub, a massive production platform with a capacity of a billion cubic feet of natural gas per day. Anadarko was also returning some workers to its Marco Polo and Constitution platforms in the Gulf, which sustained some minor damage in the storm, the company said. But Anadarko's western Gulf facilities remain shut in, pending flyover assessments, the company said.

Heavyweight oil and gas Gulf producer, Royal Dutch Shell, said it was redeploying workers in the eastern Gulf of Mexico to restart production, a process that will continue until Sunday.

BP PLC, another large producer of oil and gas in the Gulf, said Sunday it expects to progressively restart production over the next week.

The speed of the production ramp-up depends not only on the ability of oil companies to resume operations but also on the capacity of pipelines to start working.

'Moderate' Damage At Shell
Shell said Sunday it had found "moderate" damage to some platforms, although there didn't appear to be any structural damage.

Exxon Mobil Corp., Apache Corp. and BHP Billiton Ltd. deployed personnel to evaluate their platforms but haven't released the results of the inspections.

"Getting out is a challenge," said Bill Mintz, Apache's spokesman. "We are doing it safely and expeditiously and it's going to take some time."

Tim Evans, an energy analyst at Citi Futures Perspective in New York, said that despite the damage to rigs and platforms, production losses from Hurricane Ike wouldn't be as prolonged as those experienced after hurricanes Katrina and Rita ravaged the Gulf Coast.

"I don't think we are talking about anything that severe," he said. Evans anticipates that 80% of production affected by Ike will be restored within two weeks, unlike the nine months that it took to restore production following Katrina.

Copyright (c) 2008 Dow Jones & Company, Inc.


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