Kerr-McGee Restarts Red Hawk Platform

Kerr-McGee Corp. (KMG) says it has begun to restart the Red Hawk platform in the Gulf of Mexico, which has been idled since Hurricane Katrina last August. The company said it initiated reduced natural gas production in the past couple days and should be fully operational in coming weeks.

Before the hurricane, Red Hawk produced about 120 million cubic feet of gas a day. Kerr-McGee, based in Oklahoma City, operated the platform and owns a 50% stake. Devon Energy Corp. (DVN), also based in Oklahoma City, owns the remaining 50%.

Red Hawk, located about 210 miles south of Lafayette, La., in 5,300 feet of water, was largely undamaged by hurricanes Katrina and Rita. The floating facility, however, couldn't resume production primarily due to damage to a pipeline operated by Enterprise Products Partners LP (EPD), according to Kerr-McGee. The hobbled pipeline prevented Kerr-McGee from moving gas to onshore markets.

Energy facilities in the Gulf of Mexico, a region that produces one-quarter of U.S. oil and natural gas, were walloped by the hurricanes last year. Idled production helped drive up gasoline and natural gas prices last fall. It has taken considerably longer to restart energy production following hurricanes Katrina and Rita than it did after Hurricane Ivan in 2004.

The Minerals Management Service, a federal agency that regulates offshore production, reported last week that 13.4% of daily gas production and 22.3% of oil production in the gulf was still idled, nearly eight months after the storms. About 730.5 billion cubic feet of natural gas production has been immobilized due to damage to offshore platforms, pipelines and onshore gas-processing plants. The U.S. consumed about 21.9 trillion cubic feet of natural gas last year, which was used to heat

homes, run power plants and to produce a variety of products, including fertilizers and petrochemicals. Red Hawk began production in July 2004. Known as a cell spar, the facility floats in the deep waters of the gulf tethered to the ocean floor. It did not produce any crude oil, although future development of the field was expected to find crude. Copyright (c) 2006 Dow Jones & Company, Inc.