US Oil Companies Keep Close Eyes on Path of Hurricane Felix

LONDON Sep 3, 2007 (Dow Jones Newswires)

Hurricane Felix is keeping oil companies operating in the U.S. Gulf glued to latest weather forecasts during the Labor Day holiday but, with the storm set to maintain a southerly path, they haven't yet been forced to take preventative action.

"We're watching the situation and keeping a close eye on the path (of the hurricane) in case it heads further north, but right now it is not in an area that is affecting us, and I have received no notifications at this time," said Shaun Wiggins, spokesperson for Royal Dutch Shell PLC (RDSB.LN) in Houston. "We have a very robust system in place that we can set in motion if need be."

Felix was upgraded to the strongest hurricane Category five after building strength over the weekend and, at 1100 EDT (1500 GMT) Monday, had dropped slightly from its peak of 165 miles an hour but remained "potentially catastrophic," the National Hurricane Center said Monday.

It was centered about 265 miles south-southwest of Kingston, Jamaica, and about 365 miles east of Cabo Gracias a Dios on the Nicaragua-Honduras border. It was projected to slash across Guatemala's Peten region and southern Mexico, then emerge in the southern Gulf of Mexico, an area dotted with major oil drilling platforms run mostly by Mexico's state-owned Petroleos Mexicanos, or Pemex. Pemex said Friday it had restored all offshore oil and gas production taken off line ahead of Hurricane Dean but hasn't yet said whether it will close production in ahead of Felix.

Felix is taking a roughly similar path to August's Hurricane Dean which forced Pemex to shut in 2.65 million barrels a day of oil production but ultimately caused only minor damage to oil facilities.

Valero Energy Corp.'s (VLO) 275,000-barrel-a-day Aruba refinery was hit by Hurricane Felix over the weekend, but spokesman Bill Day said production wasn't affected.

The bulk of Valero's refineries are situated on the U.S. Gulf coast and, while at this stage it doesn't look as if the hurricane will reach that far north, Day said the company would continue to monitor the track of Felix.

ConocoPhillips (COP) runs a number of refineries on the U.S. Gulf coast and was taking a similar approach.

"We've been watching from the Gulf of Mexico standpoint but since we have stayed well outside the projection cones, we don't expect any operational impacts," said spokesman Bill Tanner. "We will continue to monitor and take the necessary steps as circumstances dictate."

Chevron Corp. (CVX) wasn't able to comment on whether it was taking precautionary action ahead of Hurricane Felix while Exxon Mobil Corp. (XOM) wasn't immediately available to comment.

Hurricane Ivan damaged offshore pipelines in 2004, and hurricanes Katrina and Rita hobbled U.S. refiners along the Gulf Coast in 2005. All three caused extended disruptions to the energy supply chain that contributed to surges in petroleum and natural gas prices.

Crude oil futures climbed to three-week highs Monday as the market factored in the potential of production disruption from Felix.

"Volatility on the oil market will probably continue...given that the hurricane could change course," said Eugin Weinberg, an analyst at Commerzbank in Frankfurt.

But traders said illiquid conditions as a result of the U.S. Labor Day holiday may have exaggerated the move.

Meanwhile, the National Hurricane Center has identified another potentially worrying Atlantic weather formation midway between Africa and the Lesser Antilles.

"Although upper-level winds are not particularly favorable for development at this time, the circulation remains well-defined and there is still some potential for this system to become a tropical depression during the next couple of days," it said.

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

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