DOE: Gulf Oil, Gas Shut-In Organized, As Expected

NEW YORK (Dow Jones Newswires), September 1, 2008

The progressive shutdown of U.S. oil and gas facilities in the path of Hurricane Gustav is proceeding in "an organized and expected fashion," a U.S. Department of Energy official said Sunday.

"The temporary disruption of oil and gas production in the Gulf is a regular and well practiced event," Kevin Kolevar, assistant secretary for electricity delivery and energy reliability, said during a televised press briefing. "And if history is any indicator, we'll be doing this at least once more this year."

Absent any significant damage to energy systems from Gustav, the record level of inventories in the Strategic Petroleum reserve coupled with stocks held by companies in the Gulf Coast region "should ensure these disruptions are localized and temporary," Kolevar also said.

According to figures from the Minerals Management Service, 96% of the U.S. Gulf Coast crude production of 1.3 million barrels of day was shut in as of Saturday, while 82% of of natural gas production has been shut in.

Also, there are 32 refineries with the capacity to process 7.1 million barrels a day in region, Kolevar noted, saying companies are closely monitoring the storm. So far, those facilities closer to the coast are being shut down.

Kolevar said the Department of Energy would provide updated figures on Monday.

A spokeswoman for the Energy Department said separately Sunday that DOE has "teams on the ground monitoring the situation, but it's still too early at this point for a decision on drawdown" of the SPR.

The emergency reserve holds 707 million barrels of crude in underground salt caverns along the Gulf Coast. A maximum of 4.4 million barrels a day of crude could be drawn from the reserve, a figure that is equal to three times the oil output from the Gulf region.

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

Read more on preparations for Gustav in Rigzone's Special Coverage Gearing Up for Gustav.

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