Almost 20 per cent of the US’s oil refining capacity was shut after Hurricane Ike slammed into the Gulf Coast, limiting fuel deliveries and prompting the Department of Energy to release 309,000 barrels from its strategic reserves.
At least 13 refineries in Texas including plants operated by Exxon Mobil Corp., Valero Energy Corp and Royal Dutch Shell Plc shut 3.64 million barrels a day of refining capacity as Ike approached Texas. Exxon and Shell said on Saturday they would begin assessing damage of Gulf facilities as soon as weather permitted.
Gulf refineries and ports are the source of about 50 per cent of the fuel and crude used in the eastern half of the US.
Analysts predict gasoline prices may again reach $4 a gallon.
“If these refinery outages go three weeks or more, most of the nation could see $4 gasoline again,” Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University in Dallas, said in an telephone interview. “If they are back up in a week, it may be a 15- or 20-cent-a-gallon increase.”
The US Department of Energy said today it released a total of 309,000 barrels in crude from its Strategic Petroleum Reserve because of shortage in refineries owned by ConocoPhillips and Placid Oil along the Gulf Coast.
“The oil was requested because of disruptions in supply caused by Hurricanes Gustav and Ike,” the Department said in an e-mailed statement. Deliveries will begin today, it said. The deliveries are for the ConocoPhillips refinery at Wood River along the Capline pipeline system and Placid Oil's Port Allen refinery, the statement added.
Gasoline Prices
Wholesale gasoline in the Gulf Coast market this past week climbed before Ike's arrival by 58 per cent to $4.65 a gallon, according to data compiled by Bloomberg. Regular gasoline at the pump rose 5.8 cents to an average $3.733 a gallon, AAA said yesterday on its Web site. The price reached a record $4.11 on July 15.
Calcasieu Parish, Louisiana, which is home to three refineries, reported “widespread” power outages and flooding in Ike's aftermath, Tom Hoefer, the parish's public information officer, said in an interview. Hoefer said the refineries likely escaped damage.
''There has been no wind damage to any of them, and none of them are in flooding areas,'' he said.
The three local refineries, which can process a combined 772,000 barrels a day, are owned by ConocoPhillips, Citgo Petroleum Corp. and Calcasieu Refining Co. Citgo spokeswoman Shawn Trahan, in a telephone interview, declined to say if the refinery was affected. Calcasieu couldn't immediately be reached. Electricity Supplies
CenterPoint Energy Inc. said about 4.5 million people may be without power in the Houston area. Entergy Corp., Louisiana's largest utility owner, said an estimated 462,054 customers were without power in Louisiana and Texas.
Gasoline shortages may occur across the southern U.S. up to Washington because of the closures caused by Hurricane Gustav, which made landfall Sept. 1 in Louisiana, and now Ike, Kevin Kolevar, assistant secretary for electricity delivery and energy reliability at the U.S. Department of Energy, said on a conference call.
''We expect to see constrained supplies of refined products,'' he said. ''The administration will utilize every tool at our disposal to lessen the likelihood of limited fuel supplies,'' including tapping the Strategic Petroleum Reserve.
Ike was the first storm to hit a major U.S. metropolitan area since Hurricane Katrina devastated New Orleans in 2005. New Orleans Devastation
By 4 p.m. local time yesterday, Ike had weakened to a tropical storm with maximum sustained winds of 45 miles (72 kilometers) per hour, down from 110 mph at its 2:10 a.m. landfall in Galveston, the Miami-based National Hurricane Center said in an advisory.
The storm idled about 99.7 percent of oil production and 98.5 percent of natural-gas output in the Gulf of Mexico, the U.S. Minerals Management Service said yesterday. Gulf fields produce 1.3 million barrels oil a day, about a quarter of U.S. output, and 7.4 billion cubic feet of gas, 14 percent of the total, government data showed.
A pair of drilling rigs were adrift in the Gulf, according to the Minerals Management Service. The MMS and the U.S. Coast Guard are monitoring the paths of the two rigs, while tugboats are being sent to secure them. The MMS's Eileen Angelico declined in an interview to identify which companies operate the rigs.
ConocoPhillips restored power to its Belle Chasse, Louisiana, refinery and is preparing to restart it. The company's Lake Charles refinery is operating at reduced rates and continues the restart process following Hurricane Gustav. Conoco Start-Ups
Shell, Europe's largest oil company, will redeploy workers to the Gulf to assess damage to offshore production and begin restarting units, the company said in a statement.
Shell also plans to examine its Deer Park, Texas, refinery and chemical plant, which has some power. Motiva Enterprises LLC, a joint venture of Shell and Saudi Arabia's state oil company, said production at its Norco, Louisiana, refinery is limited by ''dependent resources.''
Output at Motiva's Convent refinery, which restarted some units, is ''constrained'' by available products, Shell said. The plant is not able to make finished gasoline. It can blend some components.
Shell may redeploy some workers to company-operated assets that were not in the immediate path of Ike, the statement said.
Shell Redeployment
''Once power and communications are restored at our facilities, then personnel can commence repairs, and where possible, conduct restart and production ramp-up procedures,'' the company said. 'Production ramp up at each facility will vary and could take from a few days to weeks.''
Ike is similar to Hurricane Alicia in 1983, Jim Rouiller, senior energy meteorologist at Planlytics Inc. in Wayne, Pennsylvania, said before Hurricane Ike made landfall.
''It took them over a year to get their feet on the ground again,'' he said. ''The refineries were down for months. Basically, the whole infrastructure around the Houston metropolitan area was devastated.''
Hurricanes Katrina and Rita forced the temporary shutdown of at least 20 U.S. refineries during August and September 2005, idling 30 percent of the nation's capacity. Most of those plants resumed operations within a few weeks of the storms.
Gasoline supplies across the southern and eastern U.S. may be disrupted by Ike, Rouiller said.
''We could have this capability lost for a long period of time,'' he said.
Supply Disruptions
Exxon Mobil, the world's largest oil company, said it is beginning to check for damage at its Texas refineries in Beaumont and Baytown, the biggest U.S refinery.
Valero, the largest U.S. refiner, said it lost power at three Texas refineries that had been shut before Ike's arrival. The Texas plants are in Houston, Port Arthur and Texas City.
The company closed 64 company-operated gasoline stations out of almost 200 in the Houston region.
To contact the reporter on this story: Jordan Burke in New York at jburke29@bloomberg.net; Aaron Clark in New York at aclark27@bloomberg.net
