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Heart Of US Petroleum Industry Menaced By Rita

The total lost output from the region since August 26, just before Katrina arrived, is now 28.5 million barrels, or 5.2 percent of annual production in the Gulf of Mexico.

Houston, Texas (AFP) Sep 22, 2005
Hurricane Rita threatens a large portion of the US oil and gas operations industry in the Gulf of Mexico and along the Texas coast just weeks after a devastating blow to the sector from Katrina.

Oil producers and refiners were attempting to secure their facilities in the face of a storm that threatens about 27.5 percent of the industry, said Red Cavaney, president of the American Petroleum Institute.

Companies "are making the maximum effort to prepare for Hurricane Rita," he said.

"However, we are facing an unprecedented situation ... at a time when our companies are still in the early stages of recovery from Hurricane Katrina's devastation. It is too soon to estimate the extent of fuel supply disruptions, if any. However, even if we are fortunate enough to escape with minimal damage, the shutdowns in preparation for Rita will have some effect."

"It's almost like, what Katrina didn't get, this one's going to," said T. Boone Pickens, a longtime oil investor and head of BP Capital, in a speech Wednesday.

Pickens said he expects crude oil, natural gas and gasoline prices to settle once the storm passes, but to remain high because supply is tight.

Rita, a major hurricane with the potential to deliver massive damage, was bearing down on the coastal areas of Texas which holds about 23 percent of US refining capacity.

With Rita swirling toward the coast, 92 percent of US oil production in the Gulf of Mexico had been shut down as of Thursday because of the threat posed by the vast storm and the aftermath of Hurricane Katrina, the US Minerals Management Service said.

Additionally, 74 percent of the 819 offshore oil platforms in the Gulf and 65 percent of the 134 wells had been evacuated.

The total lost output from the region since August 26, just before Katrina arrived, is now 28.5 million barrels, or 5.2 percent of annual production in the Gulf of Mexico.

Meanwhile, 18 of the 26 refineries along the coast - producing a total of some four million barrels a day - were shut down.

British energy giant BP and Anglo-Dutch peer Royal Dutch Shell announced the evacuation of their Texas refineries, having already shut down their offshore Gulf Coast oil platforms due to Hurricane Rita.

"We've shut everything down," said David Nicholas, a London-based BP spokesman.

"We evacuated all our workers from the offshore platforms in the Gulf, shutting in production. We have shut down operations at our Texas City refinery."

The Texas City refinery is BP's biggest in the United States and has a capacity of some 470,000 barrels per day.

"We've similarly shut operations at our chemical plants in the region, and we have shut our main office in Houston," he added.

Meanwhile, Anglo-Dutch group Royal Dutch Shell has closed down key offshore wells, which flow a combined 161,000 barrels of oil per day and 438 million cubic feet (15,330 cubic metres) of gas.

Shell has also pulled 545 staff from its Gulf coast oil platforms.

Valero, the largest US refiner, said it was shutting its refineries in Texas City and Houston, with a total output of 378,000 barrels per day.

Exxon Mobil evacuated non-essential personnel in Texas from its facilities in Baytown and its giant refinery in Beaumont had an emergency plan in effect. ConocoPhillips had evacuated its refinery in Old Ocean, Texas and was preparing to shut another in Lake Charles, Louisiana.

Some facilities in Louisiana and Mississippi were still out of service more than three weeks after Katrina roared through the region.

While crude oil supplies appeared adequate, there was greater concern about refined products like gasoline because of the lack of spare refining capacity.

Some said gasoline and natural gas prices might top the levels reached after Katrina, which at the time seemed astronomical - three dollars a gallon (3.8 liters) for motor fuel and 12 dollars per British thermal unit for natural gas.

"The growing realization of the impact on this energy center will continue to drive energy prices higher and higher," said John Kilduff at Fimat USA.

"Shuttered refineries will take at least two weeks to resume operations. Natural gas inventories, already challenged prior to Katrina and, now, Rita, will be constrained further and 15 dollar (per BTU) natural gas is likely, as are four- to five-dollar (per gallon) gasoline retail prices. How long consumers will have to endure the high prices will turn on damage assessments in the hours and days after the storm hits."

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