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Damage to Oil Refineries Drives Up Demand for Specialty Compressors

Posted on: Wednesday, 7 September 2005, 18:00 CDT

Sep. 7--The misfortunes that Hurricane Katrina brought to the oil and natural-gas industry are creating business opportunities for a Mount Vernon company.

Ariel Corp., which employs 700 people, makes compressors that are used in natural-gas production, oil drilling and gasoline refining.

Because of severe damage to those operations in the Gulf of Mexico region, the company likely will see an uptick in orders, from replacement parts to new machinery.

"They probably stand to benefit from this," said Thorsten Fischer, a senior economist at Economy.com in West Chester, Pa. "It is almost certain that the infrastructure will be restored."

Fischer said 54 percent of natural-gas production is shut down in the region and 70 percent of oil production is out of commission.

"We have several thousand compressors out in the Gulf of Mexico on production platforms," Ariel Chief Executive Karen Buchwald Wright said. "Quite a few of those were damaged, so, clearly, we do anticipate they we will be replacing equipment."

But it will take time before orders arrive, said Tom Rastin, Ariel's vice president of marketing and engineering. That's because flooded refineries and damaged platforms will require major repairs before compressors will be needed.

Fischer estimated that it could take months to restore many oil, natural-gas and gasoline-refining operations.

"When a production platform is destroyed, having a new compressor isn't going to put it back into production," Rastin said.

"Manufacturers like ourselves are about six months behind these type of events."

Rastin said the loss of natural-gas production in the Gulf could spur increased drilling in other areas of the country, which also could boost demand for Ariel's products.

The Gulf region produces 10.4 billion cubic feet of natural gas per day, about 19 percent of U.S. production, according to the federal Energy Information Administration.

"Other regions are going to have to pick up the slack," he said.

Ariel's customers are companies that package compressors with engines for sale or rent to major natural-gas and oil companies.

The company has experienced strong growth this year, well before the hurricane. It has hired 100 people since January and still is in a hiring mode to keep up with demand for its products, Rastin said.

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Source: The Columbus Dispatch, Ohio

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