Gulf Oil Production Faces High Hurdles

NEW YORK – Several days after Hurricane Katrina crashed ashore in Louisiana, an offshore energy producer contacted JF Moore International Inc., with an unusual request.

The producer wanted to know if the marine engineering and loss adjusting firm could tell it where its platform used to be – not where it had been moved to by the storm, but the longitude and latitude it started from. With 80 percent of New Orleans under water, the company couldn’t get into its office to look up the coordinates.

The incident illustrates the high, sometimes absurd, hurdles oil and gas companies face trying to figure out how badly offshore facilities have been damaged.

“It’s going to take more time to do everything,” said Jim Moore, president of JF Moore.

Nine days after the hurricane plowed through the heart of the Gulf Coast energy industry, a lot of the damage remains unassessed.

Energy companies are scrambling to locate their employees, displaced and traumatized by the storm, and gain access to the facilities and equipment flooded, wrecked, or left without electric power by the storm.

Still largely unknown is the severity of the blow dealt to the spaghetti-bowl of underwater pipelines that move oil and gas from offshore platforms to refineries and processing plants.

In many ways, pipelines hold the key to the resumption of normal oil and gas production in the Gulf of Mexico, source of about 25 percent of all hydrocarbons produced in the United States.

“There is a widespread concern about the pipelines due to what Ivan did,” said Neil Earnest, vice president at Muse Stancil, a downstream consulting company. “And this was a much more powerful storm than Ivan.”

When Hurricane Ivan struck the Gulf of Mexico last year, the pipeline problems prevented many operators from resuming oil and gas production for weeks and months after the storm made a landfall.

“No news is bad news,” wrote Dan Pickering of Houston-based consultancy Pickering Energy Partners Inc., who suspects pipelines have been damaged. “Only 10 to 15 percent of (Gulf of Mexico) shut-in production is associated with permanent damage, so majority appears stuck behind infrastructure.”

Gulf of Mexico oil and gas output, most of which was shut in ahead of Katrina, continues to recover. Some 57 percent of oil production and 42 percent of gas production remained off line Wednesday, the U.S. Minerals Management Service said. But much of the returned output comes from the Western Gulf of Mexico, which wasn’t in the path of the hurricane.

There are already signs that Ivan’s scenario may repeat itself. Chevron Corp. said Tuesday that its massive, deepwater Petronius platform “is ready to produce once it is safe to export production to associated pipeline infrastructure, where the full extent of damage is still unknown.”

Petronius produced about 50,000 barrels a day of Heavy Louisiana Sweet crude oil and 56 million cubic feet a day of gas.

The Odyssey line, operated by Shell Pipeline Co., a unit of Royal Dutch Shell PLC, connects Petronius to the Delta pipeline system, which in turns carries crude to Chevron’s Empire Terminal in hard hit Plaquemines Parish, La.

BP PLC said 175,000 barrels a day of offshore oil production – 12 percent of U.S. output in the Gulf – will remain bottled up by problems with pipelines and other infrastructure needed to move it ashore.

A big gas pipeline owned by Enbridge Inc. has been damaged. The Mississippi Canyon Corridor line, which starts at Shell’s offshore pipeline hub at West Delta-143 and terminates in a processing plant in Venice, La., took a direct hit from Katrina, the company said. Both the gathering point and the processing plant were also damaged.

The pipeline has a capacity of 800 million cubic feet a day, about 8 percent of the Gulf’s total gas output. Enbridge’s pre-Katrina output level of 2.7 billion cubic feet of gas has been reduced to 0.9 billion cubic feet of gas, according to the company. Current flow is 1.4 billion cubic feet of gas, with 0.5 billion cubic feet being pulled from storage.

JF Moore used to use the port in Venice, La., as a base before Katrina.

“Now, Venice is pretty much wiped out,” Moore said. “So you go to Morgan City. But there are only so many docks available, only so many boats available.”

In addition, many shipyards where rigs are fabricated and where companies go get the crews to repair rigs and platforms have been flooded and wrecked by the storm.

“You go down there to assess what needs to be repaired,” Moore said. “But now you can’t get started. There is no shipyard. There are no workers.”

Enbridge still hasn’t conducted underwater inspections to assess the damage to its pipeline. Neither did it gain access to its facility in Venice, La.