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Oil Flowing Again in Gulf Coast Area

Posted on: Saturday, 10 September 2005, 12:00 CDT

Prices for crude oil and gasoline are falling, but remain high.

Oil production is resuming and a few refineries have reopened in the Gulf Coast area battered by Hurricane Katrina, prompting a slow retreat in gasoline prices.

Pump prices in Tulsa have tumbled from a high of $3.19 a gallon last week to $2.99 at most places late Tuesday.

The national average is $3.069, according to the Department of Energy.

Before Hurricane Katrina pummeled the central Gulf Coast last week, most Tulsa gas stations were charging $2.56 for a gallon of regular unleaded.

"We'd be thrilled to see that again," said AAA-Oklahoma spokesman Mark Madeja.

The hurricane shut in more than 1 million barrels of daily oil production from the gulf, which accounts for 25 percent of U.S. oil output. Nearly half of the region's oil production is back online, the Minerals Management Service reported Tuesday.

As more production is restored and as 30 million barrels of crude is released from the nation's emergency oil reserve, pump prices are expected to decline steadily.

What's more, demand for gasoline is expected to ease now that Labor Day, the last summer holiday, has passed.

"We are going to see a substantial decrease in demand," Madeja said. "We are done with the summer driving season."

In Oklahoma City, motorists were paying, on average, $2.96 a gallon for regular unleaded, down from $3.04 on Saturday, AAA- Oklahoma said.

The recovery of some Gulf Coast oil operation caused the price of crude to fall $1.61 a barrel Tuesday to $65.96 on the New York Mercantile Exchange.

Wholesale gasoline futures plunged 12.87 cents to $2.055 a gallon, excluding taxes, on the Nymex.

But while a few Gulf Coast refineries have reopened, five remain closed. In addition, several offshore production facilities were decimated by the hurricane, which could limit the recovery.

"There were a number of production platforms that were totally destroyed," said Doug Fears, chief financial officer of Tulsa-based Helmerich & Payne Inc. "I've heard more than a dozen."

H&P, which provides drilling rigs to some of the world's largest oil producers, had six active rigs in the gulf when the hurricane hit last week.

One of those rigs suffered severe damage. The rig was on Shell's Mars platform, one of the largest producing platforms in the gulf. The platform was significantly damaged and remains shut down.

Three of H&P's gulf rigs have resumed operations, Fears said. One rig will be returned to operation soon, and the damage to another rig is still being assessed.

Apache Corp. said it lost eight production platforms to Hurricane Katrina. Those facilities produced about 7,500 barrels of oil and 12.1 million cubic feet of gas a day.

More than 870,000 barrels of daily oil production from the gulf, or 58 percent of the region's oil output, is shut in, according to the Minerals Management Service. Normally, the gulf produces about 1.5 million barrels of oil a day.

Nearly 13 million barrels of oil production, or 2.3 percent of the gulf's annual output, has been lost since Aug. 26, the agency said.

About 4.16 billion cubic feet of daily natural gas production from the gulf, or 42 percent of the region's gas output, remains shut in. More than 67 billion cubic feet of output has been lost since Aug. 26.

Tulsa-based Williams Cos. Inc., which operates undersea pipelines and production facilities in the gulf's deep water, reported Tuesday no significant damage to its Gulf of Mexico assets. Inspections and repairs to those facilities are under way, the company said.

Russell Ray 581-8380

russell.ray@tulsaworld.com

Source: Tulsa World

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