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Gulf Oil Operations Closing As Hurricane Draws Near

Reuters
Saturday, 30 Aug 2008 | 1:45 PM ET

Royal Dutch Shell,BP and other oil companies wrapped up evacuations and shut down production Saturday as an intensifying Hurricane Gustav churned toward the petroleum-rich waters of the Gulf of Mexico.

AP

As of midday Saturday, slightly more than three-fourths of the Gulf's oil production and nearly 40 percent of its natural gas output had been shut down, according to the U.S. Minerals Management Service, which oversees offshore activity.

Shell said it was on schedule to complete the evacuation of more than 1,300 workers from 20 production platforms and other facilities by Saturday afternoon. The task took four days and involved 17 helicopters.

BP said it also planned to have its workers evacuated Saturday.

Both oil giants said production was being completely shut off — a process that can involve closing safety valves in thousands of feet of water to prevent the release of oil or natural gas.

Analysts say prolonged supply disruptions could cause a sudden price uptick for gasoline and other petroleum products. Gasoline prices rose this week for the first time in more than a month, and they continued upward Saturday. A gallon of regular gasoline jumped more than a penny overnight to a national average of $3.682, according to auto club AAA.

How long production remains halted depends on Gustav's path and timing. Frank Glaviano, a Shell vice president who oversees production, said the flow of oil or natural gas usually can resume rather quickly — as long as equipment is not damaged by the storm.

"It usually takes a couple of days before we can start to get a significant amount of production back up," Glaviano said. "It can take several days for the subsea wells. Typically, about half of our production comes back rather quickly."

The U.S. Gulf Coast accounts for about 25 percent of domestic oil production and 15 percent of natural gas output, according to the MMS. The Gulf Coast also is home to nearly half the nation's refining capacity.

Gustav grew into a fearsome hurricane Saturday as it trekked toward the Gulf Coast with landfall expected as early as Monday.

The National Hurricane Center issued a hurricane watch for Alabama, Mississippi, Louisiana and part of eastern Texas.

Some models showed Gustav taking a path toward Louisiana and other Gulf states devastated by hurricanes Katrina and Rita three years ago. They knocked out the region's offshore energy infrastructure for several weeks and caused a spike in gasoline prices.

Shell said Saturday it was experiencing "extraordinary demand" for gasoline at some of its stations in south Louisiana as many residents evacuated. A few stations ran out of fuel, though Shell said it was trying to get them resupplied as quickly as possible.

San Antonio-based Valero Energy Corp., North America's largest refiner, said its Texas and Louisiana refineries were monitoring the storm closely but had made no decision as of Saturday morning to shut down operations or evacuate workers.

Valero spokesman Bill Day said the company had closed a handful of its gas stations in south Louisiana because of evacuation orders, "but we're also working with local authorities to provide fuel along evacuation routes."

ConocoPhillips said it was preparing its three Gulf Coast refineries — one in Texas, two in Louisiana — for potential high winds and water.

"Appropriate planning is under way to allow for the safe shut down of refinery operations and the evacuation of refinery personnel as circumstances warrant," the Houston-based company said.

Anadarko Petroleum Corp., the largest independent deep-water producer in the Gulf of Mexico, said it expected to have its roughly 600 employees and contract workers in the Gulf removed from the storm's projected path by Sunday evening.

About 35,000 people work in the Gulf, staffing offshore rigs and production facilities, among other tasks.

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