The punch of Hurricane Gustav appeared to fall softly Monday on the nation's vast energy complex along the U.S. Gulf Coast, and was overshadowed...
HOUSTON — The punch of Hurricane Gustav appeared to fall softly Monday on the nation’s vast energy complex along the U.S. Gulf Coast, and was overshadowed by growing anxiety over the state of the global economy.
Even as 110 mph winds raked refineries that line the coast and rushed over the deep-water rigs off the shores of Texas and Louisiana, the price for a barrel of oil plummeted by more than $4 a barrel amid a broad sell-off in European and Asian markets.
Louisiana Gov. Bobby Jindal estimated that roughly one fifth of the oil and natural-gas output that was shut before Gustav could be back on line by the weekend, and several energy producers and refiners said their facilities appeared to be unharmed.
Still, the storm’s impact on production platforms, drilling rigs and other equipment will not likely be fully known for a day or so.
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Assuming no damage, it typically takes two to four days to restart a refinery. It can take a day or two to get offshore-oil and natural-gas production going again.
In 2005, hurricanes Katrina and Rita knocked out the region’s offshore infrastructure for several weeks.
Valero Energy said late Monday an initial assessment of its St. Charles, La., refinery, which turns 250,000 barrels a day of crude oil into gasoline and other fuels, found “no significant structural damage,” although it was too soon to say when the plant would restart.
Transocean, the world’s largest offshore-drilling contractor, said it appeared its three moored, semisubmersible rigs in the Gulf remained anchored in position during the storm.
Transocean said eight other rigs that used thrusters to move out of the storm’s path also were safe and would be moving back to their drilling locations as soon as Monday evening.
In recent days, oil companies shut down virtually all oil and natural-gas production in the Gulf, and the storm’s threat halted about 15 percent of the nation’s refining capacity based in the region.
Any serious damage to oil platforms and rigs or prolonged refining disruptions could push up energy prices. Eqecat, a risk-modeling firm, projected Monday that Gustav could knock out capacity for about 5 percent of both oil and natural-gas production for the next year.
However, one factor likely to mitigate the impact is that many analysts believe the appetite for fuel has been reduced by high prices and slower economic growth.
“U.S. demand has fallen dramatically,” said Linda Rafield, an analyst at Platts, the energy-information arm of McGraw-Hill. “People look like they’re making what I’d call a long-term adjustment in consumption patterns.”
All that appeared to be supporting oil prices over the past week was Gustav.
With many betting the U.S. energy complex in the Gulf survived largely intact, attention returned almost immediately to the state of the global economy.
Markets in Asia tumbled sharply. The sell-off in Europe was less pronounced.
Light, sweet crude for October delivery fell $4.34 at $111.12 in late-afternoon electronic trading on the New York Mercantile Exchange.
The U.S. Gulf Coast is home to nearly half the nation’s refining capacity, while offshore the Gulf accounts for about 25 percent of domestic oil production and 15 percent of natural-gas output.
Gustav churned through an area with one of the Gulf’s vital assets: the Louisiana Offshore Oil Port, which shut down operations over the weekend.
The facility handles about 12 percent of the nation’s crude imports and is tied by pipeline to about half the nation’s refining capacity, much of it along the Mississippi River from the New Orleans area north to Baton Rouge.
Any prolonged closure of LOOP, as it’s called, could severely disrupt crude imports and their shipment to refineries. LOOP is about 18 miles south of Grand Isle, La.
“We have no reports, either confirmed or unconfirmed, of damage to LOOP,” said Mark Lambert of the Louisiana Department of Transportation.
The petroleum industry has spent hundreds of millions of dollars since the hurricanes of 2005 strengthening its operations both offshore and inland. The enhancements include stronger moorings for production platforms, deeper pipelines and greater supplies of backup electricity and other supplies.
“The industry is much better prepared this time around to cope with any wind or water damage,” said Rafield.
Gustav’s strength at landfall was nowhere near that of Katrina and Rita, a factor that oil analyst Jim Ritterbusch said likely contributed to falling oil prices.
Gustav was also expected to nick airlines, tourism, insurers and utilities.
By disrupting travel to and from the Gulf Coast, Gustav denied the airline industry some critical revenue over the Labor Day weekend.
“It will be a big hit to the airlines for September,” said AirTran Airways spokesman Tad Hutcheson.
“It’s usually a tough month. The only bright spot is the Labor Day weekend. Those pretty much were full flights we’ve had to cancel.”
Robert Hartwig, president and economist at the Insurance Information Institute, said insurance payouts will likely not be nearly as high as those suffered from hurricanes Katrina or Rita in 2005.
“There will be thousands of claims, there will be insured losses, but they will be manageable by the resources that the private insurance industry has at its disposal,” he said.
The region likely mitigated damage by enacting stricter building codes, tightening down roofs and elevating structures based on lessons learned from Katrina.
“Louisiana and much of the Gulf Coast has spent the last three years hardening its defenses for the next hurricane,” Hartwig said.