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Industry Prepares for Storm Season Building on Lessons Learned

The Gulf of Mexico's (GOM) oil and gas platforms, pipelines and processing facilities will never be hurricane-proof, but after the record-breaking 27 storms last year, the energy industry has tried to do as much as it can to prepare for the inevitable weather watches this summer.

Platform evacuations were almost routine last summer, but hurricanes Katrina and Rita were a different story all together. The twin terrors tore the anchors loose on 19 mobile oil and gas rigs, destroyed or damaged 166 platforms, pummeled 461 pipelines and flooded most of the near-shore gas processors and refineries. The story is still being told: nearly 13% of the daily natural gas production remains shut-in; about 21% of the daily oil production remains off line.

But with months to recover and to plan for this year, the energy industry has done as much as it can -- for now.

"As much as possible has been done in the off season" to ready for this summer's storms, said Elmer P. Danenberger III, chief of offshore regulations for the Minerals Management Service (MMS). Among other things, the American Petroleum Institute (API) with MMS and industry support, issued new guidelines requiring the estimated 4,000 offshore drilling units to be 40-50% stronger this year than a year ago. Stronger moorings are required, and more inspections of the mooring systems are required.

MMS Director Johnnie Burton said MMS was "fully aware of the challenges we faced in the upcoming season and have worked closely with the oil and gas industry and other federal agencies in developing stronger safety standards for Gulf operations. Because of that advanced work, we are better prepared this year." But she added, "one can never be truly ready for a hurricane."

Beginning this season, MMS conducted extensive pre-season planning with the Department of Energy (DOE) and the U.S. Coast Guard to improve communications during storms. It also coordinated with the energy industry to improve safety issues, specifically through Mobile Offshore Drilling Unit improvements, jack-up site assessment guidelines, risk assessment tools and platform upgrades. A Coast Guard representative joined the MMS Continuity of Operations Plan team to enhance communication regarding offshore platform damage and subsequent warnings to mariners. MMS also improved its electronic hurricane reporting system for industry.

"We did it as good as we could" after last year's storms, "but we look forward to doing it better next time," said API CEO Red Cavaney.

But some storm-related problems remain unresolved. Two major deepwater projects -- Shell Oil Co.'s Mars platform and Kerr-McGee Corp.'s Red Hawk facility -- are only now beginning to ramp up. Total SA's Matterhorn platform has completed its repairs, but it is waiting for pipeline restoration to processing facilities before it resumes production, now targeted for mid-June. Shell's Cognac platform won't be on line until 4Q2006 -- if no other storms delay its restart.

"In such a short amount of time [operators] certainly can't do any reengineering that's going to make an impact on this hurricane season," said Jim Flanagan of IHS, an energy consultant. Most have focused on repairs only, he said. "They just have to hope it's not going to be that bad a year."

Kevin Kolevar, director of DOE's Office of Electricity and Delivery and Energy Reliability, said the energy industry had "never before...seen the kind of devastation we experienced." Going into the 2006 hurricane season, he said minimizing damage to production capacity is only one concern. The industry also has been trying to fix problems within its communications systems, he said.

"One of the chief lessons learned from the hurricane season last year was that the energy sector is an interdependent system," Kolevar said. He said it was "not enough" anymore to only "know your neighboring utility or the utility that provides power to your particular refinery."

Improving communication systems with employees is high on a lot of offshore companies' lists. In the past, hurricanes knocked out power and phone communication -- but usually only for a day or two. The devastation caused by Katrina when it came onshore was unprecedented. The storm knocked down electricity poles, washed away computer servers and severed cellular towers. Many employers could not contact their employees to know if they were safe. It took El Paso Corp. more than a week to track down all of its GOM employees.

Wood Mackenzie analyst Eugene Kim said many energy companies are setting up backup communication systems in their storm-prone areas. Some "are assigning double e-mail addresses in case communication lines go down..." One operator has installed multiple global positioning systems on its offshore platforms. "Normally, you'd have one, but now a lot of them have two in case one gets damaged."

Operators also are stocking up on all sorts of storm-related supplies. ExxonMobil Corp. added 130 more portable generators to its fleet of emergency equipment and pre-wired connections for the generators to ensure they will be able to start if needed for use on platforms and for pipelines.

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