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E&Ps, Pipes Assess Rita's Damage to Onshore, Offshore Infrastructure

With two massive hurricanes storming through many of the major oil and natural gas fields of the Gulf of Mexico in less than a month, about 78% of the daily natural gas production and 100% of the oil production in the Gulf of Mexico remained shut in Monday, according to Minerals Management Service (MMS), which compiled reports from 76 producers. MMS also reported that almost 93% of the 819 manned platforms and 75% of the 134 rigs also remained evacuated.

Oil shut ins, which totaled 1.5 million bbl/d, remained at the same number reported on Sunday, but gas output had climbed slightly from the reported shut in of 8.05 Bcf/d (80.5%) a day earlier. Gas production in the Gulf is normally 10 Bcf/d.

Cumulative shut-in gas production since Aug. 26 (pre-Hurricane Katrina) is 163.869 Bcf, or 5.59% of yearly Gulf output (3.65 Tcf). Cumulative shut-in oil production since August 26 is 34.81 million bbl, or 6.358% of the yearly oil production offshore (547.5 million bbl).

The U.S. Coast Guard completed several over-flight assessments in and around Texas, Louisiana and the Gulf of Mexico over the weekend, and so far, it reports "relatively little negative impact" in the Houston Ship Channel area, with one minor pollution spill west of Pelican Island. There also were several minor pollution spills sighted in the Port Arthur, TX area. Offshore, the survey showed two damaged drilling platforms but no visible sheen. More flights are scheduled in the coming days.

Oil and natural gas companies, which were hampered by a shortage of employees following massive evacuations throughout coastal Texas and Louisiana, offered their first assessments -- with some good and some not so good news. The Greater Houston-Galveston area appeared to have escaped any major damages to energy or chemical complexes, but aerial and onsite assessments were continuing in the hardest hit areas around Port Arthur and Lake Charles, LA, also home to several oil refineries and energy complexes. Both areas were flooded following the hurricane.

While early reports had most the oil refining capacity relatively undamaged, the real problem is the offshore and natural gas, Exxon Mobil CEO Lee Raymond said in a broadcast interview with CNBC Monday. While onshore refineries came through fairly well, "offshore is another matter. Offshore production from Katrina is still curtailed, largely because some of the big installations in the deep water of the Gulf still are not on, and we're still having a lot of difficulty restoring gas processing and pipelines onshore, which were damaged very severely by the high water. In many respects the story of Katrina that's most relevant is the offshore, and not even so much crude oil, but ultimately natural gas supply which will become an issue, I think, later this winter," Raymond said.

Sabine Pipe Line was continuing a force majeure at all receipt and delivery points at its Henry Hub as the company assesses Hurricane Rita damage. The company said personnel accessed various facilities in the proximity of the Sabine Henry Hub. Two separate natural gas releases were located and secured, neither of which was sourced from Sabine Pipe Line LLC facilities. The company also reported there have been media reports that "authorities responded Saturday to a rupture at Henry Hub." Sabine said Sunday it has been unable to verify or confirm any rupture or release at this time. Sabine is working with local emergency response personnel to make definitive assessments of its Henry Hub facility. Sabine's Henry Hub facility is located in Vermilion Parish, LA. Parish officials are reporting that 80% of Vermilion Parish is under water.

El Paso Corp. said Tennessee Gas Pipeline has confirmed a new leak on the 524G-100 line from Bay Marchand 5 to Leeville upstream of its 500 Line. There also still remain multiple other leaks upstream of the 500 Line on the Bluewater system and other facilities offshore Louisiana. El Paso's Port Sulphur Compressor Station (Station 527) on its 500 Line did not sustain any additional significant damage as a result of Hurricane Rita and received only minor flooding. But the station still requires repair or replacement of liquid separation equipment, compressor units, and ancillary equipment from damage due to Katrina.

Now El Paso also may have trouble on its 800 and 100 lines. Initial damage assessments revealed moderate damage to the Starks, LA compressor (Station 820) and the Johnson Bayou Dehydration Plant on the 800 Line. Tennessee personnel were expected to perform more detailed damage assessments on Monday. The pipeline still has not received damage assessments from operators of the Sabine, Grand Chenier and Blue Water Plants. Inlet valves at the Grand Chenier Plant, Johnson Bayou Plant, Blue Water Plant and Sabine Plant on the 800 line remain shut in.

Tennessee said it has sustained supply losses of 900,000 Dth on the 800 line and 500 line, not including the 650,000 Dth that has remained shut in as a result of Hurricane Katrina.

On the 100 Line Station 25 in Cleveland, TX, and Station 32 in Jasper, TX, remain unavailable and under a force majeure due to power outages and evacuations resulting from Hurricane Rita. Station 25 will be without power a minimum of two days and may be longer. Tennessee personnel are inspecting Station 32 and the surrounding area. At this time, no significant damage has been discovered, the company said.

Kinder Morgan said Natural Gas Pipeline Company of America's Louisiana Line can operate at only about 60% (600 MMcf/d) of normal firm capacity because of an outage at Compressor Station 342, which is surrounded by water and in need of damage assessment.

A Kinder Morgan spokesman said that initial damage assessments have revealed no significant damage to the company's intrastate Texas pipelines. However, firm gas transportation capability has been down to about 60% of normal flows, or about 2.7 Bcf/d, due to outages.

Trunkline Gas Co. reported damage to its Longville compressor station. However, the station is being bypassed, said a spokesman. Nominations through Longville as of Tuesday will be limited to 230 MMcf/d. Meanwhile, the Trunkline LNG terminal remains shut down and under damage inspection, and the Terrebone and Sea Robin offshore pipelines also remain completely shut down.

Pipeline operator Enbridge Inc. said Monday its Gulf gas pipelines were still shut down, and said crews were only beginning to assess Rita's impact. Its 800 MMcf/d Mississippi Canyon pipeline already was offline from Hurricane Katrina. Its Western Gulf region pipe systems, Garden Banks and Stingray, were in the path of Rita, and the company has yet to determine if they sustained any damage, according to a company spokesman.

Jim Rennie said emergency response and rescue took precedent for aircraft, and Enbridge had not been able to perform an aerial inspection. However, "We do know there's flooding of onshore treatment and processing facilities that we have along the coastline of western Louisiana." He said Enbridge personnel had flown over the Eastern Gulf region on Sunday and reported no additional damage to that part of its offshore system.

Duke Energy Field Services (DEFS) reported minor damage to its Spindletop gas storage facility (750 MMcf/d of deliverability) in Jefferson County, TX, and its Port Arthur (206 MMcf/d), Brookeland (100 MMcf/d) and Cipco gas processing plants. A company spokeswoman said DEFS expects to have the facilities operating again soon, but she could not provide a timeline. The company still has not assessed the damage to its Beaumont processing plant (100 MMcf/d).

Six other DEFS gas processing plants, including Fullerton (65 MMcf/d), Minden (115) and George Gray in Texas, Artesia (70) and Pecos Diamond (40) in New Mexico, and Mobile Bay (600) in Alabama, remain out of service due to outages at third-party downstream facilities, the company said. The amount of DEFS gas processing that remains down totals more than 1.3 Bcf/d.

In addition, there are three other major Louisiana gas processing plants (4.25 Bcf/d) that remain damaged by Katrina: Toca (1,100 MMcf/d), Yscloskey (1,850) and Venice (1,300). That puts the total gas processing outage currently at more than 5.5 Bcf/d.

Duke Energy Gas Transmission said it has not been able to complete a damage assessment to the Texas Eastern Transmission system, but the pipeline is operating and holding pressure. A company spokesman said gas production shut ins upstream of Tetco peaked Saturday at 1.13 Bcf/d and fell to 910 MMcf/d on Monday.

Onshore, Cheniere Energy Inc., based in Houston, found "negligible" damage from Rita at its onshore Sabine Pass LNG construction site in west Cameron Parish, LA. Cameron Parish was one of the hardest hit areas.

COO Stan Horton said a preliminary assessment of the Sabine Pass site, which has been elevated and improved, found no material flooding of the site. Wind damage to the site appears negligible because no structures had been erected.

"Upon a complete assessment of the site by us and our contractors, an update will be issued," Horton said. "Plans will call for construction to resume as soon as possible. Roads to the site from the east and west are open and will allow for immediate resumption of activities." Cheniere's Houston offices plan to reopen on Wednesday.

Also onshore, Swift Energy Co. said assessments of its Toledo Bend area, which consists of the Brookeland Field located in East Texas in Jasper and Newton counties, and the Masters Creek Field located across the Sabine River in the western Louisiana parishes of Rapides and Vernon, were hampered because of communications and logistics problems. Combined production from the Toledo Bend area was approximately 15 MMcf/d for the two weeks before Rita struck.

"Damages in these fields as well as in its coastal Louisiana fields including Lake Washington in Plaquemines Parish, Bay de Chene in Jefferson and Lafourche Parishes, and Cote Blanche Island in St. Mary's Parish, all of which were also shut in as previously announced," remain shut in, said Swift in a statement. "While no estimate can be made of the status of these fields at this time, the company expects to begin receiving detailed information over the next several days." Approximately 55-60% of Swift's total production is shut in.

Offshore, there were more than 500 platforms and about 40 drilling rigs in Rita's path, but many had not issued assessment reports on Monday. According to offshore data compiler RigLogix, Todco, Rowan, Diamond Offshore and Pride had the most drilling rigs at risk in Rita's path, while Apache Corp., BP plc, Newfield Exploration, Forest Oil Corp. and Devon Energy had the largest number of platforms at risk.

Pre-Katrina, Shell Oil Co.'s net production from Shell-operated and outside-operated fields for the first six months of 2005 averaged around 450,000 boe/d.. At the time of evacuation for Rita, 160,000 boe/d of Shell net production (operated and outside-operated) brought back on-line after Katrina was shut-in. That production remains shut in.

Saturday, Shell conducted a fixed wing over flight of its Gulf assets in Rita's path, and it appears they suffered no significant topsides damage, the company said. On Sunday, 65 operations staff were redeployed to begin restart operations and by the end of Monday, more than 400 staff were back on location. On-site inspections thus far confirm no significant damage from Rita, though assessments are continuing, including pipeline and processing facilities that support offshore production.

BP continues to assess its offshore and coastal onshore facilities, and said it was beginning to restaff "as and when it is safe to do so and personnel access is practical." An initial assessment by BP on Sunday via aerial overflights and small crews placed on several BP-operated deepwater production facilities indicated no major damage. "However, recommencement of production will require full assessment of facilities, including key downstream infrastructure." Also, some of BP's onshore locations are shut in because plants and other infrastructure downstream of these fields were impacted by the storm.

BP typically produces about 850,000 boe/d (net) from offshore Gulf and U.S. onshore facilities (excluding Alaska), some of which was already impacted by Katrina.

Chevron Corp. also was not spared by the storm. An initial assessment indicated its massive Typhoon tension leg platform, which it operates and jointly owns with BHP Billiton, was severed from its mooring and suffered "severe damage" during Rita. The platform, which has been located and is being secured, was located in 2,000 feet of water in the Green Canyon blocks about 165 miles south-southwest of New Orleans. Typhoon ramped up in 2001, and before Rita it was producing 40,000 bbl/d of oil and 60 MMcf/d of gas.

"Chevron has mobilized appropriate resources to address any environmental concerns," and "no employees are at risk," the company said in a statement. "Prior to the storm, the company safely evacuated employees and contractors from the U.S. Gulf of Mexico facilities. Decisions on when production can be restarted from the company's other offshore facilities will be made when the post-storm assessments are concluded." Also, in keeping with state and Houston officials' recommendations, Chevron said its Houston offices would reopen on Tuesday.

Aerial inspections of ConocoPhillips' offshore oil and natural gas assets "show no visible damage," the company said. Onshore oil and gas production facilities also showed no significant damage, but ConocoPhillips plans further inspections before it resumes operations.

"We are currently working to remobilize our crews to conduct onsite inspections and, based on those inspections, begin steps to resume operations," ConocoPhillips said in a statement.

Kerr-McGee Corp.'s initial flyover of its Gulf facilities indicates all of its major operated facilities are intact, with no structural damage observed. The company is returning workers to the Gulf to further assess facilities and prepare for restarting production and drilling activities. The company also announced its Houston office buildings were not damaged by the storm.

"Our top priorities always are the safety of our workers and care for the environment, and in anticipation of Hurricane Rita, we evacuated all 110 offshore employees and all contractors and shut in our operations," said COO Dave Hager. "Our initial inspection from the air showed no damage to our major deepwater facilities in the western Gulf -- Nansen, Boomvang, Gunnison and Red Hawk. Our deepwater Neptune facility, in the eastern gulf, was unaffected by the storm and is ready to restart production as soon as pipelines permit. We expect to restart Gulf production as quickly as it is safe to do so."

The truss spar hull for the Kerr-McGee deepwater development of the Constitution and Ticonderoga fields had been installed and was fully moored prior to the storm, and the flyover confirmed the hull was on location with no apparent damage. The Constitution topside, located at Gulf Island Fabricators' yard in Houma, LA, also sustained no damage.

Nexen Inc., which shut in 50,000 boe/d before Rita, reported it was too early to fully assess its offshore operations. Nexen is a partner in two major deepwater projects, Gunnison and Aspen, which were in Rita's path. In an initial aerial inspection, a spokesman said the company reported no obvious damage, and those two facilities "were closest to the action."

At Burlington Resources Inc., the impact from Rita was mostly felt in its onshore South Louisiana fields, with other minor impacts in peripheral areas because of processing plant shutdowns and higher pipeline line pressures.

Overflights of Burlington's affected areas indicate little apparent damage to producing facilities, but because of extensive flooding, on-site inspections are not expected to occur until midweek. "Consequently, the timing of additional resumptions is still being assessed."

Several oil service companies also were impacted by Rita. Rowan Companies Inc. said jack-up rigs Rowan-Odessa and Rowan-Halifax were not at their "pre-storm locations." Also, in addition, the hull of the jack-up Rowan-Louisiana apparently detached from its legs and is aground offshore Louisiana. The company also was unable to account for one rig, the Rowan-Fort Worth, via a high-altitude aerial survey conducted Sunday.

The company's other Gulf rigs were identified, although an assessment of their condition will depend upon a closer inspection, Rowan said in a statement. The company plans to conduct more extensive aerial surveys as soon as weather conditions allow and will provide an update on the status of its fleet once additional information is available.

Diamond Offshore Drilling Inc.'s Ocean Saratoga and Ocean Star broke free from their moorings as the hurricane passed west of both semisubmersibles, the company said in a statement. Ocean Saratoga was about 100 miles northwest of the original location and Ocean Star was about 100 miles north of its original location. Diamond said an aerial assessment reported no other "significant" damage, but a further assessment still needs to be conducted.

Two offshore drilling rigs owned by GlobalSantaFe Corp., the Adriatic VII and the High Island III, couldn't be found on their drilling locations, the company said following a flyover. The rigs have a combined book value of $22.2 million and are insured for $125 million. The rigs contributed $5.3 million of the company's $135.3 million of net income for the first six months of 2005. The company said there were no signs of damage to other rigs.

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