Determining the amount of damage inflicted on energy infrastructure located onshore and offshore the Texas and Louisiana coasts proved difficult Monday as the area began its painful recovery from Hurricane Ike’s impact. The Category Two hurricane slammed into Galveston, TX, around 2 a.m. Saturday, and its winds apparently destroyed at least 10 offshore production platforms. The biggest problem facing the Gulf Coast was a lack of power — a problem that could take up to four weeks to remedy, officials said.

Hurricane Ike caused the largest blackout in Texas history, affecting as many as five million people from Texas into Louisiana. Nearly all of the 2.258 million homes and businesses in CenterPoint Energy’s service territory were without power on Saturday; by noon Monday it had restored power to about half a million customers. CenterPoint is in charge of the transmission system that spreads from Houston to Galveston, and about 158,000 never lost power during the hurricane.

A massive force of restoration workers descended on Entergy Texas Inc. With practically all 395,000 customers in the dark, assessment of damage and restoration of electricity was under way, and by early Monday, it had 385,530 customers without power and 8,070 were connected. Texas-New Mexico Power Co., which serves 115,000 total customers, reported 79,000 customers without power at mid-morning Monday; 36,000 were connected.

The energy providers said the complete loss of systems — which apparently was not anticipated — is making slow progress. One of the only areas of Houston that maintained its power during and after the storm was a portion of downtown, where the transmission lines are buried underground.

Terry Hadley, a spokesman for the Public Utility Commission of Texas, said, “in terms of outages, this is as big as we’ve seen.”

Officially, the Minerals Management Service (MMS) reported that two drilling rigs had been pulled from their moorings and were floating in the Gulf of Mexico (GOM). However, following fly-overs by some of the offshore operators, KHOU-TV in Houston reported that at least 10 production platforms and/or rigs had been destroyed. According to the MMS, there are about 4,000 energy structures in the U.S. GOM. By comparison, hurricanes Katrina and Rita in 2005 destroyed a total of 113 platforms and eight rigs; 52 other platforms and 19 rigs suffered extensive damage (see Daily GPI, Jan. 12, 2006). At least 58 pipelines also were damaged in the 2005 hurricanes.

Fly-overs by offshore operators, MMS and the U.S. Coast Guard were being conducted in both fixed-wing aircraft and helicopters. Damage estimates may not be confirmed until the offshore structures are boarded and actual inspections take place, but overall damage estimates to the Houston-Galveston area onshore on Monday ranged from $10-18 billion.

Based on reports from 89 operators submitted to MMS at midday Monday, 93.8% of the natural gas production remained shut in. Gas output pre-Hurricane Gustav earlier this month was estimated at 7.4 Bcf/d. Almost all of the GOM oil output — 99.9% — also remained shut in Monday; estimated oil output pre-Gustav was 1.3 million b/d. Personnel remained evacuated from 562 production platforms, equivalent to 78.4% of the 717 manned platforms in the GOM. Personnel from 82 rigs also remained evacuated; this is equivalent to 67.8% of the 121 rigs operating in the Gulf.

Early reports indicated no significant damage to natural gas pipelines and production infrastructure, and pipeline personnel were returning to facilities to begin damage assessments, the Department of Energy stated in a situation report. Portions of Sabine Pipe Line’s mainline and the Henry Hub reportedly were flooded by rain and storm surges from Ike, and a force majeure that began last Friday remained in effect.

Offshore oil and gas operators already were redeploying workers to their GOM installations once the storm had passed Saturday. Among those issuing reports was Shell Oil Co., which said it had redeployed around 250 people as of Monday to offshore structures that were not in Ike’s immediate path. Redeployments were to continue “until we reach our pre-storm staffing levels of about 1,400 people,” a Shell spokesperson said. “Production ramp-up at each facility will vary, depending on damage assessments and repairs, as well as downstream oil and gas infrastructure readiness.”

Aerial reconnaissance flights over Chevron Corp.’s GOM oil and gas production facilities in the western area “indicate several platforms have been affected by Hurricane Ike,” said spokesman Mickey Driver. “Damage assessments are under way with the goal of bringing production back online as quickly and safely as possible.”

Enterprise Products Partners LP said initial inspections by onsite field crews indicated “minimal to no visible damage” to its company-operated onshore assets on the Texas and Louisiana Gulf Coast. In the eastern GOM, service and operations on the Independence Hub platform and Trail pipeline resumed, and Enterprise expected to re-man its other offshore platforms beginning Monday after initial assessments are completed. The loss of commercial power at its Texas facilities “represents the most significant challenge” facing the company. Enterprise deployed backup and temporary generators to restore limited service to some of its assets.

Anadarko Petroleum Corp., which operates the deepwater gas facility Independence Hub, said it had successfully restarted the platform. However, Anadarko found “minor surface damage” at its deepwater Constitution and Marco Polo platforms. ExxonMobil Corp., meanwhile, had not been able to fully assess the status of its GOM infrastructure Monday because of a no-fly zone around Galveston; its Hoover-Diana platform is directly south of the island city. However, an initial assessment indicated that most of its offshore platforms are “structurally sound.” Detailed evaluations are expected to take “several days to complete.”

With no electricity, tap water declared unsafe to drink and broken windows across the region, energy-related businesses were operating with skeleton staffs, and that was expected to continue on a day-to-day basis until services could be restored. The Houston-based headquarters for ExxonMobil, Shell, Chevron, ConocoPhillips, El Paso Corp. and Halliburton Co. were among a few of the hundreds of offices that planned to be closed through at least Monday. Only essential personnel were expected to report to work.

“We will make a decision Tuesday about the rest of the week,” Chevron’s Driver told NGI.

Steve Smith, an energy analyst based in Natchez, MS, noted in his Weekly Gas Outlook that in a special post-Hurricane Ike trading session Sunday that West Texas Intermediate (WTI) oil closed at $99.11/bbl, down $2.07/bbl from Friday.

“This oil price decline suggests that news through Sunday morning had not included reports of significant sustained damage to GOM gas production facilities,” said Smith. “As of Sunday…the MMS reported 6.3 Bcf/d of GOM gas production shut in. We estimate a cumulative 120 Bcf of GOM gas shut in from Aug. 29 through Sept. 14. We estimate another 70 Bcf of cumulative GOM shut-ins from Sept. 15 (Monday) through Sept. 30.”

Combining the “likely” production losses from hurricanes Gustav and Ike — assuming no sustained damage from either hurricane — removes enough gas from the September-October balance to “substantially reduce the odds for a fall ‘storage capacity crunch,'” Smith stated. “Over the next few weeks we expect prompt gas futures to firm relatively to prompt WTI futures. That said, our ‘bear case’ for a well supplied year-ahead gas market is still intact — the surge in onshore shale gas continues to be the dominant factor for the 2009 gas market.”

A surge in crude prices for any of several reasons “might provide some temporary upward support for gas futures at any time in the year ahead, but a stronger sustained gas price is likely to require rebalancing North American supply and demand by first experiencing 12-18 months of prices generally below $9/MMBtu,” said Smith.

Sarah Emerson, director of Energy Security Analysis Inc. in Boston, said “initial indications” are that the oil refineries could be in operation “within days and not weeks and that damage wasn’t as bad as it could have been offshore.”

Facilities that escaped Ike’s path of destruction may be slowed by electric transmission issues. For instance, Texas Easter Transmission reported that mainline capacity in South Texas had been restored, but it notified customers that several Gulf Coast area compression facilities were operating on emergency back-up generators because commercial power was unavailable.

“Even though there is little indication of serious damage, I think it will be difficult to restart these oil refineries because of the power issue,” Caprock Risk Management’s Chris Jarvis told Reuters. “Parts of the power system took a devastating hit.”

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