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Tropical Storm Arlene Fizzles, But Lively Hurricane Season Still Expected

Tropical Storm Arlene barely pinched oil and natural gas output in the Gulf of Mexico (GOM) earlier this month, according to the Minerals Management Service (MMS). In its final report on the first storm of the season last week, MMS reported that the cumulative shut-in gas production from June 10 through midday last Tuesday was 3.428 Bcf, which is equivalent to 0.087% of the yearly production of about 3.94 Tcf.

Cumulative oil production shut in for the same period was 574,747 bbl, or the equivalent of 0.109% of annual GOM production -- about 529 million bbl. The MMS reported that 28 platforms and four rigs were evacuated, equal to 3.42% of 819 manned platforms and 3.57% of 140 rigs currently operating in the GOM.

Summing up Arlene's impact, Citigroup's Kyle Cooper said, "Arlene had very little effect on the Gulf of Mexico oil and gas operations."

While Arlene failed to develop into a significant storm such as Hurricane Ivan in 2004, a review of hurricane trends show that there is more than a one in three chance of large hurricane catastrophe-losses in the United States in the current season, according to Oakland, CA-based EQECAT Inc., an extreme risk modeling firm.

The company said last week that its projections are based upon current forecasts by the National Hurricane Center (NHC), which has suggested 2005 is likely to be an "above average" year.

"Although the current season might not be as severe and unusual as the 2004 season, the potential for large losses in 2005 is likely to be troubling to insurers and reinsurers, which will have to cover the potential hurricane damage claims," said Tom Larsen, senior vice president of EQECAT.

The most recent forecasts by NHC have suggested 12 to 15 named storms are expected for 2005, with seven to nine becoming hurricanes, and three to five expected to be major hurricanes. The number of storms anticipated for 2004 was 12 to 15 and the number of hurricanes expected were six to eight. The actual number of storms in 2004 was 15, with nine of them hurricanes.

EQECAT pointed out that the most recent NHC forecast also suggested the accumulated cyclone energy (ACE) index of storms in the current season will be between 120% and 190% of the median value.

"The forecast 2005 ACE index is similar to the ACE Index for 12 other years since 1950, among which four seasons resulted in very large losses," Larsen added. "The 12 years with ACE values between 120% and 190% of the median included some seasons with severe and costly storms, such as Hazel, Carol, and Edna, all in 1954; Camille in 1969; Allen in 1980; and Hugo in 1989."

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