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MMS' Burton: Three Months Before Most Gulf Production Back on Market

Amid the extensive damage to onshore energy facilities in the wake of Hurricane Katrina, Minerals Management Service (MMS) Director Johnnie Burton on Friday said it will be at least three months before 90% of pre-storm Gulf of Mexico production returns to U.S. markets. Right now the GOM is producing about 65% of its pre-Katrina average of natural gas and less than half of its previous oil volumes.

"That would mean that refinery, processing plants, pipes -- everything is up to snuff to the point that we can flow 85-90%" of Gulf offshore production to the market, she said during a briefing with reporters at the MMS headquarters in Washington, DC. As of Friday, about 33.8% (3,384 MMcf/d) of the daily natural gas production and 56% (840,921 bbl) of the daily oil production in the Gulf was still shut in due to damage from Katrina.

She estimated that Gulf of Mexico oil and gas production will return to 85% of pre-storm levels in about 30 to 40 days, but Burton added "that doesn't mean it's going to go anywhere if the [onshore] infrastructure that feeds it is not up" and running.

She acknowledged that MMS' projections were just educated guesses. "None of us can tell you [for certain] how many days it's going to take" for the Gulf Coast energy industry to recover fully from Katrina.

"We're seeing quite a bit of damage on the onshore vs. offshore," Burton told reporters. She estimated that about 35% of the shut-in oil is shut in because it can't go anywhere onshore Louisiana due to damaged refineries, terminals and other facilities. She said the percentage was "somewhat similar" for natural gas, as eight processing facilities in Louisiana and Mississippi remain offline. Processing plants strip impurities from natural gas, making it ready to be transported over pipelines throughout the U.S.

Noting that the price of natural gas has gone "through the roof," Burton said believes pipelines and gas processing facilities will try to do everything they can to get natural gas to markets in the months ahead. "Do you really think [an energy] company is not going to do everything it can to find a market and sell it? They will," but she noted that laying connecting pipe will be no easy task.

Burton said that industry, along with MMS, are trying to figure out workarounds. "For gas, sometimes they are able to direct to [a] different pipeline. For oil, they are looking...at tankering the oil."

Underwater oil and gas pipelines that provide takeaway capacity from Gulf platforms are still being assessed by energy companies, according to Burton. "This is the hardest part to check," she said, adding that "so far as we know," there hasn't been any major damage to underwater pipelines. Offshore pipes appear to have escaped the onslaught that they incurred last year when Hurricane Ivan struck the Gulf Coast. Some onshore gas pipelines were not as lucky, but Burton declined comment as these are out of her jurisdiction.

As for damages to drilling rigs, the MMS reported that 46 mostly low-producing structures were destroyed; 20 producing structures had extensive damage, four drilling rigs were destroyed (a jack-up rig and three platform rigs); nine drilling rigs suffered extensive damage; and six rigs were adrift following Katrina, but have been located and remanned, and are currently being repowered. She said MMS still does not have a dollar estimate on the extent of the damage to energy facilities in the Gulf.

Burton said the agency's policy was not to identify the energy companies that sustained damage to their platforms and rigs, unless the company itself publicly released the information. She chided reporters for demanding specific damage estimates about energy companies. In the first week after Katrina, "they hardly knew what was going on [on] their platforms because they were looking for people."

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