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Rita Shuts In Most Offshore Production, Threatens Onshore Facilities

September 26, 2005
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Almost all of the oil produced in the Gulf of Mexico (GOM) and 72% of the natural gas was shut in Friday, but near month futures fell 46.6 cents to end the day at $12.324 apparently in part because Hurricane Rita dropped in intensity from a Category 4 to a Category 3 less than 200 miles offshore. Rita was poised to strike at daybreak Saturday around the "Golden Triangle" of Texas, home to some of the largest refineries and chemical manufacturers in the country.

The Minerals Management Service (MMS) reported that 7.2 Bcf/d of offshore Gulf of Mexico natural gas production and 1.49 million bbl of oil production was shut in as of Friday morning and 634 manned platforms and 90 manned rigs were evacuated. The evacuations amounted to about 77% of the total Gulf platforms and 67% of the rigs. But, it's hard to imagine that anyone would remain offshore during a hurricane of Rita's magnitude.

Golden-CO-based consulting firm Bentek Energy, which tracks gas flow nominations into the nation's pipelines, said total Gulf production shut-ins, including flows onshore and offshore Texas and Louisiana, reached 10.2 Bcf/d on Friday up from about 9.9 Bcf/d on Thursday.

Only 3.64 Bcf/d of gas was scheduled to flow in the Gulf Coast region on Friday, Bentek said. As expected, gas production flows were down sharply on all the major pipeline systems. Gas production flows into Gulf pipelines on Aug. 26, prior to Katrina, totaled 13.8 Bcf/d.

Cumulative production shut-ins since Katrina now stand at 143 Bcf, Bentek reported. Despite the continuing shut-ins, however, the industry appears to be maintaining relatively high storage injections. The Energy Information Administration reported a 74 Bcf net injection for the week ending Sept. 16. The injection came in about 5 Bcf higher than the ICAP storage options auction and 6 Bcf higher than injections during the same week last year. Working gas levels stand at 2,832 Bcf, or 100 Bcf less than the same time last year and 92 Bcf more than the five-year average.

"As long as storage injections can continue to keep pace and this production comes back online in the short term, prices may not be that bad this winter," said Porter Bennett, president of Bentek Energy. However, the winter strip (November-March) remained near $13.50 on Friday.

Rita was on a "slow, weakening trend" and downgraded to a Category 3 storm with winds around 125 miles per hour, the NHC reported in a 4 p.m. CST update Friday. The NHC said the storm appeared on track to make landfall around the Golden Triangle, an area of extreme southeast Texas near the Louisiana border. The "triangle" is formed by Beaumont, Port Arthur and Orange, the largest cities, and the "golden" refers to the wealth from the original Spindletop oil strike near Beaumont in 1901.

Maximum sustained winds in the early afternoon had decreased from 140 mph, and a further weakening was expected before landfall. However, "Rita is still expected to come ashore as a dangerous hurricane." Hurricane force winds extended outward up to 85 miles from the center, and tropical storm winds extended outward up to 205 miles. Coastal storm surge flooding of 15 feet above normal tide levels was expected locally, and up to 20 feet at head of bays and nearby rivers. Large swells generated by Rita were likely to affect most portions of the Gulf Coast, NHC said.

Jack Colley, director of the Texas Division of Emergency Management, said parts of the state would begin feeling tropical storm force winds about 3 p.m. CST Friday. He said Chambers, Jefferson and Orange counties "could expect probably sustained hurricane winds, beginning at midnight [Friday], for the next 16 hours, an incredible storm."

Rita was expected to produce rainfall accumulations of eight to 12 inches, with isolated amounts of up to 20 inches over southeastern Texas and southwestern Louisiana as it moves inland. Since the storm was expected to slow down significantly after making landfall, the NHC predicted total accumulations in excess of 25 inches are possible over several days across eastern Texas into western Louisiana.

A hurricane warning on Friday afternoon was in effect from Sargent, TX to Morgan City, LA, and a tropical storm warning was in effect for the southeastern coast of Louisiana, east of Morgan City to the mouth of the Pearl River, including metropolitan New Orleans and Lake Ponchartrain, and south of Sargent to Port Aransas, TX.

Dr. Jeff Masters, director of meteorology at The Weather Underground, said storm surge heights would peak at 15-20 feet in some bays, and bring the ocean inland up to 50 miles from the coast. "This surge will be lower and cover less length of coastline than Katrina's surge, but will still cause widespread destruction" in Port Arthur and Orange, TX and Cameron, LA, he predicted.

Forecaster Charlie Notis of Freese-Notis Weather in Iowa was not so sure Rita would be the storm other forecasters were predicting, and said Rita could weaken into a tropical storm before it made landfall early Saturday.

"The latest satellite photos are showing Rita falling apart rapidly," Notis said. "The eye is almost non-discernable. The whole hurricane structure looks ragged."

Notis said the storm was fighting very dry air and probable sheering as it plowed its way through the Gulf of Mexico toward the Texas-Louisiana border. Pressure was rising steadily on Friday, a sign of weakening. "From what once was a super hurricane, this could turn into one of the biggest duds of all time. Let's hope this is the trend."

It may take a few days before oil and natural gas producers assess and determine what damage Rita inflicted on their offshore operations in the GOM. However, based on projections at midday Friday, Rita likely will storm across some of the most active producing areas in the offshore, with about 30% of the mobile offshore installations in her direct path.

Rita is likely to cross the offshore drilling areas of the Walker Ridge and Keathley Canyon, then move north across the eastern portions of Garden Banks and the western portions of Green Canyon. These two areas only have about 40 offshore platforms, but "all of these are major deepwater projects," including Kerr-McGee Corp.'s Red Hawk spur and ConocoPhillips' Magnolia field, according to RigLogix, which provides comprehensive rig data.

After passing through these deepwater areas, Rita will begin to push onto the shallower waters of the continental shelf, first reaching the southern additions of South Marsh, Vermillion, East Cameron and West Cameron, the data service noted. "Rita is likely to continue across the rest of the West Cameron area and reach large portions of the High Island and Galveston areas before making landfall east of the Houston area."

According to RigLogix, there are 534 unmanned platforms and 215 manned platforms in Rita's projected path. Overall, those rigs, pre-Rita and pre-Katrina, have a crew capacity of 3,876 personnel.

West Cameron, south of Lake Charles, LA, "is likely to be one of the areas hardest hit by Rita and will most likely see some of the worst damage to its offshore installations. This area is one of the most actively producing and explored areas in the Gulf of Mexico. It has the third highest number of unmanned offshore platforms and the fifth highest number of manned platforms of any area in the GOM, with a total of 292 unmanned and 88 manned platforms."

Another 22 mobile offshore drilling rigs are in the West Cameron area, including 19 jackups, two submersibles and one platform rig. "Of those rigs, 10 of them are owned and managed by TODCO, The Offshore Drilling Co., which is the rig manager with the most rigs facing possible damage from Rita."

There are another 50 or more rigs in areas likely to be damaged by Rita. About 16 semisubmersible rigs are located in the Walker Ridge, Garden Banks, and Green Canyon areas. Closer to shore, 25 jackup rigs are located in the areas of High Island, East Cameron, Vermilion and Galveston.

"If Rita is able to inflict as much damage to the offshore rigs in its path as Katrina was, there will be some fairly serious losses to the Gulf of Mexico rig fleet," said RigLogix. "Approximately 60 rigs stood in the direct path of Katrina, and of those rigs, eight were damaged severely or lost entirely. That is about 12% of the rigs in Katrina's path. There were an additional 10 rigs that suffered less severe damages, which amounts to another 15% of the rigs in Katrina's path."

Assuming a similar rate of damage for Rita, RigLogix estimated nine rigs could be severely damaged and another 12 rigs with lesser damage. "That is a significant portion of the GOM rig fleet which is already depleted from the losses suffered by Katrina."

To view the mobile offshore rig data compiled by RigLogix, visit www.riglogix.com.

Besides potential offshore damage, Rita's punch may be "potentially worse" for the U.S. refining sector than Hurricane Katrina was because of extreme flooding in Port Arthur and Beaumont, TX, key refining centers of the country, said Ben Sebree, vice president for governmental affairs for the Texas Oil and Gas Association.

Sebree, whose association represents major integrated oil and gas companies, on Friday called Rita "as bad, potentially worse," for Gulf Coast refineries. "This storm looks like another Katrina."

The Port Arthur/Beaumont area is home to four major refineries operated by ExxonMobil Corp., with capacity of 348,000 bbl/d; Motiva Enterprises, 235,000 bbl/d; Total SA, 180,000 bbl/d; and Valero Energy Corp., 250,000 bbl/d.

Some models show Rita producing a 25-foot storm surge near landfall, and Sebree said the surge would put Port Arthur under 10 feet of water. The city of 58,000 is above sea level, and it would drain more quickly than New Orleans, but "The fear is serious flooding and facility damage from the wind, that could result in weeks to get them operational again."

Flooding could damage electrical systems, which could potentially require months to repair, he said. "When the ocean comes in and floods your facility, you've got a big problem."

Well ahead of the storm producers had shut in offshore facilities and closed down much of their onshore operations along the Gulf Coast, including refineries, processing plants and Houston office buildings.

Having dealt with the devastation and loss from Hurricane Katrina, which hit the Louisiana and Mississippi coast on Aug. 29, just 26 days before Rita hit the Texas coast, companies already were planning for the aftermath. Chevron Corp. said it had set up a toll-free telephone number to help employees let the company know of their situations. Any employees affected by the storm in Houston and the Texas gulf region are asked to contact the company by calling (800) 334-3963. BP plc continued its final preparations in anticipation of Rita's arrival. The oil major typically produces about 400,000 boe/d (net) in the Gulf, "but this capacity had already been impacted by Hurricane Katrina," the company said.

Exxon Mobil said it had shut down its production, refining, chemical, pipeline and office facilities in the path of the storm, but was continuing to operate its North Houston Terminal so that first response vehicles can access fuel and continue to make deliveries to stranded motorists. The company said it was "working very closely with the Texas Department of Public Safety to use every resource available to minimize supply disruptions and assist in the evacuation process in a safe and timely manner," and has extended its Hurricane Katrina fuel donation program to the areas in Texas and Louisiana affected by Hurricane Rita. First responders eligible for the fuel program include police, fire and rescue squads, as well as hospital and medical facilities.

Among other things, BP closed its greater Houston offices and manufacturing plants on Wednesday, and set contingency plans for situations that could displace employees from their typical work locations. BP Energy, which markets natural gas and power throughout North America, activated and manned its designated back-up location and server systems in order to maintain business that is normally handled out of Houston. It also deployed additional personnel and using its other offices and systems around the country to support customers. And BP gave Rita her own website. For further information, visit www.bprita.com.

Also, CenterPoint Energy, which is headquartered in Houston, said it was ordering materials and arranging workers to help repair any damage from Rita, and said it would need 5,000 to 10,000 utility linemen and tree trimmers when the storm has passed.

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