Hurricane Katrina barreled ashore with the eye just east of New Orleans Monday morning, shutting in about 8.3 Bcf/d or more than 80% of the 10 Bcf/d of natural gas production in the Gulf of Mexico. The expiring September futures contract shot past $12 Sunday night/Monday morning, but slipped during the session Monday to go off the board at $10.847, up $1.055 from Friday's close. The Henry Hub, closed in a force majeure action early Monday, reopened for business late in the day. The U.S. Coast Guard expected to be able to send out planes over the Gulf Monday night or Tuesday morning to assess damage.
In the cash market Transco Zone 6-New York City's spike of more than $3 led gains by several Northeast citygates that exceeded $2. Overall large increases roamed far afield from the stricken Gulf Coast region; even many western points were up more than a dollar.
The Minerals Management Service, which had already relocated its Crescent City operations to Houston, said it counted a total of 8,299.42 MMcf/d of gas and 1,375,413 bbl/d of oil as shut in, based on reports from 57 companies that reached it by 11:30 a.m. CDT. It also tallied the evacuations of 615 platforms and 96 mobile drilling rigs. MMS said cumulative shut-ins were 15.447 Bcf of gas, or 0.423% of annual GOM production, and 3,133,859 bbl of oil, or 0.572% of annual GOM output.
By comparison, shut-ins caused by Hurricane Ivan "the Terrible" peaked at 6.5 Bcf/d last September (see Daily GPI, Sept. 17, 2004).And in mid-February of this year, when MMS quit issuing Ivan-related statistics due to only minor outages remaining, cumulative deferred gas production since Sept. 11, 2004 had reached 172.259 Bcf, or 3.871% of normal yearly production from the Gulf, MMS said (see Daily GPI, Feb. 15).
|Hurricanes Impacting GOM Gas Production|
|Storm Details||(Aug 1992)||(Sep 2004)||(Aug 2005)|
|Max wind in Gulf (mph)||138||125||160|
|Wind at landfall (mph)||121||121||140|
|Landfall location||South LA||Southeast AL||Southeast LA|
|One month later||1.5||1.7||--|
|Four months later||0.7||0.6||--|
|Price one week before landfall||$1.854||$4.658||$9.564|
|Price change at landfall||14%||1%||16%|
|Price change one month after landfall||36%||44%||--|
|Price change four months landfall||-9%||37%||--|
|Source: NOAA, MMS, NYMEX|
It was impossible to tell when the shut in gas would come back on line, but it's a near-certainty that storage gas is being withdrawn to make up for the drop in new production, which should result in a very small storage injection -- or conceivably a net withdrawal -- for the week ending Sept. 2. That would tend to keep the market bullish independent of weather influences.
Dawn Tuesday was expected to see a small army of planes and boats braving the Gulf for damage assessments. While damaged or missing platforms will show up relatively quickly, it may take several days to determine if undersea pipelines were damaged or displaced. Offshore drilling contractor TransOcean Inc. said according to an onboard transponder beacon it believes its moored semisubmersible Deepwater Nautilus has drifted off location in the aftermath of Hurricane Katrina.
But on the other side of the supply/demand coin, Katrina can be expected to result in significant load reductions by causing power outages and lowering temperatures as it proceeds on a generally northeastward tracking through the central and eastern U.S. Nearly a million customers had lost electricity in Louisiana, Mississippi and Alabama Monday morning. Sections of Louisiana remained under water Monday night. Generation, transmission and distribution for Louisiana-based Entergy all were hit and the utility said it could be a month or more before customers were back on line.
The hurricane reached the Category 5 level with 160 mph winds when it was coming through the oil and gas production area in the Gulf about midnight Sunday night, Monday morning. It weakened to a Category 4 with 140 mph winds before it crossed land. The National Hurricane Center (NHC) first described Katrina as "major" and then as "catastrophic." Over the Gulf, hurricane force winds extended for up to 105 miles from the center and tropical force winds extended for up to 230 miles.
September natural gas futures skyrocketed in overnight Access trading to an all-time record of $12.070 on the basis of both the short-term and possible long-term shut-in production. In regular outcry trading Monday, the expiring September contract had hit a high of $11.70 before slipping in the afternoon as damage reports were slow to materialize. Most producers did not expect to have damage reports until Tuesday at the earliest after the winds calmed and planes and boats could get into the Gulf to make assessments.
Crude futures were also notching new highs. In overnight Access trading, October crude notched a $70.80/bbl high, which marks a new record.
Hurricane Katrina made landfall near Buras, LA shortly after 6 a.m. CDT with top winds of 140 mph, and was pummeling the New Orleans area, causing a reported breach of at least one of the levees surrounding the city. The Minerals Management Service office in the Crescent City had already relocated its operations to Houston and was expected to report on shut-ins and evacuations sometime Monday afternoon. The hurricane also was spreading destruction along the coast in Mississippi and in Mobile Bay, AL. There was no estimate of how much onshore gas was shut in.
Transco reported 1.5-1.8 Bcf/d of supply reductions and said, "Gas Control does not expect to see much of that production returning" for Tuesday's gas day.
Southern Natural Gas reported seeing a reduction of more than 850 MMcf/d in flowing supply. Various interconnects in the southeast Louisiana area with Koch Gateway, Trunkline, Tennessee, ANR, Sabine, Columbia Gulf, NGPL and LRC had been shut in due to a force majeure notice issued Sunday, Southern said, and it identified 58 receipt points that would not be flowing Monday until further notice, based on its best information available. Flows were restored Monday afternoon at a Sea Robin interconnect.
Sabine Pipe Line said Monday afternoon that following a preliminary assessment in the wake of the hurricane, its Henry Hub delivery point in Louisiana "avoided significant damage." The company noted that it has begun accepting intraday nominations for all receipt and delivery points on the Sabine system. "As individual flows are reinstated, Sabine will return to full service, ending the Force Majeure condition previously noticed," the company said. Since it was the closing day for the September contract the NYMEX Board met and announced late Monday it would extend the delivery period of its natural gas futures contract for one day, through September 1, 2005. (see separate story).
Southern affiliate Tennessee said it had experienced production losses of approximately 1.1 Bcf/d on its 500 and 800 lines, and would continue to force-balance all Supply Area Aggregation pools during all intraday nomination cycles until further notice. In addition, Tennessee was confirming to zero all receipt points that have been shut in.
"It's a shame," said a spokesman for El Paso Corp., the operator of Southern and Tennessee. Both pipes had recently gotten everything restored from damage by Hurricane Ivan last year, and now there might be more infrastructure outages to cope with, he said.
Panhandle Energy listed these supply cuts for its pipelines with offshore segments and/or connections: Florida Gas Transmission, 700 MMcf/d; Trunkline's Terrebonne System, 450 MMcf/d; and Sea Robin, 400 MMcf/d.
Columbia Gulf experienced "a significant loss of supply," but a spokesman said it was not releasing volume numbers. The pipeline had evacuated Saturday its only staffed platform, Vermilion 245, he said.
Texas Eastern typically receives 325 MMcf/d on its Venice system in the Mississippi Delta area of Louisiana, but none was flowing there Monday. The Cameron system in southwest Louisiana was flowing about 100 MMcf/d, down from its normal 175 MMcf/d, said a spokeswoman for Duke Energy, the Texas Eastern operator. The pipeline had force balanced short TABS-1 pools in its South Texas, West Louisiana and East Louisiana zones.
Due to an agreement with The Williams Cos. in their partnership that operates Gulfstream Natural Gas, Duke was not releasing shut-in figures for that pipeline, the spokeswoman added.
As for producers, many said it was far too early to tell what Katrina's long-term repercussions would be, but there were already unconfirmed rumors of some platforms floating freely in the Gulf.
Kerr-McGee spokesman John Christiansen said the potential damage to offshore platforms won't be assessed before late Tuesday at the earliest. "We won't get out there until the threat has passed." He said he didn't think any of the producers would be able to assess damage to the platforms or begin returning workers to the offshore platforms until late Tuesday or sometime Wednesday.
Chevron Corp. spokesman Matthew Carmichael also said it was too soon to know how much damage Katrina might cause to its offshore platforms and onshore refineries. "We'll just have to see what's left" once the storm passes, he said. He did not know when the company would be returning workers offshore.
Chevron is monitoring its offshore platforms through electronic monitoring systems, but it was too early to state whether the rigs had sustained any damage. BP also is remotely monitoring platforms, and its Thunder Horse platform, which was damaged by Hurricane Dennis a few weeks ago, appears to be stable, according to BP spokesman Hugh Depland.
Apache Corp. said Monday that it began shutting in production in portions of the Gulf of Mexico Saturday in advance of Hurricane Katrina. Currently, the company has shut-in gross operated volumes of approximately 70,000 bbl of oil and 565 MMcf/d in the Gulf of Mexico and onshore Louisiana.
A total of 336 of Apache's 386 structures in the Gulf of Mexico are shut in and the storm was affecting onshore facilities. Later Monday, Apache expected to begin repopulating structures in the Gulf west of Lafayette, LA, outside the main path of the storm. The company declined to speculate on damage or a timetable for restoring production.
Swift Energy reported it had shut in all its coastal Louisiana properties including the Lake Washington Field in Plaquemines Parish, Bay de Chene Field in Jefferson and Lafourche Parishes, and Cote Blanche Island Field in St. Mary's Parish, with total estimated shut-in production at about 93.5 MMcf/d of mostly oil and some natural gas. The company said it had two drilling rigs in Lake Washington evacuated, flooded and pinned down in the inland waters, while a third rig under tow to the field was returned to safe harbor. Two completion rigs along with associated work barges were moved to protected waters.
Burlington Resources shut in 130-150 MMcf/d, all onshore in Louisiana.
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