Florida Gas Transmission (FGT) reported that its compressor station 12 in Munson, FL, was damaged by Ivan’s high winds Thursday morning and as a result the pipeline will have about 500,000 Dth/d less firm transportation capacity into the market area available on Friday. However, the news came too late for a cash market reaction. Spot prices on FGT were the biggest decliners Thursday in a surprisingly weak marketplace nationwide.

It’s hard to believe that cash prices plummeted 10-60 cents on the same day a Category three hurricane plowed through the central Gulf of Mexico. But the gas market has looked right past possible storm damage to several more weeks of mild weather, very weak demand and growing gas storage levels, which rose an unexpectedly large 99 Bcf last week, according to the latest report from the Energy Information Administration (EIA). Near-month gas futures fell 10.5 cents to $4.719.

The Minerals Management Service (MMS) reported that about 545 platforms and 69 rigs remained evacuated at 11:30 a.m. CDT on Thursday. MMS said there was 6.5 Bcf/d of shut-in gas production Thursday and 1.4 million bbl/d of shut in oil. The shut-in gas represents about 53% of total Gulf gas supply (12.3 Bcf/d), while the shut-in oil is about 83% of the total (1.7 million bbl/d).

Cumulative shut-in production currently totals 17.7 Bcf of gas and 3.9 million bbl of oil, according to MMS. That’s not small potatoes, but on the gas side it only represents 0.4% of total annual Gulf of Mexico gas supply. Some production could remain shut in through Friday or perhaps even through the weekend, so those totals certainly will grow.

(See late-breaking damage report from MMS in separate story)

Producers reported early Thursday afternoon that they were remobilizing and sending personnel back out to Western and Central Gulf offshore platforms and were in the process of starting to do reconnaissance of eastern Gulf leases with fixed-wing aircraft. Some gas production was being returned remotely. Pipelines, such as Transco, reported rising supply. However, producers expected to take at least through Friday to get personnel back offshore and operations back up and running.

Anadarko said its largest platform, Marco Polo, was not damaged and was restarting. It was producing 31,500 bbl/d of oil and 26 MMcf/d of gas before it was shut down. Anadarko crews checking out other platforms in the Gulf so far have found no damage, the company said.

Diamond Offshore Drilling, however, found that one of its rigs, the Ocean Star, drifted 12 miles after slipping from its moorings. It was being monitored Thursday by satellite. However, Diamond said so far it does not see any damage to its five evacuated drilling rigs.

Shell and ExxonMobil both said it was too early to do a damage assessment. “As soon as power is restored and people are allowed back into affected areas we’ll begin our assessment process to determine the integrity of our equipment post-storm,” an ExxonMobil spokeswoman said. “Once we ensure that all the systems are safe and operational we will return to normal operations.”

MMS spokesman Tim Powers said there had been no reports of damage to offshore facilities Thursday, but it’s still very early in the process. “You assume there’s going to be some heliport damage, some stairways and other stuff blown over, maybe even worse, but you don’t know until you go out there. It could be a week until we get final reports on damage.” MMS’s district offices were not expected to report back to the New Orleans Gulf headquarters until Monday, Power said.

Transco said Thursday that shut-ins upstream of its system had been reduced to 1 Bcf/d from 1.3 Bcf/d on Wednesday, but it would continue emergency supply proceedures on Friday. Gulfstream Natural Gas reported that shut-ins were still at 600 MMcf/d but it would operate normally Friday. Supply cuts upstream of Texas Eastern were still at 300 MMcf/d Thursday.

Williams reported that its midstream business found no damage to Mobile Bay gathering and processing facilities and platforms. Duke Energy also said that Dauphin Island Gathering Partners reported no damage in the area.

While the 1.2 million electric customers without power in the Gulf Coast states on Thursday undoubtedly were cursing the storm, gas consumers probably were showing no animosity toward Ivan, the worst storm to hit the production area this year. Gas prices surprisingly plummeted to levels not seen in some locations since last November.

The market has been unable to escape a downtrend that started in June. High levels of working gas in storage, mild temperatures, rain and weak demand have all combined to put continued downward pressure on prices.

Some of the largest price declines on Thursday were in the Gulf Coast market, where most points were down more than 30 cents. Midcontinent declines were generally between 15 and 20 cents and Midwest points slipped between 25 and 30 cents on average.

“It was very quiet in the Midwest and Midcontinent market,” said a regional marketer. “There’s no power plant load; in fact there’s nothing. You can start at 8 a.m. and be done by 8:15 right now. Everyone is looking for some place to put their gas. If the power plants would come up and burn some we would have at least some market. Ventura prices were down about 20 cents.”

Even Florida prices, which had been the largest gainers earlier in the week, came down sharply on Thursday. Florida Gas Zone 3 was hit the hardest with declines of more than 65 cents. But that will probably change with the impact on Friday of the downed compressor station.

“The market is much weaker today. Some supply is returning,” said a Florida utility buyer prior to news of the compressor damage. She said FGT had the premium market all week because demand made a significant rebound following service restorations after Hurricane Frances. The real problem all week obviously has been getting supplies into the pipe, she added.

“The pipeline only allows us to get so much through the compressor stations so you can’t source everything in [FGT] Zone 1 because Zone 3 is shut in. You can’t find gas getting into Gulfstream because that goes right into Mobile Bay and Destin, which is completely shut in. You schedule as much as you can and hope for the best.”

Florida customers probably will have trouble Friday finding enough gas to meet demand. They had been nominating 2 Bcf/d into FGT and getting only about 1.8-1.9 Bcf/d to flow. Now with the compressor station damaged they will have to fight over only 1.5 Bcf/d of capacity. An FGT spokeswoman said the pipeline will do whatever it can to increase available capacity.

The rest of the market, however, doesn’t really need much gas, so storage has become a very important commodity, judging from the larger than expected storage injections lately.

The weekly gas storage report on Thursday morning provided a significant impetus for further market weakness. The EIA reported that 99 Bcf of gas was injected, which was quite a bit higher than the 80-95 Bcf average of market expectations and was near the 101 Bcf injection during the same week last year when storage levels were 255 Bcf lower.

There currently is 2,874 Bcf of working gas in storage, which is 201 Bcf (7.5%) more than the five-year average. There are seven more weeks in the traditional injection season, and during many years storage levels continue rising an additional week into November. Over the next seven weeks, storage only has to rise 47 Bcf each week for working gas levels to reach 3.2 Tcf.

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