Producers, pipelines and other industry companies with facilities in Lili’s path grew increasingly alarmed on Tuesday as the hurricane continued to grow in strength and appeared poised to wreak havoc on infrastructure in Louisiana. By the end of the day Tuesday, it was clear Lili would pack far more punch than the much weaker Isidore did only a few days earlier.

The Henry Hub was among the facilities shutting down operations and evacuating personnel. Many other gas, oil and chemical operations in the region were doing the same as the National Hurricane Center (NHC) reported that Lili had grown to a category four hurricane with sustained 140 mph winds and the possibility of strengthening further before making landfall on Thursday afternoon somewhere in southwestern Louisiana.

At 4 p.m. Lili was 285 miles south of New Orleans and moving northwest at 16 mph. The NHC expected the hurricane to make a gradual turn north in the next 24 hours. Hurricane force winds extended outward from the eye about 45 miles, with tropical storm force winds extending outward 185 miles.

“In my 15 years in the trading business, I’ve never seen an announcement from the Henry Hub like this one,” said one producer. “It’s pretty serious. They are evacuating the whole region.” Sabine Pipeline (owned by ChevronTexaco) sent a notice to all shippers saying that there would be no onsite personnel and no compression for at least the next 48 hours. All receipts and deliveries nominated from Oct. 2 going forward were subject to being cut. “Intraday and non-timely nominations will only be accepted with prior approval by Sabine Pipeline and will be scheduled on a best-efforts basis until further notice.”

A spokeswoman for Texas Eastern noted the hurricane is forecast to bulldoze through a spaghetti nest of pipelines and processing infrastructure.

“These are very difficult times. This is serious because this storm is very dangerous,” said the head of one trading group for a large production company. “Trading gas for tomorrow is at least secondary to all this.

“Obviously with the shut-ins that we’ve experienced we are force majeuring our customers so we aren’t in the marketplace doing anything on a swing basis. There are some people doing that, but who knows if the gas is going to show up anyway.

“This marketplace is not very liquid right now anyway given the disruptions. Not only is the production shut in but there are processing plants shut down right now — the Venice plant, for example. There are petrochemical plants considering evacuation routes for their people. There’s a lot of nervousness in the marketplace right now. Hopefully we don’t have damage to infrastructure, but this size storm can inflict a lot of damage.”

The Minerals Management Service reported that 8.6 Bcf/d of gas production and 1.54 million bbl/d of oil production was shut in on Wednesday. In total, there were 735 platforms and 99 rigs evacuated, according to reports from 52 producers and field services companies.

Trading was virtually nonexistent at points in Louisiana. Some production was still flowing from offshore Texas and the far Western Gulf, but it had been reduced to a trickle. Shippers reported that many transactions done on Monday at Louisiana points weren’t backed up by any supply because of the production cuts.

“There were a few Gulf points trading. Slowly, but surely it’s all going away, though,” said one Gulf trader. “Even the Hub is being evacuated. All nominations going forward could be cut. This could be bad. We’ll see what happens in the next 24 hours. The hurricane is still pointed toward Houston at this point, but they’re still saying it’s going to turn north.” He said the transactions that were done showed spot prices at most locations outside New York and the Rocky Mountain region down 10-25 cents on Wednesday from Tuesday.

Gulf pipelines scrambled to make up for lost supplies. Transco reported that about 1.2 Bcf/d of gas had been shut-in upstream of its system, and Texas Gas had experienced about 350 MMcf/d of curtailments. Florida Gas said early in the day that curtailments were up to about 500 MMcf/d and rising.

Texas Eastern said all offshore supplies had been shut in, taking about 1 Bcf/d off the pipeline, which is about the same amount as what was lost last week because of Isidore. Tetco still has a significant amount of onshore gas flowing through the pipe, a spokeswoman said. “We might lose some additional compression on the rest of the system because we evacuated our engineers in Louisiana at our compressor stations,” she added. Tetco’s total capacity is 5.9 Bcf/d.

Gulf South reported 900 MMcf/d of curtailments. CMS said the Terrebonne and Sea Robin pipelines were completely shutdown. Together they have about 2.5 Bcf/d of capacity.

“I think everyone at this point is a little concerned about the facilities that are out there,” said CMS Trunkline spokesman John Barnett. However, he said CMS’s Lake Charles LNG plant still had not been shut down or evacuated. The facility is 35-40 miles inland on a ship channel and is continuing operations, but “we will continue monitor the storm and as conditions change and if they warrant we will shut the plant down,” he said. There currently is no LNG ship in port. The Lake Charles Ship Channel, which accesses various refineries and petrochemical plants, is closed.

New York prices spiked when buyers scrambled to make up for the lost supplies. New York traded from the $4.80s to over $5.50. “It was a big range. Non-New York was far below and actually fell below yesterday’s levels. We traded some Transco non-New York in the $4.70s on Monday but today we did $4.535. TCo Pool (Columbia) fell from $4.50 on Monday to the low $4.30s and Tetco was in the mid $4.70s on Monday, but dropped to the $4.50s today,” a Northeast marketer said. “Late New York stuff was way up.” Henry Hub traded $4.15-45, but most of that probably will not be delivered, he noted.

Spot prices at most points started high, but then dropped progressively through the morning due to lack of buyers available and the morning dip in November futures, which had fallen to $3.95 in the first hour from $4.067 on Tuesday before rebounding after the hurricane was upgraded.

Southwestern spot points gained strength in relation to Nymex futures despite being down from Tuesday, a western trader said. He attributed the strength to demand from power generators. “It’s because Palo Verde 1 is down for maintenance and the Comanche Peak nuke has an unscheduled outage. Power was trading $60 in [the Electric Reliability Council of Texas] today. That pushed gas prices up.”

The 1,243 MW Palo Verde Unit 1 in Arizona and the 1,150 MW Comanche Peak nuke in Glen Rose, TX, were at zero power along with 13 other nuclear plants across the nation. The Nuclear Regulatory Commission reported that about 16,422 MW of nuclear generation was down on Wednesday mostly for annual maintenance work.

“The [Nymex] board was trading in the mid to upper $3.90s this morning. Basis at Waha was minus 28, but Waha was trading in the low $3.90s rather than the mid $3.60s. We were 25 cents above next month’s value. The board did eventually go up above $4.10, but that’s not where it was when we were trading. Power prices drove it. The electric generators were heavy buyers both same day and tomorrow.”

Meanwhile, Rockies prices experienced a rare rally Wednesday, mainly because of work being done at the Jonah Field in the Green River Basin of Wyoming. Opal prices soared to more than $3 from a low of $1.40 on Tuesday.

Duke Field Services is adding looping and compression to the Jonah Gathering System. The work will completely shut down Jonah gas flows on Thursday, which means about 700 MMcf/d of gas production will be off the market. Jonah Gas Gathering spokeswoman Sherry Andersen said the expansion will bring capacity to 850 MMcf/d from its current 725 MMcf/d. She said about 500 MMcf/d is expected to be flowing again on Friday and by next Tuesday a total of 850 MMcf/d should be available.

“Opal started at a buck fifty and obviously the people that were selling it didn’t realize there was a major outage,” said a Rockies marketer. “It went from $1.50 to $2.50 in all of about 3-4 minutes, and then $2.50-$3 was where it traded the bulk of the morning. We stayed out of the way most of the time.”Northwest domestic gas and CIG gas were trading about 10-50 cents behind where Opal was trading at any moment in time, he said.

“Anyone with transport on Northwest was going out and purchasing non-Opal gas and that pushed non-Opal prices up as well,”said another source. “At one time, I sold $3.00 at Opal and bought $2.30s at other points in the Rockies. When you see that kind of volatility in the market, things can get pretty out of whack in terms of what people are hearing and seeing. I think some people are going to end up without gas down there. There were some cuts there last month, but it’s more significant this time around. Last month, we didn’t get this kind of pop in the market.”

Despite the outage, balance-of-the-month prices at Opal remained relatively flat in the low $1.60s from the $1.50s on Monday.

It was a little colder in the Pacific Northwest Wednesday, which lifted demand, but marketers said there seemed to be plenty of gas available. Sumas traded down from Tuesday into the low $3.20s for most of the session, but went out in the $3.10s. Malin was in the $3.50s most of the day. Kingsgate opened around $3.30 and fell a nickel or more. Jackson Prairie storage will be undergoing four days of maintenance, which may have helped push down Stanfield prices.

Chicago was immune to the hurricane threat and traded 10-15 cents or more behind the Henry Hub averaging around $4.00 most of the session. Price softness was even more pronounced at MichCon, which fell to the low $3.90s before rebounding near the end of trading, according to one source.

Storage will take a back seat to Lili tomorrow, but the injection figure should add to any bullish impact on futures from the storm. Early indications point to a relatively small injection of 30-40 Bcf compared to 67 Bcf in the prior week. Isidore undoubtedly detracted from injections last week and Lili probably will do the same this week, which could kick a nice chunk out of the storage surplus heading into the winter heating season.

©Copyright 2002 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.