The platform and pipeline damage from Hurricane Ivan is proving more difficult to repair than some producers thought as recently as last week. The Minerals Management Service (MMS) said on Friday that although about 1 Bcf/d of the 1.8 Bcf/d of gas production currently shut in could return to service by the end of October, it may take much longer to restore the remaining 800 MMcf/d portion.
“While significant production from Gulf of Mexico facilities remains shut in due mostly to pipeline damage there is a good likelihood that significant portions of this may be able to return to production in a few months,” said Chris Oynes, Gulf of Mexico regional director at MMS. “The companies are engaged in around the clock repair operations and only bad weather is slowing down further progress. For example, the tropical storm Matthew in the Gulf area [Friday] is stalling operations.”
The National Hurricane Center said on Friday that the thirteenth tropical storm of the season had formed in the Western Gulf of Mexico on Friday. At 4 p.m. CDT, the center of Tropical Storm Matthew was located 260 miles east-southeast of Brownsville, TX, and moving east at 10 mph with maximum sustained winds near 40 mph. The NHC also said that strong winds on the Louisiana coastline were not directly related to Matthew but were more associated with a “pressure gradientbetween Matthew and high pressure over the southeastern United States.”
Oynes noted that oil producers “are now starting to approach MMS with alternative ways to return to production while pipeline repairs are continuing. MMS expects that some companies will soon request approval for modifications to their past plans to allow offloading of [oil] production from a platform to a large tanker and then further offload the production into a shuttle tanker to take to delivery points onshore. This will help restore [oil] production ahead of pipeline repairs.” The same can’t be done, however, for natural gas.
In an updated damage assessment released Friday, MMS said 150 platforms and 10,000 miles of pipelines were in the direct path of Ivan. Pipeline damage, rather than platform damage, is responsible for most of the production curtailments. Tennessee Gas and Southern Natural experienced the worst gas pipeline damage and they continue to work to restore service on parts of their systems.
A total of 12 larger diameter pipelines (10-inch diameter lines or greater) were damaged because of Ivan. Seven platforms were destroyed and six others had major damage. Five drilling rigs also had major damage. Production lost from five of the destroyed platforms totals 3,100 bbl/d of oil and at least 9 MMcf/d of gas. The remaining two platforms destroyed were not producing platforms.
The MMS said on Friday that 1,775.12 MMcf/d of Gulf gas production and 475,176 bbl/d of oil production remains shut in due to damage from Ivan, according to reports from 19 companies. A total of nine manned platforms and one rig remain evacuated. Cumulative production deferred because of damage from Ivan totaled 74.1 Bcf of gas and 17 million bbl of oil.
Energy consulting firm PIRA Energy Group said last week that it expects up to 110 Bcf of gas production will have been deferred because of damage from Hurricane Ivan when all the repairs are finally completed later this year. PIRA estimates that at least 40 million boe of oil and gas will be deferred, including 17 million bbl of oil and four million barrels of natural gas liquids. However, because of new reports from producers that repairs will take longer than first expected, those predictions could end up falling short of the mark.
Stone Energy and Shell reported on Friday that some of their production shut ins could continue into next year. Stone said on Friday that 62 MMcf/d of its natural gas production remains shut-in or curtailed as a result of Hurricane Ivan. All Stone’s production from the Gulf Coast Basin, with the exception of the Weeks Island field, was shut-in for four days during the month of September as a result of the hurricane. While there was no significant damage at any of its operated platforms, there was damage to non-operated wells and platforms where Stone has working interests, as well as downstream production facilities and third-party pipelines, all of which impacted its ability to restore production at certain fields.
The majority of damage is concentrated in the Main Pass and Mississippi Canyon areas, Stone said. “Repairs to our non-operated wells and platforms, as well as downstream facilities will be ongoing during the fourth quarter of 2004 and possibly 2005.” As a result, Stone estimates that 1.7 Bcfe of expected September 2004 production has been deferred.
Meanwhile, Shell reported that restoration of its production will take longer than it expected as recently as last week. The company hopes to get output at its Ram-Powell field back up to 70% of pre-storm levels by early December and back up to full production during the first quarter of 2005, said Shell spokesman Johan Zaayman. Ram-Powell was producing 244 MMcf/d of gas and 17,700 bbl/d of oil prior to Ivan.
Zaayman said that Shell also expects that its Main Pass 252 field won’t be up until early 2005. That field was producing 94 MMcf/d of gas and 1,800 bbl/d of oil before the hurricane hit. Most of the production from the company’s Cognac field should be back to pre-hurricane status by mid to late October. That field was producing 30 MMcf/d gas and 6,000 bbl/d of oil a day before the storm.
On Tuesday, BP delayed the full return of its Gulf of Mexico oil and natural gas output until the end of October because of ongoing pipeline repairs. BP’s Gulf production is currently 150,000 boe/d compared to a normal level of 350,000 boe/d, a spokeswoman said.
Williams said last week that it expects to take up to a $20 million pre-tax charge against earnings because of lost revenues and uninsured damages associated with Hurricane Ivan. Underwater inspections at its facilities in the eastern Gulf were expected to conclude last week. The company’s primary operations in the Gulf have returned to service, with the exception of the Devils Tower platform, a deepwater spar at Mississippi Canyon Block 773, about 150 miles south of Mobile, AL. The Devils Tower facility is scheduled to return to service in late October to mid-November, following repairs to the topsides over the next several weeks.
Dominion, which owns 75% of Devils Tower production and is the operator of the platform, said that until production resumes, it has a comprehensive insurance program to reimburse for delayed production beyond an estimated $9 million after-tax loss of income.
Production from three Devils Tower wells was interrupted on Sept. 15 by Ivan. A fourth well near completion at the time of the hurricane also is expected to begin production between late October and mid-November. A new completion rig needed to bring the facility’s four wells into production is expected to be available for installation in about 90 to 120 days. Prior to the hurricane, Devils Tower was producing 20,000 bbl/d of oil and 16 MMcf/d of gas.
Comstock Resources said last week that Bois d’Arc Energy LLC’s, in which it owns a 59.9% stake, had to shut in nearly all of its oil and natural gas production for part of September because of Ivan. That resulted in lost production of 40,000 bbl of oil and 300 MMcf of natural gas or 540,000 Mcfe. Bois d’Arc also had three drilling rigs under contract standing idle for a combined total of 22 days.
However, actual damage caused by the storm to Bois d’Arc’s production facilities was minimal and repairs are estimated to cost $1.2 million, the company said. Bois d’Arc also expects that certain of its properties, which are capable of producing 10,000 Mcfe/d, could also be shut-in much of October due to damage to certain pipelines that service these properties.
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