Uncertainty about when gas processing units damaged by Katrina will ramp up again, as well as concerns about pipeline integrity, continued to provide market support on Thursday. The Minerals Management Service (MMS) reported that offshore gas production had barely moved from levels on Wednesday.

Based on reports from 56 producers operating in the Gulf of Mexico, shut-in natural gas production barely inched up over a 24-hour period, to stand at 4.02 Bcf/d, equivalent to just over 40% of the daily 10 Bcf/d of output, according to the MMS. On Wednesday, shut-in gas production totaled 4.04 Bcf.

Cumulative shut-in gas production between Aug. 26 and Wednesday is 75.759 Bcf, which is equivalent to 2.076% of the yearly production of gas in the Gulf, which is 3.65 Tcf.

Shut-in oil production as of noon Thursday was 901,726 bbl/d, equivalent to just over 60% of the daily oil production in the Gulf, which is currently 1.5 million bbl/d. Cumulative shut-in oil production between Aug. 26 and Wednesday was 14.564 million bbl, equivalent to 2.7% of the yearly production of 547.5 million bbl. The MMS also reported 125 platforms and five rigs remained evacuated.

Gas analysts and consultants continue to be concerned about the amount of damage and time it will take to repair three gas processing facilities located in some of the most devastated areas along Louisiana’s lower eastern Gulf Coast, as well as the Mississippi Canyon Corridor pipeline system.

“There is still an immense amount of uncertainty about how much gas will be shut-in from Hurricane Katrina,” said natural gas analyst Ron Denhardt of Strategic Energy & Economic Research Inc. (SEER). “Probably the greatest question is the amount of lost gas production because of the loss of processing plants.”

On Wednesday, Dynegy Inc. CEO Bruce Williamson, whose company operates two of the damaged processors, said the Yscloskey plant (1.85 Bcf/d) and Venice (1.3 Bcf/d) could be out of service for three to six months (see Daily GPI, Sept. 8). Enterprise Products Partners LLC, which partially owns the third plant (Toca, 1.1 Bcf/d) said it expects repairs to take several weeks.

“A limited amount of gas can be blended,” said Denhardt, but pipe “rerouting will not be easy because the processing plants are located in eastern Louisiana and the extra capacity in processing capability is in western Louisiana. The major pipeline flow is west to east. Given the likely basis differentials, we believe that substantial gas will be processed, but at this time, we do not know how much.”

The processing plants out of service deliver processed gas to Tennessee Gas Pipeline (Yscloskey), Southern Natural (Toca) and Texas Eastern, Columbia Gulf and Gulf South (Venice). Unprocessed gas can leave liquids in the pipeline, which can create operational problems and possible equipment damage.

Enbridge Inc. had some good news to report on Thursday. The company said that its Mississippi Canyon offshore pipeline system, which it thought had been damaged by Katrina, was found to be intact and operational on Thursday. However, there is no estimate yet on when the system will be brought back onstream, according to spokesman Jim Rennie. The pipe’s return to service depends upon the status of the facilities at both the onshore and the offshore ends of the pipe, he said. Mississippi Canyon delivers gas to the Venice and Toca processing plants.

Enbridge has ownership interests in five gas pipelines that deliver offshore production to the Louisiana and Mississippi coastlines. The company’s offshore systems were flowing about 2.7 Bcf/d prior to Katrina’s arrival. Rennie said throughput is recovering “incrementally,” with the amount of gas currently at more than 1.5 Bcf/d.

Denhardt offered some “alternative outcomes” based on the extent of the damage to the processing plants and pipelines. “If we assume most of the gas could be rerouted, there would still be 1.3 Bcf/d shut-in for an unknown period.”

SEER’s “extreme assumption” considers the possibility “Dynegy’s plants were processing 3.15 Bcf/d [before Katrina hit], the gas cannot be rerouted, and these plants are shut down for six months. Add the shut-in production and Mississippi Corridor, and 4.45 Bcf/d (8.5 Bcf/d of U.S. gas production) could be shut in for up to six months. The impact of a loss of this magnitude on gas prices would be enormous.”

Considering “the amount of money at stake, some very creative solutions will take place, and, even in the worst case, the amount of shut in gas will be far less than these estimates.”

On Thursday, production was flowing and ramping up from all Shell-operated assets in the Western Gulf of Mexico. Production resumed from Auger, Brutus, Bullwinkle Cougar, Enchilada, North Padre Island and West Cameron 565. In the eastern Gulf of Mexico, its Fairway asset and Yellowhammer Gas Processing Plant near Mobile Bay, AL are “operating normally.”

Net Gulf production from Shell-operated and outside-operated fields for the first six months of 2005 averaged around 450 million boe/d. Currently, Shell’s net production has returned to approximately 160 million boe/d.

“Significant efforts continue as we make a comprehensive assessment of our hurricane-impacted assets, Mars, Ursa, Cognac, and West Delta 143 as well as of pipelines and other related onshore processing/handling facilities that transport and receive our production,” Shell said in a statement.

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