The offshore oil & gas industry and America's economy are facing some tough numbers and difficult decisions thanks to multiple hurricane strikes in the Gulf of Mexico.
As of Sept. 25, the US Minerals Management Service reported 666 platforms and 92 rigs evacuated in the Gulf of Mexico, with shut-in production of 1.5 million b/d of crude and 8 bcfd of natural gas. That amounts to all of the normal crude production and 80% of the natural gas production from the gulf. By comparison, at its peak Katrina shut in 95% of the oil and 85% of the gas production in the gulf, much of which had not been restored before Rita struck 3 weeks later.Posted by Alan at September 27, 2005 12:29 PMMoreover, the cumulative amount of production lost since Aug. 26 when Katrina first threatened oil and gas operations in the US sector of the Gulf of Mexico totaled 33.3 million bbl of crude and 157 bcf of natural gas through Sept. 25.
Rita was the fifth storm to disrupt gulf production this year. Hurricane Dennis disrupted production of 5.29 million bbl of oil and 23.3 bcf of gas; Tropical Storm Cindy, 312,127 bbl of oil and 1.7 bcf of gas; and Hurricane Emily, 240,024 bbl of oil and 1.58 bcf of gas.
"Although demand destruction from lost industrial consumption has offset shut-in production from the gulf, we believe this will only occur in the interim," said Ronald J. Barone, a managing director of equity research with UBS Securities LLC, New York. "As Louisiana begins to rebuild, we expect consumption to increase, eventually approaching pre-Katrina levels. However, we expect 1-1.5 bcfd of production (2-3%) to be permanently lost. Given that demand for natural gas has already begun to outstrip production, a 2-3% decline in production could have a long-term upward impact on pricing."
In addition, Barone said, industry officials and regulators are now looking into the safety of LNG terminals. "Many are concerned about the ability of LNG facilities to withstand a natural disaster and, for that matter, about having so much gas infrastructure concentrated in the gulf in the event that the unthinkable happens," he said. "Some feel that having LNG terminals in other areas such as the Northeast [US] and California would make more sense."