Ike’s Impact on the Oil and Natural Gas Industry

The Minerals Management Services (MMS) reports that 28 of the 3,800 offshore producing platforms were destroyed by Hurricane Ike. Initial estimates indicate that the destroyed production platforms produced a total of 11,000 barrels of oil per day and 82 million cubic feet of natural gas per day. Additional damage reported includes 3 jack-up drilling rigs destroyed with one jack-up drilling rig with extensive damage. Two drilling rigs had been reported drifting but have been secured by tugs. Dallas based Ensco International Inc. has been unable to locate its Ensco 74, one of five Ensco jack-ups that were exposed to hurricane-force winds. The 74 was the farthest offshore.

Devon Oil inc. reported that just 20% of its Gulf production has been restored since Ike and Hurricane Gustav plowed through the region. Devon’s U.S. Offshore production is about 60% natural gas. Chevron Corp. said Hurricane Ike toppled several of its platforms in shallower Gulf of Mexico shelf waters. BP said the drilling derrick on its 100,000 bpd Mad Dog oil platform had toppled and fallen to the sea bed and it was too early to say when the platform could resume production. Shell Oil, the largest oil producer in the Gulf of Mexico, said initial inspections of its offshore facilities revealed only minor surface damage.

Onshore, 13 refineries representing about 19 percent of the U.S. gasoline and other fuels production capacity remained shut. Two of the largest U.S. refineries – Exxon’s Baytown, Texas, refinery and Shell’s joint-venture Deer Park, Texas, plant were restarting and are expected to be back on line this week.

Commentary -  MMS stresses that it expects reports of damages as inspections continue, but for comparison, final damage reports from MMS indicated that Hurricane Katrina destroyed 44 platforms and Rita destroyed 64 platforms. U.S. gasoline stockpiles, already running at their lowest level since November 2000, could drop to their lowest on record due to the effects of Ike according to a poll of analysts. The Energy Department released emergency crude to a handful of refiners having trouble procuring oil in the aftermath of the hurricanes.