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Hurricane threat to Gulf energy hub rattles US economy
Washington (AFP) Sept 1, 2008 With the US oil-refining industry heavily concentrated along the northern Gulf of Mexico coastline, a strategic sector of the economy is perennially vulnerable to the threat of hurricanes. Hurricane Gustav, which swept ashore at around midday southwest of New Orleans, will result in up to 10 billion dollars (8.22 billion euros) in insured losses and a long-term five percent cut to oil and natural gas production in the region, a US risk modeler said Monday. While America's ageing refineries have improved their storm defenses, "virtually all" oil production in the Gulf was "shut in," or turned off, a US Department of Energy official said Monday. The Department of the Interior's Minerals Management Service (MMS) also reported that 82 percent of natural gas production was shut in, said Kevin Kolever, assistant secretary for electricity delivery and energy reliability. "If there is a significant storm surge and a lot of flooding, there are still going to be some issues with part of the infrastructure," said Andy Lipow, a Houston-based analyst. "I do believe that the refineries are much better prepared to recover quickly than they were during Hurricane Katrina and, of course, during Hurricane Rita," referring to the two huge storms which devastated the region in August and September 2005. "Nearly every location has electrical generators," he said. But, he said, "the fact is, so much of the refining capacity is on the Gulf coast. And when you get a category four or five hurricane, there are still significant risks." The coastal region from Texas to Alabama, the most affected by tropical storms and hurricanes, is one of the largest energy production hubs in the Americas. It produces some 1.3 million barrels per day (bpd) of oil -- about one quarter of total US production of some five million bpd -- and 7.4 billion cubic feet of gas per day, according to the Department of the Interior's Minerals Management Service (MMS). The Gulf coast's refineries meanwhile produce more than half of the country's gasoline production. But the infrastructure is old, as the damage done by the 2005 storms made clear. Of the 143 working US refineries, the most recent was built in 1976. There were more than 300 in service in 1980, but today, the total capacity is less than US demand: 17.6 million barrels per day, compared to 20.7 million barrels now. Nowhere is this vulnerability better illustrated than at Port Fourchon, Louisiana, around 60 miles (100 kilometers) south of New Orleans. This bottleneck site processes crude from 90 percent of the region's myriad undersea platforms. A 2006 study by the port found that a three-week interruption would cost US oil companies 10 billion dollars, the broader economy a further 2.9 billion dollars and equate to the loss of 77,000 jobs. Yet there does not appear to be any rush to upgrade the US refinery network -- with high crude prices simply squeezing refinery profits. So the wider risks caused by such as Hurricane Gustav become magnified. "Those companies that own the existing refineries are sitting on some valuable assets," said David Newman, market analyst at Sovereign Society. "(But) a little known fact: refineries actually lose money when oil prices rise. In that way, refineries really have an inverse relationship with oil prices." After Hurricane Katrina in October 2005, Congress passed a law intended to boost new refinery development in exchange for an easing of environmental restrictions. To date, only one new site -- in Arizona -- is slated for building work, with an operational date of 2012. Related Links Powering The World in the 21st Century at Energy-Daily.com
Hurricane threat to Gulf energy hub rattles US economy
Washington (AFP) Sept 1, 2008With the US oil-refining industry heavily concentrated along the northern Gulf of Mexico coastline, a strategic sector of the economy is perennially vulnerable to the threat of mega-hurricanes. |
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