NEW ORLEANS -- Hundreds may have died in Hurricane Katrina's assault on the U.S. Gulf Coast, which flooded New Orleans and other areas. And the economic cost of the hurricane's rampage could be the highest in U.S. history; risk analysts estimated the storm would cost insurers $26 billion, said Reuters.
Meanwhile, oil reached a new high near $71 ($70.85) on Tuesday as oil firms assessed the damage wrought by Katrina's rampage through the Gulf of Mexico, where most oil and gas output was at a standstill. At least eight Gulf Coast refineries in the path of the hurricane shut down or reduced [image-nocss] operations by Monday, according to oil company and U.S. Department of Energy reports, said the Associated Press. The eight represent about 2.3 million bpd refining capacity.
The storm had swept through oil and gas fields in the Gulf of Mexico, where 20% of the nation's energy is produced. At least two drilling rigs were knocked adrift and one in Mobile Bay, in Alabama, broke free of its mooring and slammed into a bridge.
More than 90% of the Gulf of Mexico's oil output and more than 80% of natural gas production was shut as a precaution, the U.S. minerals management service said.
That closed down 1.4 million barrels per day of crude, roughly 7% of U.S. domestic demand and about the same amount as the estimated spare capacity held by the Organization of Petroleum Exporting Countries (OPEC).
"It's not out of the question that $80 could be the next barrier if there's long-term damage," said Gerard Burg, minerals and energy economist at National Australia Bank. The last time oil prices, adjusted for inflation, averaged $80 a barrel was 1980, after the Iranian revolution.
In the Gulf, reports from the Mineral Management Services showed crude oil production down about 91%, or 1.37 million barrels. The Gulf also lost about 82% of daily natural gas production, according to the assessment released midday.
Damage appeared to be minimal, but Bob Slaughter, president of the National Petrochemical & Refiners Association (NPRA), said even that assessment could be premature. He said Katrina appeared to be more damaging than Hurricane Ivan, which struck a similar path last fall. With Ivan, almost immediately after the eye passed, the initial information was, the damage was not significant, he said. Then we found out when people had time to assess things, that there was significant damage, which was the loss of production and some capacity.
Immediately after Ivan struck last September, crude oil output fell 83% or 1.4 million bpd, according to MMS research. Production over the next few months fell by 32 million barrels, or about 5.4% of the annual output.
Katrina affected some of the Gulf's largest refineries, including Exxon Mobil Corp.'s Baton Rouge, La., facility, which has a 494,000-bpd capacity. It operated at reduced capacity for a short time, then resumed normal operations by early evening, spokesperson Prem Nair said.
Others shut down completely included Chevron's unit in Pascagoula, Miss. (325,000 bpd); Valero's St. Charles, La., refinery (260,000 bpd); Motiva's facilities in Convent and Norco, La. (255,000 and 242,000 bpd, respectively); ConocoPhillips Alliance refinery, Belle Chase, La. (247,000 bpd); Marathon's Garyville, La., refinery (245,000 bpd); Chalmette Refining's facility (187,200 bpd); and Murphy Oil Corp.'s Meraux, La., refinery (125,000 bpd).
Late Monday, Valero reported that it could be one to two weeks before its St. Charles refinery can resume production. The refinery has no power and it could take as long as three days to restore it. Additionally, Valero said it will have to repair some pumps, electric motors and electrical gear. The company also reported minor damage to cooling towers and insulation that was knocked off several tanks. The company added there is no major damage nor evidence of leaks or spills.
The rest of the companies had not announced any projections for reopening.
Saudi Arabia, OPEC's biggest crude oil producer moved swiftly to pledge an extra 1.5 million barrels per day (bpd) of oil to the market if needed and the United States announced it would dip into the Strategic Petroleum Reserve (SPR) if necessary.
"Fasten your seatbeltpeak hurricane season isn't until mid-September through mid-October, and we've had two hurricanes hit the Gulf coast already," said Deborah White, senior energy analyst at SG Commodities, Paris.
And in related news, the Petroleum Equipment Institute (PEI) issued the following notice:
PEI Convention and NACS Show Update
As we continue to receive reports of damage left in the wake of Hurricane Katrina, people are anxious to know if it will affect PEI's Convention and the 2005 NACS Show scheduled for October 30-November 1, 2005, in New Orleans. At the current time, neither PEI nor NACS has received an assessment of any damage to the Ernst M. Morial Convention Center and/or any of the convention hotels. As you know, New Orleans was evacuated prior to the storm and many of our contacts, being residents of the city, are unavailable for contact. We are monitoring the situation and should there be any changes to the convention plans, we will post them on the Convention Updates page. In the interim, please keep those affected by this catastrophe in your thoughts.
And the National Association of Convenience Stores (NACS) posted the following notice on its website:
Hurricane Katrina--NACS SHOW 2005 Update
NACS is one of many trade associations that has a scheduled convention this fall in New Orleans and is closely monitoring the situation in New Orleans relative to Hurricane Katrina. We are in communication with the New Orleans Convention & Visitors Bureau and the Ernest N. Morial Convention Center, as well as local hotels. NACS will continue to monitor the city's recovery, and will update NACS Show participants as soon as relevant and adequate information becomes available from our contacts in New Orleans. Additional updates will be available on the web at the NACS Show website and here at NACS Online. Our thoughts are for the safety and well being of those in the affected areas.
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