Engineering News

Majority of Ike-affected Refineries Back Up This Week - Analyst
September 16, 2008

The Texas refinery complex hit by Hurricane Ike could be fully operational within three weeks, experts said Monday as companies began to report minimal damage to refineries along the Gulf Coast.

Dan Pickering, research analyst at Houston's Tudor Pickering Holt and Co., said he expects "75 percent are going to be back up this week."

The fear of an extended gap in supply caused the average price of regular gasoline to go up about 20 cents from Thursday to Monday. Over the weekend, customers across the country reported prices well above $4.

"This is very lucky from a U.S. consumer perspective," Pickering said. "There was the risk that 10 or 15 percent of U.S. refining capacity could have been out for a month or more, and now it looks like it's going to be a fraction of that. Within the next 10 days, everything's going to be back to, quote-unquote, normal."

The Department of Energy reported Monday afternoon that nine refineries in the Houston-Galveston region and four refineries in Port Arthur remained out of service. Three Corpus Christi refineries ran at reduced capacity.

With companies reporting little damage to refineries, the most important factor became the availability of power.

"The biggest danger was excessive flooding with highly corrosive saltwater in certain areas, and we certainly haven't seen any reports of that," said Bruce Bullock, director of the Southern Methodist University Maguire Energy Institute.

The market responded Monday by driving down the price of oil to $95.71 a barrel.

In Dallas, Exxon Mobil and Shell said they locked in their price for wholesale gasoline at the end of last week.

"We have a history of being sensitive during issues such as huge weather disruptions," said Shell spokeswoman Anne Peebles.

In North Texas, regular gasoline supplied by the major brands remained cheaper than that supplied by unbranded companies going into today, said Brad Douglass, president of Sherman's Douglass Distributing.

Independent, unbranded suppliers usually offer cheaper prices than the majors because they can hunt for the cheapest deals on the spot market, Mr. Douglass said.

The wholesale price for Exxon's regular gasoline was $3.47 per gallon Monday afternoon -- the price it had maintained since Thursday -- while Truman Arnold Cos. posted $3.91 per gallon.

Douglass said gasoline prices would probably be higher through today or Wednesday, then drop Thursday.

"We've passed the threshold," Mr. Douglass said. "Sunday and [Monday] was the real gut test."

On the production side, offshore operations experienced a few disruptions.

The U.S. Minerals Management Service reported that Hurricane Ike knocked down 10 production platforms out of the 3,800 in the Gulf of Mexico.

The hurricane also sent adrift at least two of the gulf's 121 drilling rigs.

Dallas-based driller Ensco International Inc. said it could not find one of its rigs, originally about 90 miles offshore.

The U.S. Department of Energy responded to potential import slowdowns and production disruptions by agreeing to deliver to refineries more than 300,000 barrels of emergency oil from the Strategic Petroleum Reserve.

Overall, Mr. Pickering said, the damage to the industry was not as bad as predicted Friday and shows the increased precautions companies have taken since Hurricanes Katrina and Rita.

REFINERIES' SNAPSHOT

Oil companies are working to assess damage and restart operations at Texas refineries in the path of Hurricane Ike. Here's where they stood Monday evening:

Exxon Mobil: Its Baytown refinery, the largest in the U.S., has power and should be running this week. Its Beaumont refinery does not have power.

Valero: Its Houston refinery has power. Valero is working to restore power to its Texas City and Port Arthur refineries.

BP: Its Texas City refinery, the second-largest in the area, experienced no significant flooding. Employees are working with local authorities and utilities to restore power and water.

Shell: Its Deer Park refinery, the third-largest in the area, has utilities.

Source: The Dallas Morning News

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