Oil firms batten down ahead of Rita

09/22/2005

NEW YORK (Reuters) - Oil companies on Wednesday began shutting refineries and finishing the evacuation of workers from oil and gas production platforms in the Gulf of Mexico as powerful Hurricane Rita approached.

About 14 percent of U.S. oil refining capacity by Wednesday night was shut as a precaution before Hurricane Rita strikes land and in the aftermath of Hurricane Katrina.

This practically ensures a rise in the price of a gallon of gasoline already pushed near record highs after Katrina knocked out refineries in Louisiana and Mississippi.

Valero Corp. (VLO), the nation’s largest refiner, said it began shutting on Wednesday its 243,000 barrel per day Texas City refinery and its 135,000 bpd Houston refinery, and was operating its 340,000-bpd Corpus Christi plant on a skeleton crew.

Bill Greehey, Valero’s chairman, characterized Rita as a “national disaster” that could send gasoline prices much higher.

According to the travel club AAA, U.S. retail gasoline on Wednesday averaged $2.77 per gallon, lower than the $3.06 a gallon reached September 5.

“If it hits the refineries, and we’re short refining capacity, you’re going to see gasoline prices well over $3.00 a gallon at the pump,” Greehey forecast on Tuesday.

As of Wednesday night, six Texas refineries able to process a total of 1.4 million barrels of crude oil per day—or about 8.7 percent of the nation’s oil refining capacity—had closed down in preparation for the storm. Also, Flint Hills Resources was shutting much of its 290,000-bpd Corpus Christi, Texas refinery, according to a filing with Texas environmental regulators.

Marathon Oil, another large U.S. refiner, said it began shutting down its 72,000 barrel per day refinery in Texas City, Texas, so that employees could start evacuating.

“We have started shutting down our Texas City refinery this morning and expect it to be completely shut by later today.” said Linda Casey, a spokeswoman for the company.

She said Marathon would wait to see if the storm swings east after hitting land, expected by this weekend, before taking any action at the company’s 245,000 bpd refinery in Garyville, Louisiana.

Also in Texas City, BP said it was in the process of shutting all units at its 470,000 barrel per day oil refinery there.

Sources said that ConocoPhillips had closed its 220,000 barrel per day oil refinery in Sweeny but the company was not available to confirm or deny it.

Shell said it expects its 340,000 barrel per day Deer Park, Texas, refinery to be completely closed by Thursday.

Now a Category 5 hurricane with winds up to 175 miles per hour, Hurricane Rita’s mostly likely path will take it to the Texas coast by the end of the week, hitting shore southwest of Galveston.

Although the current projected path puts it south of some major oil-producing areas in the U.S. Gulf, Rita’s energy impact could be significant if the storm takes a northerly path through the western Gulf of Mexico, according to the government.

The storm could threaten up to 18 Texas refineries that account for 23 percent of U.S. refining capacity, according to the Energy Information Administration. The U.S. Gulf Coast is home to 47.4 percent of total U.S. refining capacity, according to the EIA.

Texas and Louisiana refineries that have not closed remain in a watchful phase, waiting to see what path the storm takes as it comes nearer to land.

Exxon Mobil said it sent all non-essential personal home at its 540,000 bpd Baytown, Texas, plant.

Citgo said it was waiting until Thursday to make definite plans to shut down its 156,000 barrels per day plant in Corpus Christi but had started moving workers from its Houston offices to Tulsa.

PLATFORM EVACUATIONS CONTINUE

Evacuations of workers on oil and gas production platforms in the deepwater Gulf of Mexico intensified on Wednesday.

Chevron said as of Wednesday morning it had evacuated 2,200 workers from all of its Gulf of Mexico operations. But a company spokesman declined to comment on the amount of oil and gas production affected but noted that some of the facilities could be operated remotely.

Marathon Oil said it had evacuated about 50 workers from its Ewing Bank platform in the Gulf, shutting in about 17,000 bpd of oil and 7.5 million cubic feet of natural gas production.

The company also evacuated workers on the three platforms in the South Pass block which were damaged by Hurricane Katrina and have not operated since, according to Paul Weeditz, a company spokesman.

Apache said it expects to shut in a total of 69,000 barrels per day of oil and 630 million cubic feet of natural gas if Rita continues on its current path.

This includes 25,000 barrels per day of oil and 100 million cubic feet per day of natural gas shut in by Katrina, said Tony Lentini, a spokesman for Apache.

Lentini said Apache has evacuated 480 people from Gulf of Mexico operations, and expects to remove 247 more. It also is working to evacuate onshore workers from Cameron Parish and the coast of Texas.

Exxon Mobil said it shut in 35,000 barrels per day of liquids and 265 million cubic feet of natural gas because of Rita. Combined with production already off line due to Katrina, Exxon Mobil’s total gross production shut in is now 63,000 barrels per day of liquids and 535 million cubic feet of natural gas.

Kerr-McGee said it was removing all of its workers and shutting all of its production at its facilities.

On Wednesday, total crude oil production shut in the Gulf of Mexico jumped to 73.16 percent from the 58.5 percent shut in on Tuesday, according to the U.S. Minerals Management Service.

Natural gas production shut in on Wednesday was 47.13 percent, up from 33.8 percent on Tuesday.