Gulf Oil Production Stops as Hurricane Gustav Approaches
In a move which has already caused a slight spike in gas prices and a spike in crude oil prices at the New York Mercantile Exchange (NYMEX), oil giants including BP and Royal Dutch Shell have shut down more than three-fourths of Gulf oil production in the face of Hurricane Gustav, which is in the Gulf of Mexico and expected to make a Louisiana landfall early tomorrow. About 40 percent of natural gas output has also been shut down.
Both Shell and BP said their production was completely shut off, in a process which involves closing safety values located thousands of feet deep in the Gulf, to prevent leakage of natural gas or oil. Shell evacuated more than 1,300 employees from 20 oil platforms and other facilities, in a task which involved 17 helicopters and took four days. BP likewise evacuated its workers on Saturday. It’s estimated that 35,000 people work in the Gulf on offshore oil rigs and at production facilities.
About 25 percent of domestic oil production and 15 percent of natural gas comes from the U.S. Gulf Coast, according to the U.S. Minerals Management Service (MMS), which oversees offshore oil and gas operations. Almost half of U.S. refining capacity is in the Gulf. For the first time in more than a month, gas prices at the pump rose this week, continuing that trend on Saturday when, according to AAA, a gallon of regular gas jumped a penny to a national average of $3.682. Production of oil and natural gas can resume in a matter of days after Hurricane Gustav has passed, provided that the storm doesn’t damage offshore energy infrastructure, which could lead to prolonged supply disruptions and accompanying gasoline price hikes. Hurricane Katrina caused extensive damage to offshore oil rigs. Oil prices jumped by nearly $3 per barrel, to $118 a barrel, in a special Sunday afternoon trading session of the NYMEX, as the world reacted to Gustav’s threat.
Shell and other gas companies reported heavy demand for gas at South Louisiana gas stations, with some gas stations running out of fuel as area residents tried to flee the storm.
North America’s largest refinery, Valero Energy Corp., shut down and evacuated its Norco, LA refinery, while cutting production at its Port Arthur and Texas City refineries in Texas. Exxon Mobil shut down its Chalmette, LA refinery, which it operates in conjunction with Petróleos de Venezuela, S.A., the Venezuelan national oil company. ConocoPhillips hardened its three Gulf Coast refineries — two in Louisiana and one in Texas — against potential damage from high winds and water and prepared to evacuate personnel and shut down refineries. Anadarko Petroleum, the largest independent deep-water oil producer in the Gulf, said it would have its 600 employees evacuated by Sunday evening. Marathon Oil shut down refineries in Garyville and Lake Charles, LA.
Read more about the Bush administration’s response to Hurricane Katrina, especially regarding firefighters.
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