Originally created 06/02/04

Energy producers vigilant during hurricane season

HOUSTON -- Forecasters predict a busy hurricane season for the Atlantic and Gulf coasts, raising the risk that violent storms could put a new crimp in the nation's stressed oil and natural gas production.

"The major source of natural gas is still the Gulf of Mexico," said Bill Gilmer, the chief energy analyst for the Houston office of the Federal Reserve Bank. "When a hurricane blows through, they're forced to evacuate those rigs and they shut production down. It's a disruption to supply."

Two recent hurricanes, Claudette and Lili, didn't cause many problems for energy companies or consumers because rigs kept operating and prices and supplies were stable. But with supplies already stretched this year, a powerful hurricane could mean even higher prices at the pump and steeper rates for natural gas users.

Forecasters predict three major storms for the Atlantic during the June-through-November hurricane season, which begins Tuesday.

Hurricane forecaster William Gray and his team at Colorado State University predict 14 named storms, with eight developing into full-blown hurricanes.

The three "major" storms would have wind speeds of at least 111 mph. Tropical storms get names once they reach 40 mph. A storm becomes a hurricane when winds reach 74 mph.

In the last century, about one in three major storms in the Atlantic hit land in the United States. Based on that average, about 10 intense hurricanes should have hit the U.S. coastline in the past nine years, although only three have.

But for the hundreds of companies running more than 4,000 offshore assets in the Gulf, from unmanned wells to huge platforms that accommodate more than 100 workers, a hurricane doesn't have to make landfall to cause problems.

"It just has to be a close call to lose one or two or three days of supply," Gilmer said. "If it actually hits and you're talking about some damage, that implies a longer delay. Then you're talking about crews effecting repairs and losing days to weeks, conceivably."

One of the gulf's most active producers is Apache Corp., which under current prices lifts about $4.4 million worth of oil and natural gas daily from the sea floor. The company's 311 platforms stretch from Alabama to Padre Island, though they're mostly concentrated off the Louisiana coast.

Evacuations from platforms and drilling rigs typically begin once a threatening storm enters the gulf, perhaps 48 to 72 hours away. With each of Apache's platforms averaging $20,000 a day in revenue from the oil or gas they produce, such decisions aren't taken lightly.

"It costs a lot of money for an evacuation," said Jon Jeppesen, senior vice president of Apache's gulf coast region. "We probably leave our people out longer than the majors do, but we really track the weather and watch it."

If a storm blows into a major refining center like Houston, it could send already high $2-a-gallon gas prices even higher. About 12 percent of the nation's gasoline, enough to fill more than 2 million car tanks a day, is refined in Houston. The city hasn't taken a direct hit since 1983.

On the Net:

National Hurricane Center: http://www.nhc.noaa.gov

Colorado State University Tropical Meteorology Project: http://tropical.atmos.colostate.edu


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