Damaged US Refineries may Face Billions in Repairs
USA: September 9, 2005


BATON ROUGE - Oil refineries and chemical plants knocked out by Hurricane Katrina are slowly recovering but flooding, power outages and broken equipment at the plants could cost more than $2 billion to repair, an industry expert said Thursday.

 


"That is a conservative estimate," said Larry Wall, spokesman the Louisiana Mid-Continent Oil and Gas Association.

"We're still trying to get a handle on this thing, but it is too soon to put firm numbers on the damage," added Wall, whose group represents oil and natural gas companies doing business in the region. "This is one of the worst calamities we've been through and it is one of the worst I've seen as far as hurricane damage."

As refineries struggle with the devastation, Wall said companies are unlikely to relocate their facilities to avoid future hurricanes that have become increasingly common along the US Gulf Coast, which accounts for 40 percent of all US crude oil output.

"The refineries aren't going anywhere," said Wall. "There is too much invested in them here and companies wouldn't be working this hard to rebuild if they were thinking of moving."

The energy sector is worth $93 billion to Louisiana. It ranks fifth among US states in crude oil production and has 17 refineries, according to the US Energy Information Administration.

All but five refineries are back in operation -- albeit at different stages -- since Hurricane Katrina struck Aug. 29. The storm's 140 mile per hour winds initially halted most offshore oil and natural gas production in the Gulf of Mexico, and shut about 10 percent of US refining capacity.

"It has been very hard for these companies, because many of them first had to locate their workers who had been evacuated and now have to deal with problems of access to their facilities," said Wall, adding that some groups were using helicopters to get to their facilities.

The US government said four large refineries could be out of service for months, eliminating about 5 percent of US refining capacity and tightening the nationwide supply of gasoline.

Louisiana refineries on that list include ConocoPhillips's 247,000 barrel per day (bpd) Belle Chasse refinery and Murphy Oil's Meraux refinery.

The 190,000 bpd Chalmette refinery, jointly owned by Exxon Mobil and Venezuela's state oil company may not produce gasoline again until December, Venezuelan officials said Thursday. Exxon officials were trying to assess damage to the plant, which has not yet had power restored to.

However, the large Motiva Norco 240,000 bpd refinery, which is jointly owned by Royal Dutch Shell and Saudi Arabia, said it hopes to restart yet this week.

The other major refinery out of commission for an unknown length of time is Chevron's Corp.'s giant plant in Pascagoula, Mississippi, with a capacity of 325,000 bpd.

Mid-Atlantic's Wall said workers at refineries were working around the clock to get them running again, while dealing with government bureaucratic red tape for permits.

"The government has been very good about this and have waived some permit requirements, including a rule that only US vessels can move crude oil from one state to another," he said.

Wall said oil companies, including Shell, have had to return to their New Orleans offices with private security guards to retrieve company records from waterlogged buildings.

Refiners were also searching for accommodations for many of their employees. Chevron set up a "tent city" for 300 employees and their families at the Pascagoula refinery, he said.

Dan Borne, president of the Louisiana Chemical Association, said 25 chemical plants were affected in one form or another by the storm, with at least three severely hit.

Damaged railroad tracks, lack of raw materials, and few available trucks because of emergency relief operations were the biggest constraint to producers, Borne said.

A "high priority" was to get the New Orleans-based Air Products plant restarted because it produces about 30 percent of US liquid hydrogen used for rockets, he said. Last week, the company said damage from the hurricane would affect supplies from the New Orleans plant "for an extended period of time".

 


Story by Lesley Wroughton

 


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