Katrina's damage to production far worse than Ivan's: Analysts

Chicago (Platts)--12Sep2005

Hurricane Katrina caused far more damage to the offshore Gulf of Mexico
producing region than last year's Hurricane Ivan, and it will be many months
before the resulting loss of production is restored, Edward Kelly, head of
North American Gas & Power at consulting firm Wood Mackenzie, said Monday.
     "Recovery will not be immediate," Kelly told Interchange Energy's LDC
Forum outside of Chicago. Supply challenges existed in the region prior to
Katrina and "the storm came in the midst of that," he said.
     Based on information collected since Katrina struck the Gulf Coast on Aug
30, it appears the storm damaged far more deepwater production facilities than
Ivan, including more than three times as many shelf platforms (37 compared
with 7) and twice as many rigs (14 compared with 7), Kelly said.
     Moreover, he explained that 2 Bcf/d more gas initially was shut in by
Katrina than by Ivan. "The devil could not have designed a more damaging set
of events to Gulf Coast production," he maintained.
     Six months after Ivan struck the Gulf, the offshore gas-producing
industry was still getting back on its feet, and the same will be true of the
post-Katrina period, Kelly predicted. Even as necessary infrastructure is
repaired, getting rigs and platforms operational will remain take some time
because "gas isn't just sitting there, at pressure, ready for production."
     And the impact of Katrina will be felt throughout the winter, Kelly said,
adding that with so much production hobbled, existing demand will have to be
met by withdrawing gas from storage, leaving less available to meet peak
utility and industrial demand. 
     Consequently, price spikes and volatility are likely when cold weather
hits the market areas, he said.
     Meanwhile, analysts at RBC Capital Markets said Monday that recovery from
Katrina appears to be lagging behind that of Ivan. Producers had restored 48%
of their shut-in production by Saturday--13 days after Katrina hit--while 65%
of output curtailed by Ivan was up and running within two weeks.
     Five months after Ivan slammed the Gulf, producers reported a cumulative
172 Bcf of production losses; and RBC Capital said post-Katrina losses will
likely exceed that.

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