Valero Cuts Production at Gulf Coast Refineries Ahead of Gustav

By Jim Polson

Aug. 30 (Bloomberg) -- Valero Energy Corp., the largest U.S. refiner, reduced production at four refineries in Texas and Louisiana as Hurricane Gustav intensified before a forecast strike in Louisiana in two days.

Refineries in St. Charles, Louisiana, as well as Port Arthur, Texas City and Houston in Texas are operating at reduced rates, spokesman Bill Day said today in an e-mailed message. Output at two refineries in Corpus Christi, Texas, isn't curtailed, he said.

Valero expects to decide later today whether to shut down units and evacuate staff, Day said. The company has shut service stations in southern Louisiana parishes because of evacuation orders, he said.

``Devastating storm-surge flooding'' is possible based on forecasts, St. Charles Parish officials said in a statement. Levees guarding the parish to the east may be breached, it said. Officials urged residents to leave before a planned mandatory evacuation at noon local time.

Valero's refinery in the parish can process 186,000 barrels a day of crude oil, according to the U.S. Energy Department. Daily capacity is 210,000 barrels at Texas City and 85,000 barrels at Houston, according to the department. Port Arthur's capacity is 325,000 barrels a day, according to Valero.

Gustav, now a Category 3 hurricane with winds of almost 125 miles (205 kilometers) per hour, picked up speed as it headed toward western Cuba and the U.S. Gulf Coast, the National Hurricane Center said in a bulletin. The storm was about 185 miles east of the western tip of Cuba at 11 a.m. New York time. A storm surge of 19 feet is possible at landfall in Cuba.

Gustav may strengthen before reaching the northern Gulf of Mexico in two days, the forecast said. Tropical storm-force winds extend as far as 160 miles from the center.

To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net.