Refiners, Producers May Take Weeks to Restore Output

By Aaron Clark

Sept. 16 (Bloomberg) -- Texas refiners and Gulf of Mexico oil and gas producers may need two weeks to restore normal operations after Hurricane Ike swept through the region.

Exxon Mobil Corp., the world's biggest oil company, said its Beaumont, Texas, refinery took the ``most serious hit'' of its plants, from a wall of water pushed ashore by Ike. Chevron Corp., said ``several'' platforms in the Gulf had been toppled and Royal Dutch Shell Plc restarted ``some production'' in the region.

``You are looking at 10 to 14 days for most of the refineries'' in the Houston and Texas City areas, Andy Lipow, president of Houston-based Lipow Oil Associates LLC, said in a telephone interview. ``Power and people are the major stumbling blocks for refineries to return.''

Fourteen Texas and Louisiana refineries, with combined crude processing capacity of 3.72 million barrels a day, were closed because of Ike. The storm came ashore near Galveston Sept. 13, shutting about 20 percent of the U.S.'s oil-refining capacity.

``It's highly unlikely that we will see the bulk of these operations back to normal before a minimum of 10 days to two weeks,'' Tom Knight, trading director at Truman Arnold Cos., an independent wholesaler in Texarkana, Texas, said in an interview.

Refinery outages are expected to reduce supply and boost gasoline prices. Regular gasoline at the pump rose 4.8 percent to $3.842 a gallon on Sept. 14 from a week ago, AAA, the nation's biggest motoring club, said on its Web site.

``Over the next two weeks the national average could get as high as $3.90 to $3.95 and then come back off,'' said Lipow.

Millions Without Power

Ike left Houston without drinking water and severed power to millions after ripping through America's fourth-largest city.

About 27 percent of CenterPoint Energy Inc.'s 2.26 million Houston customers had electricity by yesterday, the company said. Houston's electricity distributor has said it may take as long as four weeks for full power restoration.

Ike was the first storm to hit a major U.S. metropolitan area since Hurricane Katrina devastated New Orleans in 2005.

Exxon plans to ``later in the week'' restart units at its Baytown refinery the largest in the U.S., the company said. Marathon Oil Corp.'s Texas City, Texas, refinery is without power and water.

Valero Energy Corp., the largest U.S. refiner, said while power has been restored to most processing units at its Houston refinery, no units are running. ``We still need nitrogen, hydrogen, we have to pump water out of some areas,'' Bill Day, a company spokesman, said in a telephone interview. ``There's a lot of issues we have to get through besides just power.''

Return to Platforms

Oil companies, which shut down most of their Gulf output for the storm, were examining Gulf assets for potential storm damage and beginning to return workers to rigs and platforms.

A total of 99.9 percent of oil production and 93.8 percent of gas output was idled in the Gulf, the U.S. Minerals Management Service said yesterday. Gulf fields produce 1.3 million barrels of oil a day, about a quarter of U.S. output, and 7.4 billion cubic feet of gas, 14 percent of the total, government data showed.

Chevron, the second-largest U.S. energy company, said reconnaissance flights over its Gulf facilities showed damage from Ike, with ``several reported as toppled in the eastern and western shelf areas.''

More detailed assessments will be carried out and production will be restored in areas unaffected by the hurricane, Chevron said in a statement on its Web site.

Shell Redeploys

Shell, Europe's largest oil company, said in a statement yesterday that it had redeployed 300 people to offshore oil and gas facilities. The company will continue to deploy workers until it reaches pre-storm staffing levels of 1,400 people, Darci Sinclair, a company spokeswoman, said.

``Redeployments to some locations in the Gulf of Mexico were hindered by a stalled cold front that was generating less than optimum flying condition,'' Shell said in a statement.


Noble Corp., the third-largest U.S. offshore oil driller, said two of its Gulf of Mexico platforms had ``mooring failures'' and have now been boarded by crews and power restored. No ``significant damage'' was found on the company's rigs and start- up operations are under way, Noble said in a statement late yesterday.

Exxon Mobil also said it was sending workers to Gulf oil and gas facilities that weren't in the direct path of the storm.

Down for `Days'

LyondellBasell Industries Houston refinery will be down for at ``least several days,'' said company spokesman David Harpole.

Shell said ``varying levels'' of services were available at its Deer Park, Texas, refinery and there was no electricity at its Port Arthur plant, which it operates in a joint venture with Saudi Arabia's state oil company.

Shell's Norco refinery in Louisiana was operating at 60 percent of capacity, while its Convent plant in the state was not yet producing gasoline and ``other products.''

Total SA, Europe's third-largest oil company, said its 240,000 barrel-a-day Port Arthur, Texas refinery is without electricity and wasn't flooded.

ConocoPhillips has begun to restart its Sweeny, Texas, refinery, the company said in a statement on its Web site. The company's Lake Charles refinery is operating at reduced rates and continues the restart process.

Pasadena Refining System Inc. said its Pasadena, Texas, refinery sustained relatively minor damage from Hurricane Ike and is waiting for employees to return before it can restart, Chuck Dunlap, Pasadena's president, said in an e-mailed statement.

To contact the reporter on this story: Aaron Clark in New York at aclark27@bloomberg.net