U.S. Refiners Accelerate Closings as Ike Strengthens

By Christian Schmollinger and Nidaa Bakhsh

Sept. 12 (Bloomberg) -- U.S. refiners are speeding up plant closures as Hurricane Ike gathers strength toward the Texas Gulf Coast, home to 23 percent of domestic oil-processing capacity.

About 19 percent of U.S. refining capacity is being shut before Ike makes landfall today. Royal Dutch Shell Plc, Europe's largest oil company, started shutting down its Port Arthur, Texas, refinery because ``of shifts in Hurricane Ike's track,'' the company said on its Web site.

``Ike is headed into the heart of the refining industry,'' Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University in Dallas, said in an interview. ``The damage is likely to come in flooding, a lack of power for an extended period of time.''

Ike is forecast to ``become a major hurricane prior to reaching the coast,'' the U.S. National Hurricane Center said. Refiners including BP Plc, ConocoPhillips and Exxon Mobil Corp. are securing plants from Texas City, Texas to Houston.

A hurricane warning was issued from Morgan City, Louisiana, to Baffin Bay, Texas, after Ike strengthened to a Category 2 storm, the center said. The storm has sustained winds of 100 miles per hour (160 kilometers per hour) and ``strengthening is forecast during the next 24 hours.''

Houston Area

The Houston area's eight refineries have a processing capacity of 2.22 million barrels a day, which represents 13 percent of the U.S. total, according to their owners and the National Petrochemical and Refiners Association.

Shell operates the 285,000 barrels-a-day Port Arthur facility with Saudi Aramco through its joint venture Motiva Enterprises LLC.

Exxon Mobil began shutting its Baytown, Texas, plant, the largest in the U.S, with processing capacity of 590,500 barrels of oil a day. The Irving, Texas-based company started shutting down its 363,100 barrels-a-day Beaumont plant yesterday.

BP is closing its 475,000 barrel-a-day Texas City, Texas, refinery. ConocoPhillips, the second-largest U.S. refiner, said its 260,000 barrel-a-day refinery in Sweeny, Texas, is closing. LyondellBasell Industries, a unit of Access Industries Holdings LLC, is shutting its 299,300 barrel-a-day Houston refinery.

Biodiesel

GreenHunter Energy Inc., an alternative energy producer, said it will shut its Houston biodiesel plant, the largest such U.S. refinery, according to a Business Wire statement.

Valero Energy Corp., the largest U.S. refiner, shut three Texas oil refineries with a combined capacity of 700,000 barrels a day because of the danger posed by the hurricane.

Valero will close its 325,000 barrel-a-day Port Arthur, Texas, refinery, a Texas City plant with a capacity of 245,000 barrels and a Houston facility which can process 130,000 barrels, spokesman Bill Day said yesterday in an e-mail.

Marathon Oil Corp., the fourth-largest U.S. oil company, began to shut its Texas City refinery, which can process about 81,500 barrels of oil a day, according to the Energy Department.

Shell earlier said it was closing its Deer Park, Texas, plant. Deer Park refines 340,000 barrels a day of oil.

Port Closed

The U.S. Coast Guard closed Houston, the nation's largest petroleum port before the storm, according to a statement on its Web site. Ships, barges and tugs were ordered yesterday to leave the port or obtain Coast Guard permission to remain.

The storm ``could also impair the ability to import refined products because Houston is a major port,'' Bullock said. ``You have a double whammy here.''

The Louisiana Offshore Oil Port, the biggest U.S. oil- import terminal, shut marine operations as did Port Fourchon.

U.S. energy producers have idled about 97 percent of oil production and 93 percent of natural-gas output in the Gulf of Mexico, the Minerals Management Service said on its Web site.

Gulf fields produce 1.3 million barrels a day of oil, about a quarter of U.S. production, and 7.4 billion cubic feet a day of natural gas, 14 percent of the total, government data show.

Exxon Mobil, the world's biggest oil company, shut down Gulf wells as it evacuated offshore platforms. The company said yesterday that 26,000 barrels of daily oil production and 130 million cubic feet of gas output was halted. Chevron Corp., the second-largest U.S. energy company, evacuated all of its Gulf oil and gas production platforms and drilling rigs.

Creole Trail

Murphy Oil Corp. shut Gulf of Mexico production at two facilities, said Dory Stiles, a company spokesman, in an e- mailed statement. Hess Corp., the fifth-biggest U.S. oil producer, also said it has shut in all Gulf output.

Cheniere Energy Inc. is closing its Sabine Pass liquefied- natural-gas terminal and Creole Trail pipeline. Sabine can move up to 2.6 billion cubic feet per day of gas to Creole Trail and has 10 billion cubic feet of storage, according to Cheniere.

To contact the reporter on this story: Nidaa Bakhsh in London at nbakhsh@bloomberg.netChristian Schmollinger in Singapore at christian.s@bloomberg.net