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Still mopping up in Gulf
[August 24, 2006]

Still mopping up in Gulf

(Houston Chronicle (KRT) Via Thomson Dialog NewsEdge) Aug. 24--BP's announcement this week that a damaged oil platform is leaking off Louisiana highlights what many have forgotten: the Gulf of Mexico's oil and gas industry is still cleaning up from last year's hurricane season.

In all, Hurricane Katrina destroyed 46 offshore platforms and Hurricane Rita destroyed 69, according to the Minerals Management Service, an agency of the Department of the Interior.

Insurance companies like AON and Willis have estimated the total damage price tag for the industry at about $15 billion.

The most recent report on shut-in production says 12 percent of the Gulf's oil output and 9 percent of its natural gas production remains off line.

David Pursell, an analyst with Houston's Pickering Energy Partners, said most companies don't expect to see the Gulf's oil and gas output reach pre-Katrina levels until next year.

Some lost wells may not be restarted at all given the extent of the damage for many low volume wells.

"The shut-in production numbers the companies discuss get smaller and smaller, but for some they may never reach 100 percent," Pursell said.

The British oil giant said this week a platform that was toppled by Katrina about 18 miles offshore has been leaking oil intermittently, "burping" a few barrels every so often and then going dormant for weeks or months at a time.

An estimated total 93 barrels of oil have leaked from an undersea valve in the Grand Isle 47 block at the site where Platform C once stood, the company said. On Aug. 15, one of the largest releases occurred when about 25 barrels escaped to the surface.

BP has already spent about $100 million this year decommissioning some of the 15 platforms lost or severely damaged by storms, including plugging or repairing some 62 wells.

It expects to spend another $100 million decommissioning the remaining platforms and wells before the year is through.

BP is hardly alone.

El Paso Corp. said it expects its hurricane-related damages will reach $575 million, including repairs to offshore pipelines and platforms and some onshore facilities.

Removing infrastructure

Chevron has reported costs of $800 million in the first six months of 2006 just to remove infrastructure the storms destroyed.

That included turning the $250 million Typhoon production platform, which capsized during the hurricanes, into an artificial reef by sinking it.

And Shell has estimated its total costs at between $250 million to $300 million, including employee displacement costs and repairs to the massive Mars platform, which saw its drilling rig collapse during the storms.

Meanwhile, Mariner Energy said about 40 million cubic feet per day of its pre-Katrina Gulf production remains off line but it should reach 100 percent, or more than 275 mcf, by the end of the year or early 2007.

The company has received about $30 million in insurance proceeds for the damage, said Mariner spokesman Jaime Brito.

"Some of our production is operated by our partners, so we are at times subject to the whim of third parties," Brito said. "It's no mystery there's only so much repair equipment and crews out there to do the work."

Apache may not replace

Apache Corp. is not disclosing the amount it expects hurricane damage will bite into the bottom line, but the company still has about 10,000 barrels per day of oil production in the Gulf shut in and about 30 mcf of gas shut in.

"We're not necessarily replacing all the damaged platforms," said Apache spokesman Bill Mintz. "If there are reserves we still want to tap into, we may drill in from other platforms."

Apache bought much of BP's Gulf of Mexico assets this year, but BP held onto the damaged platforms and wells so it could make the necessary repairs before putting them back on the market, BP said.

The U.S. Coast Guard is currently monitoring 24 damaged pipelines and platforms for leaks, according to Lt. Cmdr. David Beck in Morgan City, La.

None of the sites have had large releases that have threatened the shore, he said, and only four or five of the sites have leaked intermittently.

"They are sort of like Old Faithful, with pressure building up over time with nothing capping it," Beck said.

Companies have stationed observation and cleanup vessels near the suspect spots that they have not been able to fix, Beck said.

"BP's site at Grand Isle 47 was not the worse, but it's now at the top of our monitoring list," he said.

Copyright (c) 2006, Houston Chronicle
Distributed by McClatchy-Tribune Business News.
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