Still feeling the force of Katrina and facing another Hurricane season, Big Oil spends billions, takes new precautions.
Steven Mufson - Washington Post - June 9, 2006
A Louisiana oil storage facility was among many damaged by hurricanes in 2005. Oil firms have taken steps to prevent or reduce damage and resulting distribution disruptions if another hurricane strikes.
Shell Oil Co.'s "Mars" platform in the Gulf of Mexico had been through hurricanes, but nothing had prepared it for Hurricane Katrina last year. For four hours, the platform was lashed by 175 mile-per-hour winds and slapped by 80-foot waves. The platform's tall drilling rig, which looks like a bad copy of the Eiffel Tower, toppled over, and the rig's 1,000-ton substructure was ripped free, lifted into the air and dropped onto the platform.
Last month, Shell finished repairing the hurricane damage to the platform - just in time for a new hurricane season.
This year, however, the company is taking new precautions, installing extra rig clamps and emergency satellite-communications systems in a bid to minimize destruction from storms and to speed recovery efforts if heavy damage occurs again.
The steps taken by Shell and other companies are aimed at heading off a repeat of last year's disaster, when platforms were wrecked, oil and gas supplies disrupted and prices sent soaring. A Congressional Budget Office report estimated that repairs to the energy infrastructure in the Gulf of Mexico would cost $18 billion to $31 billion. And consumers paid billions of dollars more in higher prices for natural gas and petroleum products that were in scarce supply after the storms.
On the Mars platform, Shell is using stronger and twice as many clamps to hold the drilling rig to the platform. Different clamps work against vertical and horizontal forces. In Katrina's powerful winds, steel bolts three inches in diameter were sheared straight through. "It isn't high tech," said Frank Glaviano, Shell's vice president of production in the Americas. The old clamps had survived many hurricanes, and Glaviano thinks the new ones will work better.
In the hurricane alley in the Gulf, there are plenty of oil and gas pins in danger of being bowled over. There are a total of 4,000 oil and gas platforms and 33,000 miles of pipelines in the Gulf of Mexico, and they produce more than a quarter of U.S. oil and a fifth of U.S. natural gas supplies. No amount of preparation will make them completely safe in the event of another massive hurricane, oil executives say. According to the American Petroleum Institute, hurricanes Katrina and Rita together destroyed 115 platforms and damaged 52 others.
The fate of production operations such as Shell's are also closely linked to what other industry players do. In Hurricane Katrina, a semisubmersible drilling rig blown by the wind dragged its anchors and ripped into the two pipelines that run from Shell's Mars platform to shore. A Shell contractor used remote-controlled submarine robotic equipment to repair the pipelines, 2,700 feet underwater; the equipment had been purchased years earlier but had never been used.
This year, drilling rig owners, at the urging of the Coast Guard and the Interior Department's Minerals Management Service, are also taking precautions by increasing the number of mooring lines.
The hurricane damage wasn't all at sea. Many of the country's refineries, including the biggest, Exxon Mobil Corp.'s Baytown refinery, are on shore nearby. The API says that, at one point, the hurricanes shut down 29 percent of U.S. refining capacity. And temporary supply problems were exacerbated by the inability of terminals that did have gasoline to unload it because of power outages.
El Paso Corp., the largest interstate natural gas transmission company in the country, had $550 million in damage. About $290 million of that amount cannot be recovered from insurance companies, an El Paso spokesman said. The hurricanes damaged or destroyed 13 pipeline segments, 31 pipeline risers that link sea-floor pipelines to production platforms, four offshore gas aggregation platforms, more than 400 measurement meters and eight onshore compressor stations.
That contributed to the company's decision to sell some assets and borrow additional funds, the company said. Nearly a year later, El Paso is still delivering only 85 percent of its pre-hurricane volume, though it says that's because producer platforms and pipelines are still being repaired.
Recently, El Paso added pipeline interconnections so it will have alternate routes if portions of pipelines are damaged, thus averting bottlenecks. "If there's another Katrina, those new pathways will give us more latitude for getting gas to market," says El Paso spokesman Richard Wheatley. The company has also looked into moving certain offshore pipeline joints deeper under water while moving critical onshore equipment higher to avoid flood damage.
Many of the companies' preparations have nothing to do with prevention and have more to do with getting facilities back up after hurricanes blow through. "One of the most important things we do is preparing to get production back," said Mark D. Boudreaux, a spokesman for Exxon Mobil.
Exxon has installed 130 generators at terminals and more at retail stations, and it has identified 200 sites along evacuation routes where it plans to wire for large, mobile generators. The lack of power last year was a key obstacle in getting available oil products to consumers.
El Paso has planned for emergency work schedules after it found last year that employees were too busy dealing with their own families and homes to concentrate on fixing the company's facilities. At the suggestion of some employees, El Paso plans to institute work schedules of seven days on, seven days off in the event of another major storm.
Shell has made arrangements to use three to five helicopters in addition to the eight it has to ferry its 1,500 offshore employees and contractors back to their platforms faster. Because it takes days to move people and the paths of hurricanes are uncertain, Shell evacuates its platforms as many as four times a season, Glaviano said.
Communication was another problem last year. Shell previously relied on a microwave system, but the hurricanes blew the dishes out of line, and it took days to get them realigned so scattered employees could talk to one another. Now, Shell has a backup satellite communications system.
"The name of the game is you want to have the supply chain going," said Dan Porras, Gulf Coast regional manager of Motiva Enterprises LLC, which operates 30 terminals in nine states. "Power is of the essence. Communication with local officials is also critical."
Motiva has increased its inventories by one or two days' worth of supplies in most locations, Porras said.
Workers also need places to go when storms barrel onto shore. Shell bought $32 million of real estate to house workers temporarily. It has also kept 40 temporary office trailers at a training facility outside New Orleans for use as backup offices in case of emergency. That's where Glaviano and his family rode out Hurricane Katrina.
"We had beds, meals and electric generators," he said. "We saw some pretty decent winds, up to 80 or 100 miles an hour. But we were safe in steel buildings on high ground."