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Shell reassures over Hurricane Katrina

THE TIMES (UK): Shell reassures over Hurricane Katrina

“Shell, the international oil giant, has tried to reassure markets and its investors about the impact on its operations of Hurricane Katrina, which forced it to shut down oil and chemical refineries in the United States and Gulf of Mexico.”

Posted Saturday September 10, 2005

By Miles Costello, Times Online

Shell, the international oil giant, has tried to reassure markets and its investors about the impact on its operations of Hurricane Katrina, which forced it to shut down oil and chemical refineries in the United States and Gulf of Mexico.

The reassurances from Shell, which said it hoped to have production restored to 60 per cent of capacity during the fourth quarter, came as the oil price rose again on fears of a winter fuel supply shortage.

The US Energy Department has forecast dramatic increases to the cost of petrol and natural gas – likely to have a knock-on effect on fuel prices in Britain – after the devastation caused by Katrina resulted in lost production capacity of 13.6 million barrels of oil.

At least four oil refineries in the Mexican Gulf are believed still to be out of action in the wake of the Hurricane, which caused catastrophic damage in New Orleans and led to deaths estimated at at least 25,000.

This morning American crude oil rose again to trade above $65 a barrel, although this is down from the $70 a barrel heights it hit in the immediate aftermath of Katrina.

Shell said that production is now “flowing and ramping up” at all the facilities it operates in the Western Mexican Gulf. In the Eastern Gulf, Shell said its two oil and gas plants were “operating normally”.

During the first half of the year, Shell and its affiliates were producing about 450,000 barrels off oil a day.

Shell said – nearly two weeks after the Hurricane struck – it had now managed to return production to 160,000 barrels – just over 35 per cent of its normal amount. “Significant efforts” are being made to improve this as it tries to assess the impact of Katrina on its assets, pipelines and transportation facilities.

The group said: “Pending full assessment and evaluation of instrastructure and assets, it is expected that about 60 per cent of total production will be restored to pre-hurricane levels within Q4, 2005.

“The situation with respect to the remaining production, mainly from the Mars and Ursa area, Mensa, and Cognac, is still being assessed but production from these facilities may not be feasible during the fourth quarter, depending on options available for recovery.”

Shell and its partner Motiva operate seven refineries in the United States, processing about 1 million barrels of oil a day. The group said that two of these, representing about 27 per cent of its capacity, were hit by the Hurricane.

The oil gaint said it has completed repairs on one, the Motiva Convent refinery, and hopes to restore production to full capacity “over several days”. The second, Motiva Norco, refinery could restart operations in the middle of next week.

Shell Chemical, which operates plants in Louisiana and Alabama, is “continuing to make progress in restoring operations”. The Louisiana plant is running at 60 per cent capacity and the Alabama mobile plant is in the final start-up phase.

Shell added: “Work is in progress assessing the full impact of the storm on our network, and great efforts are being made to keep production flowing. Motiva has taken specific actions to help control prices in the affected areas and is also taking strict measures against price gouging by any of our branded locations.”

Shares in Shell rose nearly 1 per cent to 1,836p as morning trading progressed, valuing the oil group at more than £50 billion.

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