U.S. oilpatch braces for year’s first big storm

Mon Jul 21, 2008 2:43pm EDT

By Erwin Seba

HOUSTON (Reuters) – Offshore oil producers in the Gulf of Mexico on Monday geared up to prepare for the first big storm of 2008, but Tropical Storm Dolly looked unlikely to deal a crippling blow to U.S. crude oil and natural gas production.

However, oil markets reacted nervously to news that Shell Oil Co had began flying workers from platforms in the western Gulf of Mexico. U.S. crude oil futures rose $3 to over $132 a barrel earlier on Monday, and were up $1.53 at $130.41 a barrel by 2:10 p.m. EDT (1810 GMT).

The storm, with sustained winds of nearly 50 mph (85 kph), emerged from the Yucatan Peninsula over the warm waters of the Gulf of Mexico, and could reach hurricane strength on Tuesday.

The U.S. National Hurricane Center issued a hurricane watch for the southern Texas coast, an area that includes Corpus Christi, a major refining center.

Dolly was forecast to hit Texas on Wednesday just above the Mexican border near Brownsville, well away from sensitive offshore drilling rigs and production platforms. Mexico’s state oil company Pemex said its production was not likely to be hit.

The U.S. Energy Information Administration said if the storm holds to its current track it will likely miss major oil producing areas, but could threaten some coastal refineries later in the week.

“It looks like the fields and offshore platforms aren’t in that area (of Dolly’s path),” EIA analyst Neil Gamson told Reuters. According to the U.S. Minerals Management Service, no offshore production has been shut down so far.

About a quarter of U.S. oil supplies and 15 percent of natural gas supplies come from the Gulf of Mexico.

So far, the U.S. oil industry looks like it will avoid the specter of the deadly 2005 season when hurricanes Katrina and Rita slammed into the heart of the U.S. oil production region.

Those storms temporarily knocked out a quarter of U.S. crude and fuel production, toppled offshore platforms, flooded coastal refineries and sent energy prices to record highs.

Gulf of Mexico operators aren’t taking any chances this time around.

Exxon Mobil said it was preparing for heavy weather across its Gulf and South Texas operations.

Other oil and natural gas companies including majors BP Plc, ConocoPhillips, Chevron Corp, Marathon Oil Corp and Petrobras said they were monitoring the storm’s progress.

The storm could shut electrical power and bring flooding to three Corpus Christi, Texas, refineries, according to the EIA, the forecasting arm of the U.S. Energy Department.

Refiners Valero Energy Corp, Citgo Petroleum Corp and Flint Hills Resources LP said they were monitoring the storm on Monday.

Valero and Citgo said production at their Corpus Christi refineries had not been cut or curtailed due to the forecast.

Shell said it took 125 people off platforms on Sunday and planned to take another 60 from the Gulf on Monday, but noted that production was not affected.

The Mexican government has issued a hurricane watch from Rio San Fernando, Mexico, to the U.S. border. A watch means a hurricane is possible in those areas.

(Reporting by Erwin Seba in Houston; Janet McGurty and Richard Valdmanis, Rebekah Kebede in New York; Tom Doggett in Washington; editing by Jim Marshall)