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Energy Firms Prepare for Ike

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Energy Firms Prepare for Ike

By ISABEL ORDONEZ
September 9, 2008; Page C14

With Hurricane Ike on the horizon, energy companies in the U.S. Gulf of Mexico are bringing employees onshore again and preparing to halt production just days after they began restaffing following Hurricane Gustav.

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Crude-oil and natural-gas producers were in the middle of restoring operations after Gustav, which forced the shut-in of virtually all output before the hurricane made landfall Sept. 1 just southwest of New Orleans.

Oil-output volumes stayed flat on Monday compared with the previous day, with about 20% of U.S. Gulf output restored, according to the U.S. Minerals Management Service. Gas output continued growing, though, with 36% of capacity back on line.

Hurricane Ike is on a projected path to strike the southern Texas coastline not far from Corpus Christi and its cluster of oil refineries Saturday, according to the National Hurricane Center.

It is too early to say where exactly Ike will make landfall, and the five-day forecast track shows that it could strike anywhere from northern Mexico to Mississippi. Forecasters said that Ike — a Category 1 storm over Cuba on Monday — could regain strength after it enters the warm waters of the Gulf on Tuesday night.

At this point, any of the 717 manned platforms in the Gulf of Mexico could be vulnerable to the fury of Ike. However, Independence Hub — a key natural-gas production platform that has yet to restart after Gustav — as well as other platforms with significant production volumes in the eastern and central Gulf could be less likely to get a direct hit this time.

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Production shutdowns will further stress the U.S. oil supply chain, which continues to strain in the wake of Gustav, and could pressure prices higher. The U.S. Department of Energy said Monday it granted a loan of 250,000 barrels of crude toMarathon Oil Corp. for Midwest refineries that had to cut rates due to pipeline disruptions.

Light, sweet crude oil for October delivery settled 11 cents, or 0.1%, higher at $106.34 a barrel on Monday. A stronger dollar weighed on oil futures, which earlier in the day traded as high as $109.89 on Ike concerns.

Mandatory evacuations and widespread power outages hobbled refineries in Louisiana but left the processing hubs in Texas unscathed.

Now, those refineries near Houston, which include Exxon Mobil Corp.’s Baytown plant — the largest refinery in the U.S. — are up to bat. ExxonMobil said Baytown and its Beaumont, Texas, refinery are taking preliminary precautions ahead of Ike.

Royal Dutch Shell PLC, operator of the largest oil platform in the Gulf in terms of production, evacuated 150 employees Sunday and plans to remove the remaining 500 by Wednesday, when it will also completely shut output. Other players in the area, such as BP PLC, Anadarko Corp. and ConocoPhillips, began evacuating nonessential workers.

Exxon Mobil said the restoration of its operations in the Gulf will wind down as Hurricane Ike approaches. The oil giant was in the process of restarting production and assessing damage to its platforms after Hurricane Gustav.

Apache Corp., another large Gulf producer, began evacuating personnel from its operations in the eastern Gulf of Mexico, which are currently shut in, and won’t resume production before Ike moves through the area, the company said.

–Brian Baskin contributed to this article.

Write to Isabel Ordonez at [email protected]

http://online.wsj.com/article/SB122088186183509943.html

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