July 28, 2011 / 9:53 PM / 7 years ago

Gulf oil producers cut some output on Tropical Storm Don

HOUSTON (Reuters) - Gulf of Mexico producers reduced oil and natural gas output on Thursday as Tropical Storm Don churned northwest toward the Texas Coast, where it could make landfall by the weekend.

Although Don has cut a small 7 percent of U.S. Gulf of Mexico crude output and 3 percent of natgas output according to government data by midday Thursday, analysts said the storm’s relative weakness and position in the Gulf of Mexico made it unlikely to cause prolonged production outages or energy infrastructure damage.

BP Plc (BP.L), Shell (RDSa.L), Anadarko (APC.N) and Exxon Mobil Corp (XOM.N) all cut output and evacuated workers from some platforms at sea.

Oil analysts were watching the storm’s effect on energy production, while some agricultural observers eyed potential crop damage once the storm hits shore.

As of midday Thursday, 94,962 barrels a day of oil output were shut off in the Gulf due to Don, while 148 million cubic feet a day of natural gas production were offline, according to a U.S. government report.

Based on statements from oil companies about which Gulf platforms have been evacuated due to Don, Reuters data shows around 620,000 barrels a day of U.S. crude output capacity and around 1.2 billion cubic feet per day of natural gas capacity have been preemptively idled. In several cases, Gulf platforms have been producing far below their nominal capacity.

Don is the biggest threat to energy infrastructure in the 2011 Gulf storm season so far, prompting storm warnings.

But analysts and meteorologists said output cuts were precautionary and Don isn’t likely to cause platform damage or affect output for long.

“Based on what I’m seeing right now, they’ll have it back on Saturday morning. There won’t be any significant damage unless the storm becomes more serious,” said Houston-based cash crude analyst John Troland.

Weather Insight, a unit of Thomson Reuters, also said Don didn’t appear to be a major threat to production.

“The storm doesn’t have time to get really strong. And it’s not really blowing up now,” said Jerry Paul of Weather Insight.

Located in the central Gulf of Mexico, Don had winds of up to 45 miles per hour and could reach Texas by late Friday, the U.S. National Hurricane Center said.

U.S. crude futures for September delivery settled 4 cents higher at $97.44 a barrel. Benchmark natural gas futures had risen in earlier trading, before falling on a bigger-than-expected build in domestic inventories reported by the U.S. Department of Energy.


Anadarko shut in all production from six oil and gas platforms in the western Gulf and evacuated all personnel, around 185 workers. Reuters data shows the Anadarko platforms have capacity to produce around 310,000 bpd oil and more than 1.1 billion cubic feet per day of natural gas.

BP said it would shut in the Atlantis oil and gas platform in the Gulf, which can produce as much as 200,000 barrels per day of oil, as a precaution against Don.

Exxon spokesman Patrick McGinn said his company shut in about 8,000 bpd of oil and 50 million cubic feet of natural gas, while evacuating support personnel from its facilities in the storm’s path.

Shell (RDSa.L) Perdido platform in the western Gulf, with capacity to pump 100,000 bpd, has also been idled, the company said.

Two other BP Gulf platforms, Mad Dog and Holstein, although they were already shut for maintenance before Don’s approach.

    Other major Gulf producers, including Chevron Corp (CVX.N) and Apache Corp, (APA.N) were evacuating such support personnel as cleaning staff and cooks from some Gulf platforms.

    Shell President Marvin Odum told reporters on Thursday that Gulf producers aren’t necessarily more cautious about storms after BP’s oil spill last year heightened regulatory scrutiny of safety.

    “We run a very conservative program from that standpoint because hurricanes are so unpredictable,” he said. “So if there’s even a chance it’s coming a certain direction or it could turn a different direction, we will tend to shut down those operations and evacuate all of those people.”

    The Gulf accounts for 29 percent of U.S. oil production and 13 percent of natural gas output, according to the U.S. Energy Information Administration. The Gulf Coast contains around 40 percent of U.S. refining capacity and about 30 percent of U.S. natural gas processing plant capacity.

    Gulf Coast refiners reported no cuts in crude processing, but several, including Lyondell, Exxon and BP, said they were closely monitoring Don or taking steps to ensure plants were prepared for severe weather.

    The National Hurricane Center said Don was headed toward Corpus Christi, Texas, a major refining center located west of an even bigger one near Houston.

    U.S. Gulf of Mexico crude production from federal offshore areas last year totaled 1.64 million barrels a day, Department of Energy figures show.

    In oil exporter Mexico, production has not been affected so far, although state oil firm Pemex is monitoring Don and has convened its emergency response team, the company said.

    Don is the fourth named storm of the Atlantic hurricane season.

    In the agricultural sector, cotton farms in the southern coastal bend of Texas in Don’s path are due for harvest next month August, with open plant bolls that a drenching could damage. The state’s main cotton area is in west Texas.

    Additional reporting by Bruce Nichols in Houston, Janet McGurty, Joshua Schneyer, Ben Berkowitz and Selam Gebrekidan in New York, and Adriana Barrera in Mexico City. Writing by Joshua Schneyer;editing by Sofina Mirza-Reid

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