Jackson, Miss. – As half of the Gulf Coast refineries damaged by Hurricane Katrina begin to ramp up production this week, industry experts have this message: Be patient.
“What you’ve got are a whole series of requirements and processes, and that takes days, if not weeks,” said John Felmy, chief economist for the American Petroleum Institute.
The going is also slow for the restoration of offshore oil and gas production. Almost 70 percent of normal oil production and half of the natural- gas output remains shut down, according to the U.S. Minerals Management Service, which said activity is slowly recovering.
Eight major refineries that produce gasoline, diesel and jet fuel, and heating oil were knocked out of commission, and the output at two others was cut by last week’s killer hurricane and the flooding that followed. That cut overall U.S. refining capacity by more than 10 percent and contributed to a surge in retail gasoline prices and spot shortages around the country.
Motiva Enterprises LLC, Marathon Oil Corp. and Valero Energy Corp. said that they hope to restart, and in some cases make fully operational, four of those refineries this week.
Motiva, a joint venture between Royal Dutch Shell Plc and Saudi Refining Inc., said its Convent, La., refinery restarted Sunday and that its refinery in Norco, La., is expected to get started by midweek. Both are west of New Orleans.
Marathon said over the weekend that its Garyville, La., refinery west of New Orleans should be fully operational early this week.
Valero said it’s still hoping to restart this week its St. Charles refinery about 15 miles from New Orleans.
When running at 100 percent capacity, these four represent slightly more than 1 million barrels of refined oil product a day.
In contrast, Chevron Corp.’s 325,000 barrel-a-day refinery in Pascagoula, Miss., and ConocoPhillips’ 247,000 barrel-a-day facility in Belle Chasse, La., south of New Orleans, have suffered major damage and are unlikely to resume production for some time, according to the U.S. Department of Energy.
The ConocoPhillips facility, along with Exxon Mobil Corp.’s Chalmette, La., refinery and Murphy Oil Corp.’s facility in Meraux, La., also have no power. They represent nearly 690,000 barrels a day of refined oil products.
But industry experts say that even after power is restored, restarting an oil refinery is a tricky and time-consuming process.
Crews must be meticulous with repeated inspections, checking and rechecking for leaks. They also must ensure that all saltwater has been cleared or risk igniting a fire.
“What you have is an important set of steps in terms of these high-temperature, high-pressure facilities,” Felmy said. “And that’s if you have not had any damage, and we know from preliminary reports that’s not the case.”
There also are workforce issues. With communication lines either down or overloaded, many companies have not been able to locate displaced employees.
Valero estimated that almost 1,000 of its employees may have been affected by the storm, including 550 at its St. Charles refinery, scheduled to restart by week’s end.
On Monday afternoon, the company said it had heard from all but nine of its employees from the St. Charles workforce.
“It appears a lot of our employees probably lost their homes,” Valero chief executive Bill Greehey told employees last week at the company’s San Antonio headquarters. “Rest assured, we are going to take care of our employees. Whatever financial help they need, they will be taken care of by Valero.”
Refineries also will receive a boost from the Department of Energy, which agreed to lend oil from the Strategic Petroleum Reserve. Exxon Mobil, Valero, Placid Refining Co. LLC, BP Plc, Marathon and Total SA will collectively receive 12.6 million barrels of oil.
More is available. Energy Secretary Samuel Bodman offered 30 million to be provided beginning today. The reserve supply, however, must be replenished by the companies once conditions return to normal.
The Gulf of Mexico normally produces 1.5 million barrels of crude oil a day, or about a quarter of the United States’ domestic output, according to the U.S. Mineral Management Service.
The agency reported Monday afternoon that about 70 percent of oil production remains shut in.
