Beyond $70 Oil

123jump.com Staff
29 Aug, 2005
New York City

30% of U.S. domestic oil flows through Port Fourchon which seems to be in the eye of hurricane Katrina. At early morning more than 40% Gulf of Mexico oil and gas production has been shut-down. This morning's landfall of Katrina will tell us for how long these capacities will remain closed. Widespread gasoline shortages are reported in South Florida.

Asian Markets Trade Lower

At mid-day trading in Singapore oil prices were trading above $70 per barrel dragging down stocks across all eleven exchanges in Asia. Indonesia was down 3.3%, South Korea was down 2.09%, India was down 0.94% and Japan was down 1.3% at mid-day trading.

Oil Prices are Trending Higher

Oil prices are 54 per cent higher than a year ago and have risen 30 per cent in the past three months on concern refiners would strain to meet summer gasoline demand and store heating fuel for the Northern Hemisphere winter.
If the current run of oil price of $4 a gallon is added then oil prices are up 61% from a year ago.

In the Path of Katrina

Katrina, the fourth hurricane in a season of eleven Atlantic coast tropical activities, is on its way as Category 5 hurricane to somewhere close to New Orleans, Louisiana. Katrina, hurricane category one, managed to destroy power lines, trees, and flood much of South Florida and caused nine deaths.

Category one hurricane Katrina, after leaving more than 1.5 million people without electricity for more than a day, is on its way as category 4/5 hurricane to Port Fourchon, Louisiana. The second landfall of this year’s fourth hurricane is expected to directly reach oil and gas infrastructure in the Gulf of Mexico.

According to National Hurricane Center, Katrina strengthened to Category 5 early this morning. The fall of hurricane is predicted to be anywhere between western Louisiana to Panama City, Florida.

Gulf of Mexico Cyclone Activity


The month of August has witnessed so far five storms including tropical storms Harvey and Jose, tropical depression Ten, and two hurricanes Irene and Katrina.

The month of July saw unprecedented tropical cyclone activity in the Atlantic basin with the development of five storms tropical storms including two hurricanes. Tropical storms Cindy, Franklin and Gert were joined by hurricane Dennis and Emily.

According to the NHC, the previous record for named storms that formed in July was four. The two major hurricanes that developed during the month tied a record set in 1916. The July activity follows an unusually active month of June.

The predicted seasonal totals include the considerable activity that has already occurred prior to this update (7 tropical storms and 2 major hurricanes). Therefore, for the remainder of the season, NHC expects additional 11-14 tropical storms, with 7-9 becoming hurricanes, and 3-5 of these becoming major hurricanes.

What is so Special about Gulf of Mexico?

According to U.S. Minerals and Management Services, the region of Gulf of Mexico accounts for daily crude oil production between 1.5 million barrels of oil and 10 and 11 billion cubic feet of natural gas. The region has seen intense level of activity in the last three years in search of energy using deep water drilling technology.

Port Fourchon is important oil and gas city for the nation’s domestic and import oil activities. About 13% of U.S. oil import flows through the port and 27% of domestic production flows through the pipeline hub located in the city according to MMS.

A sustained shut-down has the potential to send shock waves through the national economy. Some analysts predict lost access to Port Fourchon could choke the nation’s energy supply, sending gasoline prices higher by 30 to 40 cents per gallon and natural gas price up by 40 to 50 cent per MBTU.

Port Fourchon, LA
Port Fourchon currently services all of the Gulf of Mexico's deepwater projects, which accounts for over 75% of the Gulf's deepwater oil production. MMS Projects Port Fourchon will service 44% of pending future deepwater projects.

In addition to is huge domestic hydrocarbon significance, Port Fourchon, is the land base for LOOP, which handles 13-15% of the nation's foreign oil and is connected to 30% of US refining capacity.

Port Fourchon plays a stragetic role in supporting transporting and securing 16-18% of the entire United States energy supply.


How Much of Oil Production is Shut-Down?

Several major oil companies including Shell, Murphy Oil, Anadarko Petroleum, Exxon Mobil, Chevron, and BHP have announced production shut-downs totaling 630,000 barrels of oil per day production. Last year, oil jumped 22 per cent after Hurricane Ivan damaged platforms and pipelines in the Gulf, reducing the region's output for five months.


Hurricane Katrina's projected path across the Gulf continues to move west. As of late Friday evening, Shell has evacuated a total of 465 offshore personnel and will continue to evacuate all remaining Gulf of Mexico staff, with the exception of those at our assets far to the west. Total planned evacuations for Saturday include 554 additional personnel.

ConocoPhillips, the largest U.S. refining company, closed its Alliance refinery south of New Orleans. Chevron Corp. and Valero Energy Corp. also shut refineries and evacuated staff. These shutdowns will affect the nations supply of diesel, refined products, and jet fuel in the coming days.


Gulf of Mexico based major oil and gas producing facilities:


EXXON MOBIL


Exxon Mobil Corporation is a partner in the startup of production from the Princess field sub-sea wells, located approximately 140 miles southeast of New Orleans in the Gulf of Mexico. Production at the field is currently flowing at an approximate rate of 9,000 to 13,000 barrels of oil and 15 million cubic feet of gas per day. Production began on December 17, 2003.


CHEVRON

The company is the largest producer of crude oil and natural gas in the Gulf
of Mexico Shelf, with average daily net production rates of 101,000 barrels of crude oil, 750 million cubic feet of natural gas and 14,000 barrels of natural gas liquids in 2004. It’s one of the largest operators of deepwater blocks in the Gulf.

In the Gulf of Mexico, Tahiti Platform drilled the deepest successful production test well in the area's history, to 25,812 feet. With capacity of 325,000 barrels per day, Pascagoula Refinery is company's largest wholly owned refinery located in the region.


SHELL

Hurricane Katrina's projected path across the Gulf continues to move west. As of late Friday evening, Shell has evacuated a total of 465 offshore personnel and will continue to evacuate all remaining Gulf of Mexico staff, with the exception of those at our assets far to the west. Total planned evacuations for Saturday include 554 additional personnel.

On Friday, Shell began the process to shut-in production for two sub-sea fields, Tahoe and Crosby. However, all of Shell's central and easternmost Gulf of Mexico assets will likely be shut-in by the end of Saturday, the 27th. The rate of the total anticipated daily production impact, once those assets are fully shut-in, is estimated at 420 thousand barrels of oil and 1,345 million cubic feet of gas per day.


MURPHY OIL


Front Runner and Front Runner South, discovered during 2001 in the deepwater Gulf of Mexico, are located in Green Canyon Blocks 338 and 339 and are thought to include estimated reserves of 200 million barrels of oil equivalent. Murphy owns a 37.5% working interest in both discoveries. Murphy and its partners sanctioned the development for Front Runner and Front Runner South in early 2002 and first production was achieved in December 2004 producing through the first of eight wells to be tied into the facility. The development is a Truss Spar-type Floating Production System with a peak handling capacity of 60,000 bpd of oil and 110 million cubic feet a day of natural gas.

In 1999, the discovery well at Medusa (60%) was drilled to a total depth of 16,241 feet and encountered over 160 net feet of oil in three sands. During 2000, favorable results were achieved from the fourth well at Medusa, which encountered over 200 feet of net pay and has extended gross reserve estimates to around 100 million barrels of oil equivalent recoverable. First production from the field was achieved at the end of November 2003 through a floating spar production facility. During 2004, production at Medusa will ramp up as six wells will be tied into the spar facility.

BHP

Participants:

Typhoon: BHP Billiton Petroleum 50%; ChevronTexaco 50%
Boris: BHP Billiton Petroleum 50%; ChevronTexaco 25%; Noble Energy, Inc 25%
Genesis: BHP Billiton Petroleum 4.95%; ChevronTexaco 56.67%; ExxonMobil 38.38%
West Cameron 76 (and 60, 61, 77): BHP Billiton Petroleum (Americas) Inc - interest ranges between 33.76% to 78.8%
Green Canyon 18 (and Ewing Bank 988): BHP Billiton Petroleum (Americas) Inc 25%
Green Canyon 60: BHP Billiton Petroleum (Americas) Inc 45%
Production (FY 2004 - BHP Billiton share): 6.6 million barrels of liquids; 18.9 billion cubic feet of gas
Location: All production is located offshore Louisiana and BHP owns interests in 400 feeder blocks.

ANADARKO PETROLEUM

Anadarko owns an average of 73 percent of 190 deepwater blocks in the Gulf of Mexico.

The company's first deepwater discovery, the 100 percent owned Marco Polo field, was made in April 2000 and is located on Green Canyon Block 608 about 160 miles south of New Orleans, Louisiana. Located in 4,300 feet of water, the field achieved first production in July 2004.

Beyond being a single-field development project, Marco Polo anchors a hub-and-spoke facility. The floating production facility, which is owned by a third party and operated by Anadarko, was built to handle 120,000 barrels of oil a day (b/d) and 300 million cubic feet of gas a day.

Anadarko has continued to aggressively explore the Green Canyon area with excellent results. In September 2002, Anadarko and partners discovered the K2 field, and in November 2003, Anadarko discovered the K2 North field. Both projects will be tied back to the Marco Polo platform and are expected to begin production in mid-2005.