underwater pipelines

clipped from: www.nola.com

The price of crude oil fell to its lowest point in months Monday as a weaker-than-anticipated Hurricane Gustav moved through the Gulf of Mexico. Although Gustav traveled right across an area of the gulf that is heavily populated with oil and gas rigs and platforms, its Category 2 winds were not enough to cause Wall Street to react with concern about the potential for prolonged disruptions in service.

The California consulting firm Risk Management Solutions estimated Sunday that Hurricane Gustav would likely cause $2 billion to $7 billion of damage to offshore oil and gas installations. The firm now believes that damage to offshore energy installations is likely to be on the lower end of that scale because the storm weakened before making landfall.

Although indications are that rigs and platforms escaped the storm largely unscathed, there still is the possibility that underwater pipelines and onshore refineries and natural gas processors have been damaged.

Following Rita, pipelines were found to have been damaged when rigs lost their mooring and dragged their anchors along the buried lines. There also is the worry that underwater tsunamis caused by the storm twisted and tangled lines.

It also is unclear what type of damage, if any, was sustained at Port Fourchon, a hub for the offshore petroleum industry and for oil imports. Gustav slammed into Port Fourchon before coming ashore in Cocodrie.

"Hopefully we don't have any major infrastructure problems that we can't access the port," Port Fourchon director Ted Falgout said. "If that shut-in lasts three or five days then you'll see some major energy issues in the country."

Oil had reached a record high of $147.27 a barrel July 11 and is now trading at its lowest since April. Natural gas for October delivery dropped 5.5 percent, to $7.51 per million British thermal units. October gasoline fell 10.42 cents, or 3.7 percent, to $2.75 a gallon on the Nymex.

All 1.3 million barrels of oil produced each day in the Gulf of Mexico remained shuttered at mid-day Monday. According to a report by the Minerals Management Service, the federal agency that oversees drilling, 95 percent of the 7.4 billion cubic feet of natural gas produced in the Gulf each day was also shut in.

With oil prices falling when the storm hit, Bob Hartwig, an economist who is president of the Insurance Information Institute, said that the financial markets are clearly expecting the disruption to the oil and gas industry to be minimal. By contrast, Hurricane Katrina caused $2 billion in offshore energy damage, and Rita caused $3 billion, Hartwig said.

Ninety percent of the oil and gas industry is serviced by Port Fourchon, said Loren Scott, a Baton Rouge economist, who released a study in April documenting the impact a three-week closure of Port Fourchon would have on the national economy.

"Even if you can get the workers out to the rigs, it's going to be tricky to keep them there if Port Fourchon is down for any amount of time," Scott said. "It's like a small city down there, you're going to have to wait to see what happens."

According to Scott's study, released in April, if Port Fourchon were closed for three weeks, the resulting impact would be a loss of $9.9 billion in sales at U.S. firms and a $2.8 billion decline in household earnings. The closure could also result in the loss of more than 77,000 U.S. jobs.