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Energy Companies Idle 29.6% of Oil Output for Storm (Update3)

By Aaron Clark and Mark Shenk

Nov. 9 (Bloomberg) -- Energy companies in the U.S. idled 29.6 percent of oil and 27.5 percent of natural-gas output in the Gulf of Mexico because of Tropical Storm Ida, the first disturbance of the hurricane season to disrupt production, the federal government said today.

Workers from 126 production platforms and eight drilling rigs were evacuated as the storm blows through the region, the Interior Department’s Minerals Management Service said on its Web site. About 384,642 barrels of daily oil and 1.925 billion cubic feet of gas production were shut in.

“It’s supportive for natural gas, more than anything else,” said John Kilduff, partner at Round Earth Capital, a hedge fund that focuses on food and energy commodity investments, in New York. “If the weather returns to normal later this week, we could see some substantial pulls from stockpiles.”

Crude oil for December delivery climbed for the first time in three days, gaining $2, or 2.6 percent, to settle at $79.43 a barrel on the New York Mercantile Exchange. Natural gas for December delivery rose 7.5 cents, or 1.6 percent, to settle at $4.67 per million British thermal units.

The Gulf produced an average of 1.3 million barrels of oil and 7 billion cubic feet of gas a day as of March, according to the agency. The report was based on responses from 44 companies as of 12:30 p.m. New York time.

Storm Weakens

Ida weakened to a tropical storm in the Gulf of Mexico today after winds of 105 miles (169 kilometers) per hour early today, according to the National Hurricane Center in Miami.

The Gulf accounts for about 27 percent of U.S. oil production and 15 percent of gas output, according to Energy Department figures. Fuel prices rose to a record in 2005 after Hurricane Katrina decimated platforms, pipelines and refineries on the Mississippi and Louisiana coasts.

The center of the storm was located about 60 miles south- southeast of the mouth of the Mississippi River at 4 p.m. New York time. The storm was moving north-northwest at 18 mph and a tropical storm warning remains in effect from Grand Isle, Louisiana, eastward to the Aucilla River in Florida, according to the center.

Enterprise Products Partners LP, the second-largest U.S. pipeline partnership, evacuated the Independence Hub yesterday and shut two platforms. It closed the West Delta 68 platform and the Viosca Knoll 817 platform, Rick Rainey, a spokesman for Houston-based Enterprise, said today in a telephone interview.

Independence Hub

The Independence Hub, with production capacity of 1 billion cubic feet a day, accounts for 2 percent of U.S. gas supplies and represents 10 percent of deliveries from the Gulf, according to Enterprise.

Williams Cos. evacuated workers from its Canyon Station and Devils Tower natural gas-processing platforms in the eastern Gulf of Mexico, according to Julie Gentz, a spokeswoman. Williams’s Mobile Bay gas-processing facility in Coden, Alabama, was shut this today “due to low natural-gas volumes,” and would have been shut anyway as a precaution, Gentz said.

The Houston Ship Channel, sea route to the largest U.S. petroleum port, reopened to tanker traffic after high seas from Tropical Storm Ida subsided, the Coast Guard said late today.

Ship pilots, who guide tankers through the channel to refineries in the Houston area, resumed operations after indefinitely suspending them yesterday.

Louisiana’s Port Fourchon remains open, said Chet Chiasson, the director of economic development at the port. Port Fourchon is base for three-quarters of support services to the Gulf’s deepwater oil and gas facilities.

Helicopter Evacuations

Bristow Group Inc., a provider of helicopter services, evacuated approximately 1,000 people a day over the weekend and its 75 helicopters will conduct more flights today, said Danny Holder, director of the Gulf of Mexico business unit for Bristow.

“We’ve been in evacuation mode all weekend for our customers and contractors offshore in the Gulf of Mexico and we continue that today,” Holder said. He estimated that there are 7,000 to 9,000 workers offshore in the oil and gas industry. The company has 30 clients.

Murphy Oil Corp. shut its Thunder Hawk and Medusa offshore oil and gas production platforms as Ida approached, a spokesman said. BP Plc evacuated non-essential staff and shut some of its Gulf output.

Royal Dutch Shell Plc said it evacuated about 160 non- essential workers from Gulf of Mexico drilling rigs and production platforms. Production at its platforms in the eastern Gulf of Mexico will be reduced today because of decisions taken by another company ahead of the storm, according to a statement on its Web site.

Chevron Production

Chevron Corp., the second-largest U.S. oil company, has halted “some production” at its Gulf of Mexico platforms, according to its Web site. The company moved some non-essential workers out of the area, spokesman Mickey Driver said yesterday.

Exxon Mobil Corp. evacuated crews from platforms in the path of the storm. Exxon didn’t say whether any production had been shut in.

Marathon Oil Corp. evacuated and shut in production at a platform located at Ewing Bank 873, which can produce the equivalent of about 12,000 barrels of oil a day, Lee Warren, a company spokesman, said in an e-mail. The company said it may start work on bringing production back tomorrow.

Transocean Ltd., the world’s largest offshore oil and gas driller, said it has completely evacuated its Transocean Marianas rig in the gulf. Transocean has 14 drill ships and semi-submersible rigs in the Gulf, including the Marianas, with approximately 1,930 people currently on board the other 13 rigs, according to Guy Cantwell, a spokesman.

Noble Offshore

Noble Energy Inc. said some of its offshore production in the Gulf of Mexico was shut. Noble’s Ticonderoga and Swordfish production was affected, a spokesman said.

Diamond Offshore Drilling Inc. said it evacuated one drilling rig as the storm approached and doesn’t plan further evacuations at this time.

Rowan Companies Inc. said it’s evacuating a rig. Rowan’s three other rigs operating in the Gulf “are being prepped in anticipation of the storm,” said Suzanne McLeod, a company spokeswoman.

Chevron said its 330,000 barrel-a-day Pascagoula refinery will stay open. The company is taking steps to secure the plant as the storm approaches, Steve Renfroe, a spokesman, said today in a telephone interview.

LOOP Loadings

The Louisiana Offshore Oil Port stopped loadings from tankers at about noon local time yesterday because of rough seas, Barb Hestermann, a spokeswoman, said in a phone interview.

“Customers are still getting deliveries,” she said, adding that supplies to refineries are being made from onshore storage tanks. “It seems that Monday and Tuesday will be pretty bad.”

Anadarko Petroleum Corp., the second-largest producer of natural gas in the U.S., removed all workers from the eastern Gulf and shut-in about 105,000 barrels a day of oil equivalent production at four off-shore platforms.

To contact the reporter on this story: Aaron Clark in New York at aclark27@bloomberg.net; Mark Shenk in New York at mshenk1@bloomberg.net

Last Updated: November 9, 2009 16:54 EST

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