Isaac Set to Reach Hurricane Strength on Way to Louisiana

Tropical Storm Isaac strengthened and was almost at hurricane intensity as it forced about 78 percent of oil production in the U.S. Gulf of Mexico to shut down and sent gasoline futures to a four-month high.

Tropical Storm Isaac maintained a maximum wind speed near hurricane strength as it shut 78 percent of oil production in the U.S. Gulf of Mexico and sent gasoline futures to a four-month high.

Isaac’s center was about 125 miles (201 kilometers) southeast of the mouth of the Mississippi River with top winds of 70 miles per hour, the National Hurricane Center said in an advisory at 5 a.m. New York time. That’s 4 mph less than hurricane strength. It’s moving northwest at 12 mph on a track to reach the Louisiana coast today or early tomorrow.

President Barack Obama declared an emergency for Louisiana, authorizing agencies to coordinate relief efforts. The storm, which has winds extending 205 miles from its core, or almost the distance between Boston and New York, is forecast to become a hurricane today, one day short of the seven year anniversary of Hurricane Katrina, which took 1,800 lives after levees protecting New Orleans failed.

Isaac “is becoming better defined and strengthening might be imminent,” the National Hurricane Center said today on its website. “Strong winds extend well away from the center and are expected to affect a large portion of the northern gulf coast.”

The storm halted 48 percent of natural-gas production in the Gulf and forced evacuations from 346 production platforms and 41 rigs, the Bureau of Safety and Environmental Enforcement said yesterday. Four refineries in Louisiana were shut, idling combined capacity of 832,700 barrels a day, or 4.8 percent of the U.S. total, and at least four are running at reduced rates.

Photographer: Marcus Dipaola/Xinhua/Zuma Press

Residents talk after a tornado hit a trailer park, damaging 30 mobile homes, in Vero Beach, Florida, on August 28, 2012. The freak weather is believed to be caused by Tropical Storm Isaac. Close

Residents talk after a tornado hit a trailer park, damaging 30 mobile homes, in Vero... Read More

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Photographer: Marcus Dipaola/Xinhua/Zuma Press

Residents talk after a tornado hit a trailer park, damaging 30 mobile homes, in Vero Beach, Florida, on August 28, 2012. The freak weather is believed to be caused by Tropical Storm Isaac.

Gulf Pounding

A hurricane warning was posted for 285 miles of the northern Gulf Coast from Louisiana to Florida. The Gulf region is home to 23 percent of U.S. oil output, 7 percent of natural gas and 44 percent of refining capacity. A tropical-storm warning was extended from Morgan City westward along the northern Gulf coast to Cameron, Louisiana, according to the latest advisory.

The storm may go ashore south of New Orleans in about 24 hours with sustained winds of 90 mph, or as a Category 1 on the Saffir-Simpson scale, according to a hurricane center discussion.

Isaac won’t have the power of Katrina when it hits, said Jim Rouiller, senior energy meteorologist at Planalytics Inc. in Berwyn, Pennsylvania. Katrina grew into a Category 5 system, the strongest, and went ashore as a Category 3, according to Weather Underground.

The last hurricane to threaten New Orleans was Gustav in 2008, which struck west of the city as a Category 2 storm. The last hurricane to hit the Gulf Coast was Ike later that year, near Galveston, Texas.

Damage Outlook

Isaac will probably cause minimal damage to rigs and platforms as well as onshore refineries and pipelines, Rouiller said.

“Shut-ins are widespread south and east of New Orleans,” he said. “Most should be up and running by Friday morning.”

Masters said Isaac may bring a large storm surge to the region because of its vast size and slow forward speed. He said it’s possible the surge could last through two high-tide cycles and cause heavy flooding from Louisiana to Mississippi.

Tides along the coast are expected to rise 6 to 12 feet (1.8 to 3.7 meters) above normal and as much as 18 inches (46 centimeters) of rain may fall in some areas, the center said earlier.

“All the models say it is going to dump prodigious amounts of rain,” Masters said by telephone.

Gasoline Price

Gasoline futures traded near a four-month high as Gulf refineries shut. The increases were exacerbated because of a weekend fire at Venezuela’s largest plant. September-delivery gasoline rose 2.5 percent yesterday to settle at $3.1548 a gallon, the highest level since April 30. Prices declined 0.5 percent to $3.1473 at 5:52 a.m. in electronic trading on the New York Mercantile Exchange.

Andy Lipow, president of Houston-based Lipow Oil Associates LLC, estimated yesterday that the storm may force shutdowns of 12 coastal refineries in Louisiana, Alabama and Mississippi that together account for 16 percent of the nation’s gasoline production capacity.

Valero Energy Corp. is shutting the St. Charles and Meraux refineries in Louisiana, Bill Day, a company spokesman in San Antonio, said by e-mail. “Refinery production will resume as soon as it is safe to do so,” he said.

Phillips 66 (PSX) is temporarily shutting its 247,000 barrel-a- day Alliance refinery at Belle Chasse, Louisiana, the company said in a statement on its website. Exxon Mobil Corp. (XOM) began closing operations at the Chalmette plant near New Orleans, the company said on a community hotline.

Refinery Operations

Marathon Petroleum Corp. (MPC)’s Garyville refinery in Louisiana is operating at reduced rates, Shane Pochard, communications manager for the company, said in an e-mail yesterday. Motiva Enterprises LLC’s Norco and Covent refineries in Louisiana are also running at lower rates, the company said on its website, as is Exxon Mobil’s Baton Rouge plant.

Companies including BP Plc (BP/), ConocoPhillips, Murphy Oil Corp. and Gulfport Energy Corp. were evacuating personnel or halting production at rigs and platforms. Producers shut in about 500 million cubic feet of gas scheduled to flow on the interstate Transco pipeline, The Williams Cos. Inc. said on its website.

The Louisiana Offshore Oil Port, the largest point of entry for crude coming into the U.S., stopped offloading tankers yesterday at the marine terminal, according to its website. Louisiana’s Port Fourchon, a base for support services to the Gulf’s deep-water oil and gas facilities will shut today, said Chett Chiasson, the port director.

Pipelines Shut

Operators of several offshore natural-gas pipelines in the Gulf of Mexico said they will be unable to meet contractual obligations to customers as Isaac approaches. Kinder Morgan Inc.’s Southern Natural pipeline, DCP Midstream LLC’s Dauphin Island gathering system and Enbridge Inc.’s Mississippi Canyon and Nautilus lines declared force majeure.

The U.S. Coast Guard issued shipping restrictions for ports in Louisiana, Alabama and Florida. The port of Mobile in Alabama was scheduled to close yesterday, and no vessels may enter or remain in the Port of New Orleans without permission from the captain of the port, the Coast Guard said.

To contact the reporters on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net; Matthew Brown in London at mbrown42@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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