U.S. energy companies shut nearly all offshore Gulf oil and gas production and raced to bring down flood-prone Louisiana refineries on Sunday ahead of Hurricane Gustav, which threatens to rival the wrath of 2005's Katrina.
Gustav is expected to be a Category 3 hurricane with wind speeds up to 125 mph when it hits the Louisiana coast west of New Orleans around midday on Monday in the first major test of the energy industry's preparedness since the devastating 2005 hurricane season.
In the U.S. Gulf of Mexico, which normally pumps a quarter of all U.S. oil production and 15 percent of its natural gas output, energy companies had shut in over 96 percent of the area's oil output and 82 percent of gas as of Sunday afternoon, the U.S. Minerals Management Service said.
At least nine refineries with a combined capacity of 2.2 million bpd, or 12.5 percent of U.S. refining capacity, were shut down along the south Louisiana coast ahead of Gustav.
More than half a dozen other plants, including Exxon Mobil's (XOM.N) Baytown, Texas, and Baton Rouge, Louisiana, facilities, the two biggest in the United States, were reducing processing rates, sources and industry officials said.
"This is Katrina's legacy," said Phil Flynn of Alaron Trading in Chicago. "The industry is much more prepared and taking things much more seriously. That's why so much has been shut down so quickly."
Despite Gustav's course through the heart of the U.S. oil patch, oil prices rose a modest $1.04 or 0.9 percent to $116.50 a barrel by 0305 GMT in electronic trading, with traders waiting to see if it leaves lasting damage in its wake.
U.S. RBOB gasoline futures climbed 2 percent.
"This is definitely a dangerous storm but I think most of the market is in a wait-and-see mode, waiting to see (if there are) disruptions to oil facilities and pipeline infrastructure before they make a big move," said Gerard Burg, a commodities analyst at the National Bank of Australia in Melbourne.
Hurricanes Katrina and Rita wrecked more than 100 oil platforms in 2005, shutting down a quarter of U.S. oil production and closing several large refineries for months. Katrina was a Category 3 when its 28-foot storm surge hit the coast.
The Gulf normally pumps 1.3 million barrels per day (bpd) of oil -- approximately 1.5 percent of world supply -- and 7.4 billion cubic feet of natural gas.
"This could be potentially the most dangerous storm for the energy sector we've ever seen," said Chris Jarvis, senior analyst at Caprock Risk Management in Hampton Falls, New Hampshire. "It is going right across the most important areas."
INFRASTRUCTURE CLOSURES
In addition to closing oil and gas fields and refineries, energy companies were also shutting down important fuel transportation systems.
The Louisiana Offshore Oil Port, the only U.S. port capable of offloading the biggest oil tankers and a major conduit for U.S. crude imports, halted all operations on Sunday.
"It's coming right at us," said LOOP spokeswoman Barb Hestermann of the Gustav's forecast path. "It looks like we're Ground Zero."
Gustav was forecast to slam into the coast just west of the LOOP's onshore operations center at Galliano, Louisiana.
The Sabine Pipeline, which includes the delivery point for U.S. natural gas futures, shut at noon CST (1:00 p.m. EDT). The move led the NYMEX to declare force majeure on its August and September natural gas futures contracts, meaning sellers were not contractually bound to make physical delivery.
Mississippi River traffic south of New Orleans closed Saturday night. Ship channels into Lake Charles in west Louisiana as well as Houston, Beaumont and Port Arthur in Texas planned to shut by Sunday night, cutting off crude oil shipments to refineries.
The region's largest offshore producer, Shell Oil Co (RDSa.L), said all of its Gulf production would be shut by Sunday night. All 1,300 of the company's workers were onshore.
Rival energy giants BP (BP.L), Chevron (CVX.N) had shut almost all production. ConocoPhillips (COP.N), and Exxon (XOM.N) were also shutting off production as they evacuate workers.
(Reporting by Erwin Seba, Bruce Nichols, Robert Campbell and Haitham Haddadin, and Fayen Wong in Perth; editing by Chris Baltimore and Gunna Dickson)
