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Record Hurricane Year has Oil Industry Worried

Date: 13-Jul-05
Country: USA

Warmer Atlantic waters have already touched off the most active start to hurricane season on record, with five named storms that in just six weeks have cut several million barrels of crude oil output from offshore platforms.

The latest storm, Emily, is expected to reach hurricane status -- sustained winds of at least 74 mph (119 kmh) -- in the next 36 hours, the National Hurricane Center said, and could also be headed into the oil-rich gulf.

"The waters have really warmed in the right places (for storm formation) this year early," said Dale Mohler of private forecaster AccuWeather. "It will probably stay this favorable (for high-intensity storms) for the next few weeks, until later in August," he said.

He said the high pressure system known as the Bermuda High will shift east in August and September, favoring development of storms that will have a higher chance of hitting the Carolinas northward instead of entering the Gulf of Mexico.

The offshore gulf is home to about a quarter of US oil and gas production, and the coastline is dotted with the nation's largest refineries.

Oil prices on Tuesday surged nearly $2, coming within a dollar of the record, as relief that last week's Hurricane Dennis had passed without major disruption to oil operations gave way to concern about Emily.

A sixth storm is also forming off the Cape Verde islands, but the NHC has yet to name it.

NEW THREAT

Hurricane Dennis, which passed through the gulf late last week, has taken out about 5 million barrels of crude production from the region so far, according to figures issued by the US Minerals Management Service.

Dennis is also blamed for damaging a new production platform, Thunder Horse, owned 75 percent by BP and 25 percent by Exxon Mobil Corp.

Thunder Horse was expected to start producing later this year, helping reverse a decades-long decline in domestic oil production. BP said Tuesday it was too early to say if the startup would be delayed.

Meteorologists said the nascent Emily could pose a new threat to the US oil patch as it raced across the Atlantic Ocean toward the Caribbean Islands.

"Emily has to be watched" by energy producers, Mohler said. "It could enter the Gulf by this weekend or early next week." He added that the storm could also divert away from the heavy producing regions offshore.

Oil trader and analyst Tom Mooney of Southeast Energy in Houston said Emily could also pose a threat to Hovensa LLC's large oil refinery on St. Croix in the US Virgin Islands.

The 500,000 bpd refinery is a major supplier of gasoline and other products to the US East Coast.

The most famous long-range hurricane forecaster, William Gray of Colorado State University, in May predicted 15 named storms with eight reaching the 74-mph wind speed (119 kmh) threshold to become a hurricane.

Neither Gray nor his a CSU spokesman were available Tuesday to say if that forecast had been upgraded. The hurricane season runs from June 1 to Nov. 15.

Lt. Dave Roberts, US Navy meteorologist with the NHC, said on Tuesday that if Emily becomes a Category 3 storm, it will be the first time ever that two storms of that intensity occurred before August.

The busy season comes at a time when oil and natural gas prices are expected to remain high anyway, based on ever-increasing demand forecasts.

The US Energy Information Administration on Tuesday raised its forecast for third-quarter global oil demand by 400,000 barrels per day from its forecast last month, to 84.9 million bpd. The latest forecast would put third-quarter demand up 3.3 percent from last year.

The EIA predicted that global fourth-quarter demand will be 87.2 million bpd, up 2.8 percent from last year's fourth quarter and 500,000 bpd higher than last month's forecast.

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