Oil industry upgrades in Gulf could be tested

Associated Press

Saturday, August 30, 2008

Houston — Stronger moorings for production platforms. Deeper pipelines. Larger supplies of backup electricity, water and other necessary items.

The petroleum industry has spent vast amounts of time and money since the catastrophic hurricanes of 2005 trying to make sure it’s better prepared for the next big blow.

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It could be named Gustav, a deadly storm that appears headed for the northern Gulf of Mexico, home to a complex web of platforms, pipelines and refineries in a region that produces roughly 25 percent of the nation’s oil and 15 percent of its natural gas.

Some projections show Gustav arriving early next week as a Category 3 storm.

Three years ago, as they prepared to fix the Gulf’s devastated oil and gas facilities, industry representatives realized standard repairs weren’t enough. So the companies that own the platforms, drill the wells and manage the pipelines spent hundreds of millions of dollars to improve and strengthen their operations.

Still, as Gustav churns, a question lingers: How will the revamped structures, pipelines and equipment hold up to a major storm?

“I think the industry is smarter, but it’s hard to say if it’s better prepared,” said David Purcell, an analyst at Tudor Pickering Holt & Company Securities. “If you think about an old car and you repair it, it’s hard to make it better than new. But you can make it close to new. The question is: Is new good enough?”

Petroleum companies certainly learned some hard — and very expensive — lessons from hurricanes Katrina and Rita, the culprits of the 2005 devastation.

Those storms destroyed 115 of the Gulf’s 4,000 oil and gas platforms and damaged 52 others.

Even Royal Dutch Shell’s enormous Mars production platform could not withstand the forces unleashed by Katrina.

The storm’s 175-mph winds and 75-foot waves broke the steel clamps that held the 1,500-ton rig structure to the platform and knocked a 200-foot derrick into the water. The surge caused the rig to rise up and slam into the platform, causing heavy damage.

The clamps now are four times stronger, according to Shell. The platform resumed operation in May 2006.

“If one major deep-water production platform is destroyed, you’re talking about a $1 billion or more loss,” said Satish Nagarajaiah, a civil and mechanical engineering professor at Rice University.

“If it’s multiple rigs and platforms in a variety of water depths, then we’re talking billions of dollars.”

Soon after the 2005 storms, Shell joined a number of industry players — other oil companies, federal agencies and the American Petroleum Institute, among them — looking at ways to better protect themselves against such disasters and minimize the damage and subsequent supply disruptions that contribute to spiking energy prices.

One of the key conclusions was the need for stronger mooring systems that anchor rigs to the sea floor, sometimes in thousands of feet of water. That’s prompted major rig owners such as Transocean and Noble Drilling to increase the number of anchor lines.

Noble, for example, spent as much as $30 million apiece to strengthen moorings on five deep-water rigs. The company also has added new monitors to rigs that will allow it to track, via the Internet, wind speed, wave heights, and pitch and roll during a storm.

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