Production Returns in the Wake of Hurricane Isaac (E, RDS-A, XOM, CVX, BP, PSX, VLO)

Crews were returning to both shallow-water and deep-water rigs in the Gulf of Mexico yesterday as the oil and gas industry prepares to restart production following Hurricane Isaac. A report from Platts noted that there did not appear to be any significant damage to Gulf rigs. About 95% of Gulf oil production and more than 70% of natural gas production were shut-in due to the storm. Gulf production normally comes in at about 1.38 million barrels a day of oil and 4.5 billion cubic feet a day of natural gas.

Italy’s Eni SpA (NYSE: E) could restart production as early as today, and Royal Dutch Shell PLC (NYSE: RDS-A) has begun inspecting rigs by air and could return crews as soon as today. Exxon Mobil Corp. (NYSE: XOM), Chevron Corp. (NYSE: CVX) and BP PLC (NYSE: BP) have begun checking for damage and plan to return to normal operations as soon as they determine that it is safe to do so.

At onshore refineries and natural gas processing facilities, flooding and power outages may pose a more serious problem. Phillips 66 (NYSE: PSX) has experienced some flooding at its 247,000 barrel a day Belle Chasse refinery in Louisiana and has not estimated when the plant may restart. Shell has said it will begin the process of restarting its Motiva Convent refinery. Valero Energy Corp. (NYSE: VLO) expected crews to begin returning yesterday, but have not yet specified when two refineries will restart. Platts estimated that nearly 1.6 million barrels a day of refinery output was affected by Isaac.

A Norwegian tanker operator, Stolt-Nielsen, has reported seven feet of water at a terminal in New Orleans and has declared force majeure until further notice.

Overall, the damage assessments so far do not indicate a long delay before production at rigs and refineries resumes.

Paul Ausick