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Most Gulf Drilling Shut Down in Advance of Isaac Most Gulf Drilling Shut Down in Advance of Isaac

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Most Gulf Drilling Shut Down in Advance of Isaac

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Idling: A Chevron platform near New Orleans.(Mary Altaffer/AP)

Organizers of the Republican National Convention might consider taking a cue from the oil and natural-gas industry when it comes to responding promptly to hurricanes.

Days before news outlets began reporting on Sunday that convention organizers in Tampa would delay or scrap Monday’s planned events, oil and natural-gas companies were evacuating their workers from the Gulf of Mexico, which accounts for just under a quarter of total oil production in the United States.

 

“When a hurricane enters the Gulf, even a Category 1 or 2 like the storm we’re seeing today, just about the entirety of the Gulf of Mexico begins to evacuate,” said Jim Noe, senior vice president and chief compliance officer at Hercules Offshore, which operates rigs and other drilling equipment. His company started planning for the evacuation on Thursday and, by Sunday, had evacuated more than 900 people—about 90 percent of Hercules’ personnel.

His comment reflects the Interior Department’s latest numbers on how Tropical Storm Isaac—it hadn’t reached official hurricane strength as of Monday evening—is affecting the Gulf of Mexico’s oil and natural-gas industry. As of the Interior Department’s daily 2 p.m. update on Monday, 78 percent of the daily oil production in the region and 48 percent of daily natural-gas production had been halted.

“It’s alarming when you hear numbers like that, but whenever something moves through the central Gulf … expect it,” said Ken Medlock, a fellow in energy and resource economics at Rice University’s Baker Institute for Public Policy. Forecasts show Isaac headed through the eastern central Gulf of Mexico, where much of the drilling is focused right now. For that reason, experts predict those production numbers could fall further over the next day as more companies report their delayed drilling to the government.

 

Operations in the Gulf are expected to be offline for about two weeks; the work includes more than 40 percent of the country’s total petroleum-refining capacity along the Gulf Coast. Medlock says this could create a brief and minor (a nickel or dime) increase in gasoline prices. He added a key caveat: “There is always the anticipated speculative pressure, so you might see a bit of a move on that front.”

The oil and natural-gas industry’s swift decision-making in response to Isaac is due in large part to the lessons learned from its slower evacuation ahead of Hurricanes Katrina and Rita in 2005. The one-two punch devastated the oil and natural-gas infrastructure and prompted then-President Bush to tap the nation’s strategic oil reserve.

“It used to be that there was always some hesitation to abandon a well and evacuate a rig,” Noe said. “That’s a cultural change as a result of the 2005 hurricanes.”

Medlock said that the industry and government can always improve their storm response and build more-resistant infrastructure, but much of that learning comes by doing.

 

“We’ve learned from every storm,” Medlock said. “Industry sees what can withstand storms, and that helps them improve upon the engineering process.”

This article appears in the August 28, 2012 edition of NJ Convention Daily.

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