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Andrew inflicts severe damage on oil-and-gas platforms

By HARIHAR KRISHNAN UPI Business Writer

DALLAS -- Imagine some immense power uprooting a building the size of a downtown skyscraper and toppling it to the ground.

That's how Hurricane Andrew overturned some of the giant oil-and-gas platforms dotting the Gulf of Mexico as it raged through the seas before exhausting its fury onshore Louisiana.

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There is as yet no precise estimate as to how many such platforms and other structures operated by oil and gas companies in the Gulf were damaged or destroyed. But the latest figures show the damage is far more severe than originally believed and could get worse after company crews complete their inspection, which may take several more days.

Energy companies produce about 13 billion cubic feet of natural gas and 800,000 barrels of oil per day from about 4,000 platforms and structures in the Gulf of Mexico. About 2,000 of these structures were believed to be in the path of Andrew.

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The federal Minerals Management Service, which administers federal offshore natural gas and oil operations, issued Thursday a new damage estimate that sharply raised the number of platforms and structures damaged or destroyed and the resulting loss of oil and gas supplies.

The report, based on figures supplied by companies, said Andrew damaged 166 platforms and structures, up from 100 originally estimated by MMS Monday. The number of platforms toppled now stands at 33, up from 13 in the Monday report.

'We are now estimating that between 2.5 and 2.75 billion cubic feet of daily gas production will be lost in the short term,' said Scott Sewell, MMS director. The loss is equal to 21 percent of Gulf production and about 5 percent of the nation's total gas output.

The MMS's earlier estimate of the loss was 1 billion cubic feet.

The MMS revised the loss of oil production to between 240,000 barrels and 270,000 barrels a day, or about a third of Gulf production, from the original estimate of some 15 percent.

The next updated report on the damage will be issued Tuesday.

The cost of repairing the damaged structures and the vast network of pipelines on the ocean floor could run into the hundreds of millions of dollars.

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While some experts believe the immediate market response that drove up gas prices might have been overdone, there is concern about how long the disruption to oil and gas supplies caused by Andrew might last.

The MMS estimates it will take 14 to 30 days to restore most of the lost production. But if the disruption continues into the beginning of the winter season when demand for gas peaks, prices could jump even further.

Since Hurricane Andrew, gas prices have exceeded the $2 mark for 1, 000 cubic feet -- a level not seen in years by the depressed gas industry.

Demand and price factors, however, will eventually work themselves out through free-market forces.

But for the affected companies, the more immediate worry is the damaged structures and what impact the cost of repairing or replacing them will have on their balance sheets.

It is likely that some of the platforms may not be replaced because of cost and the uncertainty surrounding the gas market.

Phillips Petroleum Co. said about 25 percent of its net oil production and 15 percent of its net gas production from the Gulf has been 'temporarily curtailed' as a result of damage to offshore platforms and other facilities. But the company said this represents less than 3 percent of its total net worldwide oil and gas production.

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Marine Petroleum Trust, a Dallas-based trust company that earns royalties mostly from Chevron Corp., said Andrew destroyed three of 19 Chevron production platforms, while 135 fields and some pipelines were damaged.

Ray Bell, a spokesman for Marine, said he expects his company's unit holders to see their distribution go down 5 cents to 25 cents a unit from 30 cents a unit in the quarter ending in December. But he said the distribution should return to the original amount after that.

Offshore Pipelines Inc. of Houston is one of the larger companies involved in the fabrication, installation and repair of natural gas pipelines and production platforms.

'Thedamage is more extensive than originally thought,' said Offshore Vice President Victor Perez. But details must come from clients who hire his company to perform repairs to pipelines at sea or transport the toppled platforms to shore for refurbishing.

A spokesman for Trunkline Gas Co., a pipeline unit of Panhandle Eastern Corp. in Houston, said one of its two valving platforms on the Terrebonne System offshore Louisiana was damaged and a second one toppled, affecting about 800 million cubic of feet a day of gas supply.

The spokesman said Trunkline is making alternate arrangements to restore about 400 million cubic feet by the end of this week. He said the disrupted production amounts to 6 percent of Trunkline's total supply.

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