Bottleneck. Restoring power is key to resuming refinery operations on the Gulf Coast. (Photo by Michael Goodman for ENR)

Raked by two monster hurricanes in less than four weeks, the oil industry in the Gulf of Mexico has "shut in" all offshore oil production and more than three-quarters of its gas production. Widespread refinery closures from both Katrina and Rita have pinched fuel supply, driving gasoline and diesel prices to stratospheric levels. Washington has responded by introducing legislation to promote construction of the first new refineries in the U.S. in nearly 30 years. In the states hit by the two storms, oil companies and electric utilities withheld cost estimates pending full assessment of the damage.

Some 3.5-million barrels per day of refining capacity remained offline due to Rita on Sept. 27, according to the U.S. Minerals Management Service. Another 879,000 bbl per day of refining capacity from three Louisiana plants and one Mississippi facility remain out of service from Katrina. They include Chevron’s Pascagoula, Miss., refinery; ConocoPhillips’ Alliance plant in Belle Chasse, La.; ExxonMobil/PDVSA’s Chalmette, La., facility; and Murphy Oil’s Meraux, La., plant, reports Platts, which, like ENR, is a unit of the McGraw-Hill Cos.

All seven refineries in the Lake Charles, La.,-Port Arthur, Texas, region–the area hardest hit by Rita–remain off-line, as does 1.79 million bbl per day of refining capacity in the Houston/Texas City area, down from 2.29 million, says the U.S. Dept. of Energy.

ConocoPhillips’ 239,000-bbl-per-day refinery in Lake Charles suffered wind damage and is without power, the company says. It has no timetable for restart. San Antonio-based Valero Energy Corp. says its severely damaged Port Arthur, Texas, refinery will restart in two weeks to a month after repairs are made. And Royal Dutch/Shell plans to restart its 333,700-bbl-per-day refinery in Deer Park, Texas, within the next few days, a company spokesman said Sept. 26.

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The tenuous balance between supply and demand has underscored the need for added refining capacity. "We’re running at utilization rates in the mid-90s [%]," says Ron Chittim, senior refining associate with the American Petroleum Institute, Washington, D.C. U.S. refineries can process more than 17 million bbl per day, but the country consumes 20 million bbl per day. "The supply-demand balance is pretty tight," Chittim notes.

On Sept. 26, Rep. Joe Barton (R-Texas), chairman of the House Energy Committee, introduced a bill to reform siting procedures for new refineries and promote construction through a number of other means. Noting that about 47% of U.S. refining capacity is concentrated in the Gulf of Mexico, Barton said, "If there is a silver lining in this tragic situation, it may be that our country understands how fragile...our energy infrastructure is."

The bill would make DOE the lead agency for refinery siting and permitting, while authorizing it to provide financial assistance to states to review applications for siting, construction, expansion and/or operation. The committee is expected to discuss the bill this week.

Oil and gas producers are continuing to tally the damage from Rita’s rampage. Chevron suffered the biggest loss when its Typhoon tension-leg platform was severed from its moorings in 2,679 ft. of water in the Green Canyon area, approximately 165 miles south-southwest of New Orleans. The platform has been secured, but is not producing.

Three jack-up rigs owned by the Rowan Cos. Inc., Houston, went adrift but were later found. The firm was unable to account for a fourth. Two Diamond Offshore Drilling Inc. semisubmersible rigs broke from their moorings and grounded 100 miles away. GlobalSantaFe Corp., Houston, also reported as missing two jack-up rigs valued at $22.2-million. A preliminary count by Pickering Energy Partners Inc., a Houston-based analyst, had four of the Gulf’s 92 jack-ups "likely destroyed" and seven of the 36 floaters loose from moorings.

Sabine Pipe Line’s Henry Hub in Vermilion Parish, La., declared force majeure and has remained closed since Sept. 23. The Henry Hub, which connects with nine interstate and four intrastate pipelines, is the pricing point for natural-gas futures traded on the New York Mercantile Exchange. ChevonTexaco-owned Sabine reported on Sept. 26 that it was investigating gas leaks close to the Henry Hub.

In Texas, Louisiana and Arkansas, 1.8 million customers lost power after Hurricane Rita came onshore. But the structural damage to most of the affected companies was minimal, with the exception of New Orleans-based Entergy Corp.

Entergy’s transmission grid suffered more from Rita than Katrina, a company spokeswoman says. At least 301 transmission-line structures and 301 substations are out of service from damage caused by Rita. All transmission lines to Entergy’s major industrial loads, which include the seven refineries in the Lake Charles/Port Arthur area, have extensive damage.

Citgo crews are gearing up to restart a 325,000-bbl-per-day refinery in Lake Charles once power is on, a spokesman says. "We’re not sure when we’ll have power to begin to restart" he says. Transmission lines serving the Louisiana Offshore Oil Port’s Fourchon booster station and the Henry Hub gas pipeline interconnection also are out.

The 500-kV bulk grid interconnect with Entergy’s generating capacity in the eastern portion of its service territory must be restored before service can be restored to the refineries and other customers in its western region, the spokeswoman says. With 12 of the 14 generating units, totaling 3,505 MW, in the western region out, Entergy on Sept. 26 began rolling outages to its customers in suburban Houston. "Entergy expects a long and difficult restoration in the aftermath of the extensive damage caused by Hurricane Rita," the spokeswoman says.

Entergy had 766,000 customers who lost power from Rita, compared to 1.1 billion from Katrina. Entergy estimates it will cost $1 billion to repair and replace its infrastructure damaged by Katrina. No estimates are available for Rita.

Officials said Entergy New Orleans, the operating company that was the most damaged by Katrina, faces up to $475 million in infrastructure repairs. The subsidiary filed for bankruptcy on Sept. 25. "We took this action after careful review of the various options available to preserve Entergy New Orleans’ business over the near and long term," says Dan Packer, CEO of Entergy New Orleans.

The bankruptcy court approved $100 million of loans to Entergy New Orleans to meet its near-term obligations, which include efforts to repair infrastructure.