Royal Dutch Shell Group .com Rotating Header Image

Royal Dutch Shell Plc .com: Oil groups still struggling to repair Katrina damage

From The Financial Times

Oil and gas companies are still scrambling to repair billions of dollars worth of hurricane-related damage to Gulf of Mexico energy infrastructure, even as this year’s hurricane season gets under way.

Last season’s triple hit – from hurricanes Katrina, Rita and Wilma – cost the industry an estimated $31bn in damage, some of which will never be fixed. Chevron, for example, recently sank its Typhoon platform instead of investing in costly repairs.

The result is that 15 per cent of daily oil production in the Gulf remains offline, as does 11 per cent of daily gas production. It could take years to restore all the production companies plan to bring back online. Indeed, companies are still fixing damage from Hurricane Ivan two years ago.

Mickey Driver of Chevron said: “You can see why gas is $3 a gallon. It is taking billions of dollars for the oil and gas industry to repair damage.”

The costs of maintaining and servicing the industry had already been rising before the storms as companies increased exploration and production to capitalise on record oil and gas prices. Now the hurricanes have pushed them higher by increasing the demand for the contractors and supplies needed for repairs.

“You just have to get in line,” said Evan Smith, co-manager of the Global Resources Fund at asset manager US Global Investors. “There are not enough trained and experienced people. There is a lack of equipment for repair and industry growth.”

The reconstruction of New Orleans and criticism of the Federal Emergency Management Agency for its role after Katrina have dominated the post-disaster commentary but the problems of getting the oil industry back on track are less well-documented.

The shortages of skilled workers and equipment have forced companies to prioritise so that, even as they have finished some key repairs, many are still fixing crucial energy infrastructure.

Shell has spent the past nine months restoring its Mars platform, the Gulf’s largest production facility. That meant procuring one of only two lift barges in the world capable of lifting a 1,000-ton piece of equipment that had toppled on to the platform as well as a floating hotel to house 500 people to do the work.

Shell brought the platform back online at the end of May and it is only now turning its attention to the older and smaller Cognac platform.

Chevron’s Empire terminal, which brings in, stores and distributes 20 per cent of Gulf production, is in the middle of an extensive repair effort that started immediately after the hurricanes but will not end until November.

Copyright The Financial Times Ltd. All rights reserved.

This website and sisters,,,, and, are owned by John Donovan. There is also a Wikipedia segment.

Comments are closed.