BP Spill Threatens Gulf of Mexico Oil, Gas Operations

By Asjylyn Loder and Jessica Resnick-Ault

May 3 (Bloomberg) — The growing oil slick fed by an underwater leak in a BP Plc well in the Gulf of Mexico may threaten production, shipping and refining of oil and natural gas in Mississippi, Alabama, and Louisiana.

Those three states account for 19 percent of U.S. refining capacity as of 2009, according to data from the U.S. Energy Department’s Energy Information Administration.

“Traders are nervous about how fast the slick could grow,” and whether it could have a significant effect on oil and natural-gas production, said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

The oil spill followed an April 20 explosion on a drilling rig leased by BP Plc that killed 11 workers. The rig, owned by Transocean Ltd., sank two days later.

President Barack Obama called the leak a “massive and potentially unprecedented” disaster that could affect the economy of the Gulf states and the jobs of those who depend on the Gulf for their livelihood.

The spill could drift west toward New Orleans, hindering ships entering and leaving the Mississippi River or deliveries of cargoes to the Louisiana Offshore Oil Port, Lipow said in a telephone interview today.

The LOOP, a deepwater port off of Louisiana, provides tanker offloading and receives oil from underwater pipelines. All operations are normal at this point, said Barb Hestermann, a spokeswoman for the LOOP.

LOOP Clear

“We don’t anticipate being impacted,” Hestermann said. “We’re quite a bit west of the oil spill.”

The LOOP handles about 10 percent of the nation’s imports and 10 percent of domestic production via pipelines in the Gulf of Mexico operated by Shell and BP, she said.

“We’re still receiving oil from both pipelines,” Hestermann said.

If the slick moves east, crude deliveries could be interrupted to Chevron Corp’s 330,000-barrel-a-day Pascagoula refinery in Mississippi, and a Shell Chemicals refinery near Mobile, Alabama, Lipow said.

“We continue to supply products to our customers,” said Lloyd Avram, a Chevron spokesman.

Royal Dutch Shell Plc operates refining joint ventures with partners at four Gulf Coast refineries. The company also has Gulf of Mexico drilling operations, and recently started production at the deepest offshore Gulf platform, Perdido. Shell is monitoring the situation, including the “trajectory and quantity of oil released to determine any potential impact on our operations,” Ted Rolfvondenbaumen, a company spokesman, said in an e-mailed response to questions.

Gas Platforms Closed

Two natural-gas platforms were closed and one evacuated as a safety measure, shutting in approximately 6.2 million cubic feet of gas, or less than one-tenth of one percent of daily gas production, according to a May 1 statement from the multiagency Joint Information Center coordinating the federal response.

The Coast Guard hasn’t restricted commercial tanker traffic into the Mississippi River, said Petty Officer Cory Mendenhall.

The Southwest Pass, the main channel to the river, isn’t affected by the spill, said Chris Bonura, spokesman for the Port of New Orleans. The river has 5,000 to 6,000 ship calls a year, he said.

‘Clear Through Tuesday’

“Everything is clear and the forecast is clear through Tuesday,” Bonura said. “We haven’t had any ships canceled or delayed.”

Valero Energy Corp., the largest U.S. independent refiner, operates five refineries located on the Gulf Coast.

“At this time, we’re not expecting any disruptions to supply,” Bill Day, a Valero spokesman, said in a telephone interview. “We have prepared equipment and expertise in case we’re asked to assist with cleanup along the Gulf Coast since we have oil-spill response equipment.”

There has been no effect on Marathon Oil Corp’s platform in the Gulf of Mexico, and no disruption to its Garyville, Louisiana, refinery on the Mississippi River, said Lee Warren, a company spokeswoman.

There is no effect on production at Exxon Mobil Corp. facilities in the Gulf of Mexico, said David Eglinton, a company spokesman.

Koch Industries does not comment on potential supply disruptions, said Katie Stavinoha, a Koch spokeswoman. Flint Hills, a unit of Koch Resources LLC, operates a refinery in Corpus Christi, Texas.

Second Well

BP is seeking ways to plug the leaks 5,000 feet under the water’s surface. The company plans to drill a second well to take pressure off of the current gusher. The U.S. Coast Guard said it has been unable to get an accurate estimate of how much oil is leaking and is preparing for a worst-case scenario.

More than 2,000 people have been deployed to protect the shoreline and coastal wildlife, according to a statement from the Joint Information Center.

Surface estimates of the size of the slick and skimming efforts were hindered as the Coast Guard ordered boats and aircraft back to port because of stormy weather. The National Oceanic and Atmospheric Administration previously estimated the well is spewing 5,000 barrels of oil a day. At that rate, the volume of the spill would exceed Alaska’s 1989 Exxon Valdez accident by the third week of June.

–With assistance from Aaron Clark in New York. Editor: Joe Link, Dan Stets.

To contact the reporters on this story: Asjylyn Loder in New York at [email protected].; Jessica Resnick-Ault in New York at [email protected].

To contact the editor responsible for this story: Dan Stets at [email protected].

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