Thursday, September 22, 2005

Hurricane Rita: Impact on the Oil Patch (Updating)

From the Wall Street Journal

Wall Street Journal Storm Tracker

From WSJ's Storm Tracker:
"Rita has forced 11 refineries to shut down and two more to deeply cut runs, further stretching already tight fuel supplies. Facilities including Exxon Mobil's massive 557,000 barrel a day Baytown refinery, the country's largest, and BP's 437,000 barrel a day Texas City refinery, the country's third-largest, are shutting down as Rita takes aim at Houston, capital of the U.S. energy industry."
It is also reporting from the Minerals Management Service that 91.9% of Gulf oil production is shut down.

Meanwhile, the refineries are preparing. From the Houston Chronicle:
Houston-area refineries say they're prepared
Copyright 2005 Houston Chronicle

Hurricane Katrina's visit to New Orleans was bad news for the nation's energy industry. If Hurricane Rita makes a similar visit to Houston it could be even worse.

There are 10 refineries in the Houston area representing as much as 13 percent of the nation's refining capacity. These facilities and countless chemical plants, located on the bays and bayous in Harris and Galveston counties, are at risk from storm surges like those that came with Katrina.

One worst-case scenario modeled by Houston engineering firm Dodson & Associates predicts that a Category 5 storm coming ashore near Freeport could send a wind-driven surge of water up Galveston Bay and into the Ship Channel. Such a storm would swamp many of these facilities, according to the study. The city is home to the nation's largest refinery, Exxon Mobil's Baytown facility, which processes 557,000 barrels a day.

Hurricane Rita may not pack the same punch as the storm envisioned in the study, and Houston is not below sea level like most of New Orleans. But with four refineries still out because of damage from Katrina, any lost capacity could add to high gasoline prices.

But it's been more than 20 years since the Houston-area felt the full brunt of a hurricane.
"People think there was a national impact from Katrina," said Chris Johnson, president of Dodson & Assoc. "But if a storm that size hits here it will be a bigger deal."

When Katrina came ashore in Louisiana last month, flooding and downed power lines crippled many onshore oil and gas facilities, including more than 10 percent of the country's refining capacity.

The last time Houston was hit by a large storm was August 1983's Hurricane Alicia. The storm came ashore on Galveston Island as a Category 3 storm, knocking out more than one-third of the area's power.

Facilities such as Exxon's Baytown refinery and most units at what was then Arco Chemical's Channel View plant remained operating throughout, however.

Designed to handle surges
Refineries and chemical plants are designed to handle heavy winds, and facilities built along the coast take flooding into consideration as well. But no one can predict how well they'll handle a hurricane.

The power lines that feed refineries are susceptible to high winds. Two large power plants run by Texas Genco sit on the south shore of the Ship Channel. The power company said they have been designed to handle storm surges.

Royal Dutch Shell's 1,500-acre chemical plant and refinery complex in Deer Park sits between 10 feet and 25 feet above sea level, said spokesman David McKinney. During 2001's Tropical Storm Allison about

4 inches of water accumulated over many parts of the property, but since then the company has upgraded stormwater pumps and improved drainage.

In Texas City, home to BP's refinery (processing 437,000 barrels a day) and a Valero facility (210,000 barrels a day), 15-to-20-foot seawalls are designed to keep storm surges at bay.

"We've looked at some modeling that shows the industrial sector, including our site, to be in a reasonably good position," said Neil Geary, BP Texas City's communications manager.

Valero's plant is right on the water.

"If we had Katrina-like storm surges at the 20-foot level, we'd see some local refinery flooding," said Valero spokeswoman Mary Rose Brown. She said the company's St. Charles, La., refinery was hit hard by Katrina, but good planning allowed it to recover quickly.

In Freeport, managers at Dow Chemical's 5,000-acre production facility are watching Rita warily. The massive facility hasn't seen a major storm since Hurricane Carla in 1961, said spokesman Dave Winder, which brought significant flooding. There have been improvements made to the levy system since, which now reaches about 16 feet high and is expected to withstand a Category 3 storm.

Exxon officials did not provide details of the Baytown refinery's storm protection by Tuesday evening.

Since Monday, most local companies have taken precautions, such as removing scaffolding, tying down loose items that could become airborne in heavy winds and removing things that could clog storm drains.

Most refineries and chemical plants need to decide whether or not to shut down processes about 72 hours before a storm hits, which in this case would be today, says David Harpole, a spokesman for Lyondell Chemical, which operates a number of local refineries and chemical plants.

"Protecting workers and the community are top priorities, but companies work to protect their physical assets, too," said Chris Miller, a spokeswoman for chemical maker Rohm and Haas. "That could mean bringing them down in an orderly shutdown, working off raw materials onsite, not accepting additional materials and shipping products out ahead of the storm."

Higher ground
Houston has a number of advantages compared with New Orleans. No parts of Houston are below sea level, so a storm surge would recede relatively quickly. But if a storm brings heavy rains to the west part of the city, bayous and streets could fill further.

"I've seen Buffalo Bayou downtown flowing upstream due to storm surge," Johnson said. "Combine that with heavy rainfall to the west and you've got a serious problem."

"Serious problem." There's an understatement.

Gas is going up, folks. Regardless.

Just hope the infrastructure damage is relatively light, so as to reduce repair time. This is going to hurt. The hurricane seems to be tanding more easterly, but it won't lose much more strength. It's going to clobber whatever it hits.

Houston Chronicle's
energy section seems to be a pretty good resource to follow this aspect of the storm, and their hurricane section is essential. Technical information on this aspect of the storm's impact is available at the US Department of the Interior's Minerals Management Service.

UPDATE 2:50 PM MDT: "Refineries Packing It In"

Refineries are packing it in
After temporary shutdowns, time needed to restart
Copyright 2005 Houston Chronicle

Much of the Texas Gulf Coast's oil and chemical industry will grind to a halt today as companies prepare for the arrival of Hurricane Rita.

Houston area oil refineries, such as BP's Texas City facility, the nation's third-largest, were shuttering operations completely on Wednesday.

Shell's 333,700 barrel-a-day Deer Park refinery started to shut down on Wednesday and expects to complete the process by this morning.

Exxon Mobil's refineries at Baytown and Beaumont were operating at normal capacity Wednesday, although nonessential personnel at the Baytown facility were allowed to leave, company officials said.

The Texas Gulf Coast is "the mother lode of refining," according to Energy Information Administration analyst David Hinton, with 17 refineries representing 23 percent of U.S. oil refining capacity.

Houston-area refineries alone account for 13 percent of the refining, while Corpus Christi is home to 3 percent and the Port Arthur/Beaumont area 7 percent.

Texas refineries may be able to weather storms a bit better than those in Louisiana because they are not below sea level. But some storm models predict a Category 5 hurricane coming ashore near Freeport could send a tidal surge as large as 30 feet up the narrow Houston Ship Channel. Such a wave could swamp the many refineries, chemical plants and other industries along the waterway.

Shutting them down
State officials are taking the threat to the Gulf's industries seriously. During a conference call Wednesday morning, officials with the state's Division of Emergency Management recommended every refinery and chemical plant shut down before tropical storm-speed winds hit.

The recommendation is somewhat redundant, however, as most plants were already considering that option.

Dow Chemical is closing its plants in Freeport, Deer Park, Clear Lake, Houston and La Porte, as well as the Union Carbide plants in Texas City and Seadrift. The 5,000-acre Freeport plant is one of the largest in the country, employing 7,500 workers.

Lyondell Chemical was expected to have its Matagorda polyethylene plant and Chocolate Bayou ethylene plant closed late Wednesday. All other facilities, including its 270,000-barrel refinery in Houston, were reducing their production rates on Wednesday and preparing to shut down as soon as today if necessary.

Shutting down a refinery or chemical plant is much more difficult than hitting a switch.

A refinery is a collection of dozens of interconnected processes, said Gilbert Froment, a chemical engineering professor at Texas A&M University. The process can take more than a day, depending on the kind of equipment.

"If you close a valve on one unit, it has repercussions on many other spots in a refinery," Froment said.

Any chemicals or materials left in a unit after it is shut down could become corrosive or even solidify and clog pipes and equipment, he said. That would make a restart extremely dangerous, if not impossible.

Several days at a minimum
How long those refineries will be shut down, of course, depends on Rita. At a minimum, they will be off line for several days.

Refiners need a day and a half to two days to bring a fully shut-down refinery back into normal production, noted Roger Diwan, Washington-based PFC Energy's managing director for the oil markets group. That means in the case of an undamaged refinery, it may not be until Monday or Tuesday before production restarts.

Seventeen facilities, from Freeport to Channelview to Alvin, had notified the Texas Commission on Environmental Quality by Wednesday that they would shut down some or all of their units because of the advancing storm.

Many planned to be shut down until Monday, according to reports filed with the state.

The facilities submitting reports to the agency by Wednesday estimated they would release 450,500 pounds of pollution as they went off line.

"This isn't typically what we would see, but I think that everybody is being cautious in the wake of Katrina," said David Bower, the TCEQ's assistant division director for field operations.

While pollution episodes resulting from an act of God or natural phenomena are exempt from fines or other enforcement actions, Bower said each case would be reviewed.

Damage assessments will begin the moment the storm passes, but one of the biggest post-Rita challenges will likely be getting employees back on the job, Lyondell spokesman David Harpole said.

"When they evacuate, people disperse in so many directions," he said. "We're trying to put in place a process to have people check in, let us know where they are and what kind of assistance the company can provide and when we can get them back."

Preparing for recovery
Valero has started preparing for its post-Rita recovery by amassing supplies at its San Antonio headquarters to send to Gulf refineries when the storm passes.

Extra refinery parts and equipment, food, water and first-aid supplies will head into the affected areas, spokesman Fred Newhouse said.

The company will also provide chain saws and generators for employees who may need them to get their own homes in order.

This plan worked well for Valero in helping get its St. Charles, La., refinery back up and running after Katrina, but Newhouse said the company is already applying lessons it learned from that recent experience.

"For example, we've made sure to send our refinery managers emergency cash for workers before the storm this time instead of after, since it's possible people may not be able to get money from their banks," Newhouse said.

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