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Some Gulf Oil Outages May Last Until Next Year

Some Gulf Oil Outages
May Last Until Next Year

October ;12, ;2004; ;Page ;A2

NEW YORK -- Damage to pipelines is keeping a substantial amount of oil and natural-gas production offline in the Gulf of Mexico, and much of it may not return until next year, the U.S. Department of Interior's Minerals Management Service said.

While nearly a third of the oil production still shut down may be back online by the end of October, the rest could take six months to bring back, the MMS said. The production is otherwise ready to be restored, the agency said. As of Friday, about 28% of crude oil and about 14% of natural gas from the Gulf remained down.

The outages are tightening an already stressed market. Yesterday, those concerns -- along with unease over a general strike in Nigeria -- contributed to a 33-cent rise in November benchmark crude futures, to $53.64 a barrel, another new high in the 21-year history of the contract. Year-to-date, crude oil has risen 65%.

The damage was concentrated more on pipelines than platforms. About 30% of the Gulf's 33,000 miles of pipelines were in the direct path of Hurricane Ivan, compared with just 4% of its 4,000 structures, the MMS said. Segments of four large oil pipelines and five large gas pipelines remain shut in. "Pipelines in the mud slide areas off the mouth of the Mississippi River experienced failures and will take a significant effort to locate and repair because the pipelines are buried by as much as 20 to 30 feet of mud," the MMS said.

As of Friday morning 475,000 barrels of oil a day and 1.8 billion cubic feet a day of gas were offline. Cumulative losses in the 3½ weeks since Hurricane Ivan began aff ecting production have been 17 million barrels of oil and 74 billion cubic feet of gas.

Chris Oynes, regional director for the MMS, said preliminary data from the government's National Oceanic and Atmospheric Administration show that central Gulf of Mexico was hit by mammoth waves -- including perhaps the tallest ever recorded in the Gulf -- that exceeded the design requirements of the area's infrastructure. "There were some extremely large waves," he said. "There is some evidence that there was one rogue wave, the largest ever seen in the Gulf of Mexico, some 90 feet high."

Companies will try to bring up pressure on pipelines gradually in order to minimize environmental damage if leaks are discovered, Mr. Oynes said. "Are they likely to find other problems at some time? Yes," he said.

The storm's eastern track, while it spared the heart of the producing area, may have been worse for pipelines. Damage from the storm surge, both incoming and receding, was made more severe by the tons of mud on the sea floor near the mouth of the Mississippi River, Mr. Oynes said.

Two tropical storms in the Gulf since Hurricane Ivan moved through have also hampered damage-assessment efforts by companies operating platforms there.

Write to Andrew Dowell at 6 and Spencer Jakab at 7
Copyright Wall Street Journal

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