Hurricane concerns shut oil, chemical plants in Gulf Coast region

Gustav threatens logistics, supply chain operations

By Dave Hannon -- Purchasing, 8/29/2008 9:11:00 AM

With tropical storm Gutstav making its way toward the Gulf Coast, oil platforms, coastal plants and logistics operations in the region are shutting down as employees are being evacuated.

According to most news reports, Gustav is expected to reach hurricane status today and make an eventual U.S. landfall anywhere between Corpus Christi, Texas, and Panama City, Fla. Weather forecaster Planalytics said Wednesday the storm could force shut 85% of the Gulf's oil facilities as more employees are evacuated over the next few days.

Gustav may halt 1.2 million barrels a day of crude oil production if it strikes the U.S. Central Gulf Coast, CNBC reported, citing forecaster Weather Insight. There is a 70-75% chance of it reaching this region, by which time it will likely be a Category 3 hurricane, according to Weather Insight.

ICIS.com reports that various petrochemical and chemical production sites along the Gulf Coast have begun to shut down, reduce feedstock and product inventories and move non-essential personnel out of harm’s way. “Polypropylene (PP) and polyethylene (PE) buyers were faced with the choice of either building inventory now and having prices drop sharply next month, or continue operating with low inventories and risk a resin shortage should a storm disrupt deliveries, sources said.”

The Associated Press reports that several U.S. railroads are now redirecting traffic around New Orleans, in some cases sending trains to Memphis, Tenn. rather than risk shipments getting stuck in or out of New Orleans after flood gates are closed. Burlington Northern Santa Fe planned to close its New Orleans intermodal facility today.

The Louisiana Offshore Oil Port said on Thursday it expects to halt accepting crude into its system as early as Saturday as Gustav approaches. The nation's only deepwater oil port can offload 1 million barrels of crude oil per day.

A recent Reuters story says Port Fourchon in Louisiana, which serves 90% of the Gulf's deepwater oil installations, “is still a glaring Achilles heel in the vulnerable U.S. energy supply chain.”

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