Business > Marathon to refine at capacity on Monday

The 245,000 barrel-per-day refinery at Garyville, Louisiana, the company's largest, was being reopened over the weekend, officials said.

Of the eight refineries, belonging to various oil companies, knocked out by Katrina, the Garyville plant was the third largest.

The two larger plants - one owned by Chevron Corp <CVX.N>. and the other by ConocoPhillips <COP.N> - are both believed to have suffered extensive flood damage, and it was not immediately clear when they would be back online.

The Chevron facility in Pascagoula, Mississippi, had a capacity of 325,000 barrels per day and the ConocoPhillips refinery in Belle Chasse, Louisiana, had a capacity of 247,000 bpd.

In all, the eight refineries in southeast Louisiana and Mississippi that were shut due to Katrina had a combined daily refining capacity of about 1.8 million barrels of crude oil.

Marathon had warned it would not be able to fully supply all non-contracted customers, creating more pricing worries. However, a spokeswoman said Saturday the company lowered prices at many of its retail stations on Friday to anywhere from $2.79 to $3.09 per gallon, depending on the region.

In total, Katrina took out about 10 percent of U.S. refining capacity, losses the market could little afford given there was no spare capacity prior to the storm and many refineries were running nearly flat-out to meet demand.

Gas stations and airports alike have struggled with short supplies that have led to canceled flights and 1970s-era fuel lines, even in the face of pump prices that in some cities have reached or even passed $4 a gallon.

Due to pipeline problems also caused by the storm, two of Marathon's refineries in the Midwest have also been operating at reduced capacity, though those pipeline operations are also "returning to normal," the Houston-based company said.

Marathon has refining capacity of 948,000 barrels of oil per day. The company has also received approval to borrow 1.5 million barrels of oil from the U.S. Strategic Petroleum Reserve, which will help the refineries ramp up production faster than they would have been able to otherwise.

"Over the past several days we have seen the capacity to ship gasoline by pipeline slowly return, so it is critical that our refineries remain supplied with crude oil," Energy Secretary Sam Bodman said in a statement.

TANKERS HEAD TO U.S.

To help stabilize U.S. gasoline supplies, the Bush administration asked the International Energy Agency to release some its emergency fuel supplies to the U.S. market.

Some 20 oil tankers, carrying a combined 10 million barrels of petroleum, are en route to the U.S. market from Europe and the Middle East, National Economic Council director Allan Hubbard told CNBC on Friday.

The return of Marathon's capacity was in line with Hubbard's forecast that about half the refining capacity knocked out by Katrina could be back in a week or two.

While the refineries are coming back on, offshore operations remain hampered. Marathon's three South Pass platforms, located 100 miles south of New Orleans, sustained "major damage."

"Operational readiness and start-up timing are uncertain at this time due to the condition of the platforms," Marathon said. The South Pass platforms produce an average 1,500 barrels of oil and 7.5 million cubic feet of natural gas daily.

Marathon's Ewing Bank platform, 130 miles south of New Orleans, suffered minor damage, which likely will be repaired this weekend or early next week. It produces an average 17,000 gross barrels of oil per day and 17.5 million cubic feet of national gas a day.

Nearly a week after Katrina's impact, about 79 percent of Gulf oil production remained shut Saturday, according to the U.S. Minerals Management Service.

Marathon Oil shares closed down 2.6 percent on Friday to $65.07 on the New York Stock Exchange. Like many other companies in the industry, it had rallied sharply for most of the week, as investors bought into the broad energy sector on the allure of oil prices over $70 per barrel.

2005-09-04