Business > Oil industry inches back from Katrina

But with eight major oil refineries shut in Louisiana and Mississippi -- and others running below capacity because of disruptions to crude supply -- officials continued to warn of fuel shortages and prices remained near historic highs.

To help offset the shortfall, Europe and Canada plan to release emergency stocks of gasoline, while up to 30 private tankers are already set to cross the Atlantic.

At the moment, the United States has lost production of about 42 million gallons of gasoline a day, equal to 10 percent of its normal consumption.

Given the severity of the damage, Valero Energy Corp. <VLO.N> Chief Executive Bill Greehey warned that the country could soon face supply shortages.

"Is there enough product to meet demand? I don't think so, and I think there will be shortages," Greehey said on CNBC television.

But there were signals on Friday that some refineries may not face the sort of delays in restarting that many had feared. In another encouraging sign, several pipelines carrying natural gas, heating oil and gasoline began to move more supply.

The largest refined-oil-products pipeline in the United States, the Colonial Pipeline, which was shut because of power outages, is now running at about two-thirds of its normal 2.3 million barrel-per-day capacity. The recovery took less time than had been expected.

Natural gas is also moving more smoothly through pipelines. Williams Cos Inc. <WMB.N> said the Transco and Gulfstream natural gas transportation systems are now fully operational. Two other pipelines owned by El Paso Corp. <EP.N> reported that they, too, were starting to increase shipments.

But new problems also appeared, including what Louisiana officials said was a major oil spill spotted from two storage tanks capable of holding 2 million barrels of fuel near the town of Venice on the Mississippi River.

CREEPING BACK

Meanwhile, a senior White House official said about half of the refining capacity of the U.S. Gulf Coast should be back in production within two weeks -- less than the months some industry-watchers warned it would take.

Marathon Oil <MRO.N> now expects to restart this weekend its 245,000 bpd oil refinery in Garyville, Louisiana.

Another plant, Motiva Enterprises LLC's 230,000 bpd refinery in Convent, Louisiana, could restart within a week.

But Motiva is still assessing damage at its 240,000 bpd refinery in Norco, Louisiana, and little is known about damage at some of the Gulf Coast's other big facilities.

At least two -- Chevron Corp's <CVX.N> plant in Pascagoula, Mississippi, and ConocoPhillips' <COP.N> plant in Belle Chase, Louisiana -- are believed to have suffered flood damage.

October gasoline futures settled down 22.53 cents at $2.1837 per gallon on the New York Mercantile Exchange.

Crude futures fell $1.90 to $67.57 per barrel even as much of the Gulf Coast's oil production remained paralyzed.

Crude production was down 89 percent, while natural gas output was cut by 73 percent, according to the government, which is loaning emergency crude supplies and has eased environmental regulations.

At least 20 rigs or platforms are adrift, listing, sunk or missing. And companies are still working to assess damage at many others. One company, Apache Corp., said it lost eight production platforms with daily output of 7,158 barrels of oil and 12.1 million cubic feet of natural gas.

Devon Energy Corp. <DVN.N> said about half of its Gulf of Mexico oil and gas production has been restored, after suspending virtually all of its output before the hurricane hit Louisiana and Mississippi on Monday.

(Additional reporting by Randy Fabi, Bernie Woodall, Robert Gibbons and Richard Valdmanis)

2005-09-03