HOUSTON (Dow Jones)--The consequences of Hurricane Rita for U.S. fuel production began to sink in Monday, as the initial relief over the storm's track away from energy-capital Houston was replaced by concerns about enduring refinery outages farther up the Texas coast.
About 100 miles east of Houston, seven refineries in Port Arthur and Beaumont, Texas, and Lake Charles, La., remain shut down in an area that suffered a direct hit from the Category 3 storm. Many of the refineries said they suffered damage from wind, and all face a crippling lack of power.
Entergy Corp. (ETR) said Monday that Rita did more damage to its high voltage transmission grid than Hurricane Katrina and inflicted "extensive damage" to east Texas and southern Louisiana lines serving the refineries.
The utility considers it a priority to restore power service to the refineries, but must fix the transmission grid first and doesn't know when that will happen.
"Further damage assessment of the lines feeding refineries will need to be completed to project restoration," Entergy spokeswoman Yolanda Pollard said. "The damage to the transmission grid due to Rita is much more substantial than what occurred from Katrina."
Energy Prices Spike
The seven refineries account for more than 9% of U.S. capacity. Oil prices surged Monday, erasing deep weekend losses as traders concluded that the aftermath of Hurricane Rita, while not as bad as expected, was still bad.
November light, sweet crude futures on the New York Mercantile Exchange settled up $1.63 at $65.82, more than $3 above the session's low. October heating oil surged 10.96 cents to $2.0586 a gallon, more than 20 cents above the session's low. October gasoline settled up 4.36 cents at $2.1292 a gallon, almost 19 cents above the low.
"The good news is Houston was spared, the bad news is that a tight situation for oil and gas supply just got tighter," Credit Suisse First Boston analyst Ken Sill wrote in a note.
Combined with the facilities around Houston shut down by Rita and those still off line in the wake of Katrina, a total of 20 refineries were off line this weekend. The outages knocked 4.8 million barrels a day of crude oil processing capacity off line - 28% of the U.S. total and more refining capacity than either No. 2 oil consumer China or No. 3 Japan even has.
Thus far, seven refineries - including Exxon Mobil Corp.'s (XOM) giant, 557,000 barrel a day Baytown, Texas, refinery - have begun to start up. Another expects to restart this week.
Most of those refineries will have been off line at least a week by the time they get up and running at normal rates. Even without the devastation to individual sites caused by Katrina, the sheer magnitude of the shutdowns will further stretch gasoline and heating oil supplies in the coming weeks.
"Clearly, we cannot afford any further disruption to gasoline production," Guy Caruso, head of the federal Energy Information Administration, said Wednesday ahead of landfall.
No Restart For Many
None of the facilities around Port Arthur/Lake Charles has a firm restart schedule. The only company to put a timeline on a restart in the area is Valero Energy Corp. (VLO), which doesn't expect its 250,000 barrel a day Port Arthur refinery to restart for 2 to 4 weeks.
Exxon Mobil Corp. (XOM) said damage at its 348,500 barrel a day refinery in Beaumont doesn't appear to be significant, but said restoring power is a priority. Petroleos de Venezuela S.A. (PVZ.YY) unit Citgo Petroleum made similar comments about its 324,000 barrel a day refinery in Lake Charles. Total S.A. (TOT) said the transmission lines serving its 180,000 barrel a day Port Arthur refinery are gone.
Royal Dutch Shell PLC (RDSB.LN) said Monday that joint-venture Motiva's 275,000 barrel a day refinery in Port Arthur sustained wind damage to a gasoline producing unit, power lines, cooling towers and other facilities. ConocoPhillips (COP) said its 239,000 barrel a day Lake Charles refinery also suffered wind damage.
Calcasieu Refining, which owns the area's smallest refinery, couldn't be reached.
Restoring power is a key issue for getting the refineries back up, but damage to the electrical system is extensive and severe. Entergy said early Monday that preliminary damage assessments show 279 transmission lines and 284 substations out of service, up significantly from the utility's count Sunday.
The situation around Houston was much brighter. In addition to the ExxonMobil restart, ConocoPhillips; a joint-venture of Lyondell Chemical (LYO) and Citgo; Valero; Marathon Oil Corp. (MRO); and Pasadena Refining were all bringing facilities back up Monday.
Deer Park Refining, jointly owned by Shell and Petroleos Mexicanos (PEM.YY), expects to begin a restart at its 340,000 barrel a day refinery near Houston midweek.
BP PLC (BP) is the one holdout, having yet to set a schedule for restarting its giant, 437,000 barrel a day Texas City refinery, the second largest shut ahead of the storm.
"Storm damage will now bring to clear focus the extant tightness in refining capacity," said New York brokerage Fimat USA Inc. in a market comment Monday.
EIGHT REFINERIES RESTARTING SOON NEAR HOUSTON DATE
(Total Capacity 1.9 Million B/D, 11.1% US Total)
ExxonMobil Baytown, Texas 557,000 In restart
Deer Park Deer Park, Texas 340,000 Midweek
Lyondell Citgo Houston 270,000 In restart
ConocoPhillips Sweeny, Texas 216,000 In restart
Valero Texas City 210,000 Monday
Astra Pasadena, Texas 100,000 Monday
Valero Houston 90,000 Monday
Marathon Texas City 72,000 Monday
EIGHT REFINERIES WITH NO FIRM RESTART ESTIMATE
(Total Capacity 2.1 Million B/D, 12.3% US Total)
BP Texas City 437,000 No estimate
ExxonMobil Beaumont, Texas 348,500 No estimate
Citgo Lake Charles 324,000 No estimate
Motiva Port Arthur, Texas 275,000 No estimate
Valero Port Arthur, Texas 250,000 Oct 8-22
ConocoPhillips Westlake, La. 239,000 No estimate
Total Port Arthur, Texas 180,000 No estimate
Calcasieu Lake Charles, La 30,000 No estimate
FOUR REFINERIES STILL SHUT AFTER KATRINA RESTART DATE
(Total Capacity 875,000 B/D, 5.1% US Total)
Chevron Corp Pascagoula, Miss 325,000 Oct 15 (Part)
ConocoPhillips Belle Chasse, La. 247,000 No estimate
Exxon/PdVSA Chalmette, La. 183,000 1Q 2006
Murphy Oil Corp Meraux, La. 120,000 No estimate
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