Dallas (Platts)--13Sep2008

Hurricane Ike's punch left most of Texas Gulf Coast, including much of
the sprawling Houston metropolitan area, without electricity after its early
Saturday landfall, and while many energy companies had yet to begin or had
started only preliminary assessments on the state of their infrastructure,
some government officials said the storm's effects were not as horrific as
initially feared.
Power companies cautioned it may take weeks to completely return service
to normal in the heart of the US oil, gas and petrochemical complex due to
downed transmission lines.
The knock-on effects on supplies and prices will likely emerge in the
coming days as companies gain a more complete picture of the storm's damage
and markets react. Yet, as of Saturday, retail gasoline costs around the US
jumped up and down in a wild patchwork following a major run up in wholesale
markets in the days before Ike's made landfall.
Fourteen refineries were shut ahead of the storm, representing some 3.817
million b/d of refining capacity, or about 22% of total US refining capacity.
That included nine along the Houston Ship Channel. A handful of
refinery operators Saturday said they were beginning to gauge damage, adding
that it was too soon to predict when the facilities could be back online.
President George W. Bush on Saturday declared Texas a "majordi saster"
area as a result of Hurricane Ike, and ordered federal aid for 29 counties to
supplement state and local recovery efforts. That said, Texas Governor Rick
Perry expressed relief the impact was not even worse.
"Fortunately, the worst-case scenario that was projected in some areas
did not occur, particularly in the Houston Ship Channel," he said of storm
surge concerns. "But there is plenty of damage out there," Perry said.
Just how much damage Ike caused to oil refineries and chemical plants
along the Texas coast is unlikely to be fully known until sometime on
Sunday, US Homeland Security Secretary Michael Chertoff said Saturday.
In a briefing with reporters, Chertoff that while damage assessments
will not be completed before Sunday, he believes the industry may have been
spared significant damage because Ike's storm surge was not as severe as some
had predicted.
"Our hope is that with the surge being somewhat less than feared, we may
have been spared some of the worst-case scenarios," Chertoff said of possible
damage to refineries and chemical plants. He said that restoring power to the
plants will be one of the "big and early challenges."
As Ike tracked on a northeasterly path out of Texas and into Oklahoma and
Arkansas, the US Coast Guard said it was beginning its first post-storm
inspections of the Houston Ship Channel, which is home to nine refineries,
including ExxonMobil's Baytown (562,500 b/d) plant, the largest refinery in
the US. ExxonMobil Saturday began preliminary site assessments of Baytown as
well as its 348,500 b/d refinery in Beaumont, Texas.
While area refineries remained offline, so did a major source of their
input as virtually all US Gulf of Mexico oil production stayed shut in. Based
on reports gleaned from production facility operators midday, the US Minerals
Management Service reported that 99.7% of normal oil output of 1.3 million b/d
and 98.5% of the typical 7.4 Bcf/d of gas was shut in.
Though some power was available in downtown Houston, more than 2.6
million electric utility customers in Texas and Louisiana were without
electricity Saturday because of storm damage, according to the US Department
of Energy.
Between 25% and 30% of CenterPoint Energy transmission lines were knocked
out of service by Hurricane Ike and the utility warned that it may take as
many as four weeks to restore power to the bulk of the customers, the company
said Saturday. The affected lines are in the southeastern half of its service
territory, which includes the Houston Ship Channel and Baytown areas where
oil, gas and petrochemical operations are centered.
"We are working with our customers in the Ship Channel area" to assess
the extent of damage to the electricity grid there, but continued bad weather
delayed the start of aerial assessments that would assist in that work, said
CenterPoint spokesman Floyd LeBlanc. Those assessments should be able to begin
soon, he added.
Similarly, Nearly all Entergy Texas customers--including oil, gas and
petrochemical complexes in Port Arthur, Texas, and other coastal area--were
without power Saturday because of Hurricane Ike.
Entergy Texas said Saturday morning that 99% of its 395,000 customers had
no electricity service. Only scattered, remote areas in the utility's western
division have power.
Ike also caused some flooding and wind damage to several coastal parishes
along the western Louisiana coast and forced Sabine Pipe Line, operator of the
Henry Hub, to declare force majeure and shut down operations late Friday.
That decision prompted the CME Group on Saturday to declare force majeure
on all remaining delivery obligations in the September 2008 natural gas
contract month.
CME said its force majeure went into effect 9 pm CDT Friday in response
to Sabine Pipe Line's shutdown.
Henry Hub is the benchmark trading point for natural gas on NYMEX.
The exchange added that its Delivery Committee currently is in contact
with Sabine regarding handling of all outstanding NYMEX delivery obligations,
as well as general conditions at the Henry Hub. It said it will advise market
participants with outstanding September and August 2008 natural gas
obligations of any further committee decisions through the NYMEX web site.

RETAIL GASOLINE LANDSCAPE A PATCHWORK OF HIGHER, LOWER PRICES
Texas gasoline supplies had been tight while diesel availability had been
mixed ahead of Ike on Friday, according to Chris Newton, president of the
Texas Petroleum Marketers and Convenience Store Association, who when reached
Saturday said he had no new information due to a lack of power and cellphone
connections in the area.
Elsewhere, rack prices widely diverged, with a huge range of price cuts,
increases or status quo in the wake of the hurricane. For the week, prices
have moved up as much as $1/gal in some locations, fueled not only by gains in
the NYMEX RBOB contract, but also big gains in the cash market differentials
to the RBOB price.
--Katharine Fraser, katharine_fraser@platts.com