Katrina Devastates Gulf Coast

Packing winds of 145 mph, Hurricane Katrina slammed into the Gulf Coast on Aug. 29, shutting down offshore oil and gas production, disrupting petrochemical plant operations, and halting rail, truck, and barge transportation across Mississippi, Alabama, and Louisiana.

Two days after the storm, crude oil production in the Gulf of Mexico was down 92% from daily production of 1.5 million barrels, according to the Department of the Interior's Minerals Management Service. The Gulf accounts for 25% of U.S. oil production. Natural gas production was off 83% from daily production of 10 billion cu ft.

Many refiners in the region remained shut down at press time, including Chevron, Valero, Motiva, ConocoPhillips, Marathon, and Shell. The Coast Guard said it had sent out crews along with petroleum industry officials to survey damage to offshore platforms. It added that five drilling rigs are missing, seven are reported to be adrift, and two are listing.

To assess the environmental impact of the storm, EPA dispatched an airplane equipped with spectral photometric equipment to review oil, chemical, and other facilities in the area around New Orleans, Baton Rouge, and the Mississippi Delta.

Crude oil future prices quickly rose as the storm hit the coast, topping $70 per bbl. According to the Energy Information Administration, "there is a concern that prices could jump significantly higher if the damage to petroleum infrastructure from Hurricane Katrina is at least as much as experienced following Hurricane Ivan" in September 2004.

Because of the disruption in supplies, Department of Energy Secretary Samuel W. Bodman said he had approved a request to release oil from the Strategic Petroleum Reserve.

Chemical analyst Donald Carson of Merrill Lynch told clients that Katrina would usher in further spikes in raw material costs for ethylene and polyethylene. Reductions in production because of the storm "could lead to increased producer pricing power and significantly higher prices" in an already tight polyethylene market, Carson said.

Many chemical plants shut down in advance of the storm, though some had reopened at press time. Degussa's plant in Mobile, Ala., experienced no significant flooding, but all units—including methionine, hydrogen peroxide, and isocyanates—remained off-line until power and natural gas could be restored.

DuPont said it had shut down and secured facilities in Burnside and Pontchartrain, La.; DeLisle and Pascagoula, Miss.; and Mobile, Ala. Extensive flooding at the DeLisle titanium dioxide plant and the Pascagoula aniline plant caused the company to declare force majeure for those two products. The company said it did not know when operations would restart.

Severe flooding and power outages affected Dow Chemical's St. Charles and Plaquemine, La., operations. Dow said the St. Charles site was the more severely affected of the two. It will be weeks before normal operations resume there because of limited power, raw materials, and transportation options. The company declared "force majeure" for all ethyleneamine products produced at St. Charles and for propylene oxide and propylene glycols produced at Plaquemine.

In Alabama, the U.S. Army's Anniston Chemical Agent Disposal facility shut down for a brief period when the storm passed overhead. The storm had no effect on weapon stockpiles, and operations have resumed, a spokesman said.