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Gulf Coast Refineries Shut Down As Gustav Advances

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The Associated Press

Published: September 1, 2008

HOUSTON - Hurricane Gustav's threat to the Gulf Coast halted about 15 percent of U.S. oil refining capacity Sunday, though for now pump prices have not risen dramatically.

However, analysts and others say a prolonged disruption in refining operations could cause price increases of 20 cents per gallon or more, not unlike the surges after hurricanes Katrina and Rita devastated the region's energy infrastructure three years ago.

Exxon Mobil, Royal Dutch Shell and Valero Energy, North America's largest refiner, were among the companies that said they had shut down Gulf Coast refineries, primarily in south Louisiana.

Altogether, about 2.4 million barrels of refining capacity have been halted, roughly 15 percent of the nation's total, according to figures from Platts, the energy information arm of McGraw-Hill Cos. The U.S. Gulf Coast is home to nearly half the nation's refining capacity.

"Fifteen percent looks small, but the impact is larger than meets the eye," said Eswaran Ramasamy, director of Platts' U.S. market reporting. "Louisiana refineries supply a chunk of the southern states' product needs - gasoline, diesel, whatever."

The two biggest challenges for refiners after Katrina and Rita passed three years ago were power disruptions and flooding - both of which prompted refiners to examine their practices and make adjustments.

Some refineries have raised critical equipment so it will not flood, and they've also beefed up plans to get backup power as quickly as possible.

The industry also will be closely watching the Louisiana Offshore Oil Port, which is in the storm's direct path and has shut down operations. The facility handles about 12 percent of the nation's crude imports and is tied by pipeline to about half the nation's refining capacity, much of it on the Mississippi River from New Orleans north to Baton Rouge.

Any prolonged closure of LOOP, as it's called, could severely disrupt crude imports and their shipment to refineries. LOOP is about 18 miles south of Grand Isle, La.

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