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Williams Companies, Inc. Message Board

  • b.thormton b.thormton Sep 1, 2008 7:01 PM Flag

    STRONG BUY

    Forbes article says models suggest 3-4 week LA Oil/NG shutdown.

    http://www.forbes.com/business/2008/09/0...

    Gustav Rides Louisana's Energy Highway
    William Pentland 09.01.08, 3:05 PM ET

    The good news is that Hurricane Gustav slowed, levies held, and, with any luck, New Orleans won't get drowned again.

    The bad news: Gustav made landfall at 10:30 a.m. local time at Cocodrie, La., near a narrow, two-lane road called Louisiana Highway 1, about 50 miles south of New Orleans.

    Eighteen percent of the entire nation's energy supply flows through nearby Port Fourchon, which is located at the intersection of the Bayou Lafourche and the Gulf of Mexico. The seaport also provides supplies and services to more than half of all offshore drilling operations. The largest pipeline in the area, the Louisiana Offshore Oil Port, runs alongside the road and handles roughly 12% of U.S. oil imports.

    Officials said it is too early to confirm the extent of damage, but computer models developed by Kinetic Analysis Corporation, a Silver Spring, Md.-based company estimate that LOOP will be out of service for two or three weeks. In addition, the models predict that 40% of Gulf of Mexico oil will be offline for 30 days and about 30% of natural gas will be offline for 30 days with marginal improvements after that.

    Perhaps because the storm did not end up being as strong as expected, or because of a strengthening dollar, oil prices fell Monday. By late afternoon in Europe, light, sweet crude for October delivery was down $4.70 to $110.76 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session, it had reached a high of $118.25 before retreating.

    Louisiana's--and America's--energy logistics depend heavily on humble Louisiana Highway 1, which is the only land-based way to access the coastal port and runs less than two feet above water under normal conditions.

    "We're kind of the poster child for the infrastructure component of what's at stake in the coastal land loss issue," Ted Falgout, director of Port Fourchon, told the Louisiana Explorer in 2003. "Our vulnerability to storms has increased tremendously because of the land loss, and the threat to Louisiana 1 is increasing daily."

    Although business groups raised $350 million in state bonds and federal assistance in 2006 to replace the highway's most perilous 17-mile stretch of with an elevated road likely to remain open in the event of a major storm, the construction only began in 2007 and won't be complete until 2011.

    The cost of restoring operations in the aftermath of Gustav will likely dwarf the $350 million allotted for the new highway. The area's oil pipeline infrastructure alone could cost massive sums to repair.

    The Louisiana Offshore Oil Port is the only port in the U.S. capable of accommodating deep-draft tankers. The pipeline can import up to 1.2 million barrels per day and is connected through a network of crude oil pipelines to about one-half of U.S. refining capacity. Associated with LOOP are Clovelly Dome, a 40-million-barrel salt cavern storage facility, and the Capline pipeline, which is the largest pipeline system delivering crude oil from the Gulf Coast to the Midwest.

    "At the end of the day, our port plays a key role in somewhere between 16% and 18% of the entire nation's hydrocarbon supply," Falgout said in 2003. "There's no other dot on the map more significant to the nation's energy supply."

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