http://biz.yahoo.com/rf/010529/n29242794.html

Hurricane season adds to volatile U.S. energy brew

By Andrew Kelly

HOUSTON, May 29 (Reuters) - Hurricanes, with their potential to disrupt oil and natural gas supplies, are the last thing the United States needs as it faces an energy crisis that has already brought record gasoline prices and blackouts in California.

But energy traders will be keeping a wary eye on the Gulf of Mexico over,the next six months as a new tropical storm season gets under way, adding a potent and unpredictable factor to the volatile brew of ingredients that determine energy prices.

``If a storm hits offshore Louisiana, offshore Texas, and knocks out some natural gas production, it can have a meaningful effect on gas prices. We've seen this several times in the past,'' said Lehman Brothers oil and gas analyst Tom Driscoll.

The Atlantic tropical storm season runs from June 1 to Nov. 30 of each year. Tropical storms become hurricanes when their maximum sustained winds hit 74 miles (118 km) per hour. Most storms occur between August and October, with peak activity in September.

Storm activity can wreak havoc on offshore energy production in the Gulf of Mexico which provides about one quarter of U.S. domestic production of both natural gas and crude oil -- 13.3 billion cubic feet of gas a day and 1.4 million barrels of oil.

Because U.S. demand for natural gas is met mostly from domestic production rather than imports, prices respond quickly to any threat that a storm may force companies to evacuate crews from offshore platforms and suspend production. Sometimes gas prices even move at the first hint that a storm might be forming thousands of miles away off West Africa.

REFINERIES LINE THE GULF COAST

Despite the nation's greater dependence on imported oil, prices for crude oil and refined oil products, such as gasoline and diesel fuel, are also affected by Gulf storms.``When forecasters say a storm has a 30 percent chance of hitting between New Orleans and Beaumont and a 50 percent chance of hitting between Beaumont and Houston, that being the core of the Gulf Coast refining area, it's a market mover,'' said Steven Jones of Houston-based energy consulting firm Purvin & Gertz.

The Gulf coast is home to a string of refineries stretching from Corpus Christi, Texas, to Pascagoula, Mississippi, which process more than 6 million barrels of crude oil a day and make up over a third of the nation's refining capacity.Refineries often have to scale back or suspend operations if a storm is heading towards them and they can remain down for lengthy periods if they sustain serious damage.

Even more vulnerable than Gulf coast refineries is the giant 545,000 barrel-per-day Amerada Hess Corp. plant on the Caribbean island of St. Croix. The Hess refinery -- the biggest in the western hemisphere and a major supplier of gasoline to U.S. markets -- was devastated by Hurricane Hugo in 1989.

In addition to its important role in oil production and refining, the Gulf coast region imports 5.6 million barrels a day of crude oil, over 60 percent of total U.S. crude imports, and severe weather can cause delays in incoming cargoes.

AVERAGE HURRICANE SEASON EXPECTED

Experts at the U.S. government's National Oceanic and Atmospheric Administration (NOAA) are forecasting an average Atlantic hurricane season this year, with eight to 11 named tropical storms of which five to seven are expected to develop into hurricanes.

The 1999 Atlantic tropical storm season brought 14 named storms and in 2000 there were 12, with eight storms in each year attaining hurricane strength. However, only two of last year's storms and four from the previous year entered the Gulf of Mexico, and all six of those storms took paths that steered them clear of the oil and gas fields and refining facilities of the central and western Gulf.

By contrast, the 1998 season saw repeated disruption of oil and gas production and refinery operations as five of the season's 14 named storms, including two hurricanes, plowed through the central Gulf before making landfall in Texas, Louisiana, Mississippi and the Florida panhandle.

Six years earlier, in 1992, Hurricane Andrew struck with such force that it caused significant damage to over 80 offshore oil and gas structures in the Gulf as part of a trail of destruction that took it through Louisiana and Florida, causing total damage of over $25 billion, making it the nation's costliest hurricane.

-- Swissrose (cellier3@mindspring.com), May 29, 2001

Answers

True perhaps, but those of us in Florida are praying for lots of tropical storms/hurricanes. Right now I think most of us would trade a little gasoline for water. The hurricanes are a very important part of the ecology (thats spelled survival) of this State. We are burning up, literally!

-- Taz (Tassie123@aol.com), May 29, 2001.

I think you folks in Florida are even drier than us in Calif! This ongoing dry spell you are suffering through is amazing. Which year is it, now, 2 or 3? I recall the fires back in 98 or 99 - awful things.

I know it's small consolation, but it looks like you have company in misery - we started our fire season a month early and already lost part of Lassen Forest. They are dry as dust in the Pacific Northwest and Alberta, too. Looks like a long, hot season . . .

-- Margaret J (mjans01@yahoo.com), May 29, 2001.

Margaret...its our 3rd year. !998 we had floods. According to Noaa we are suppose to revert to "normal" this fall. Southern and South Central Fl are starting to get the summer afternoon rains. But they usually come with lots of lightening which starts more fires. Where I live, one third of the way down the State from GA line, we have had no rain. Nrth of us is getting some rain. I was raised in Southrn California and I know how bad it can be there. Taz

-- Taz (Tassie 123@aol.com), May 31, 2001.