Gas Processors Report
GOM Production Begins to Return Just in Time for Ike Shut-In

Thursday, September 11, 2008

The impact of Hurricane Gustav's impact on the Gulf has largely subsided, but operators in the region are now preparing for Hurricane Ike. Companies in the Gulf reported little damage to facilities in the region from last week's storm, but have had to deal with a lack of power, which has kept production largely shut-in for the last two weeks.

As of Sept. 9, the Minerals Management Service reported roughly 64.8% of the region's 7.4 billion cubic feet per day (cf/d) natural gas production remained shut-in. The Henry Hub is still dealing with a lack of compression due to power outages, but all other operations remain in place. The Independence Hub resumed operations following minor repair work. A shutdown at each hub is likely ahead of Hurricane Ike.

Production in Louisiana's Lake Jackson (39 million cf/d), Lake Charles (108 million cf/d), Lafayette (866 million cf/d), Houma (650 million cf/d) and New Orleans (3.1 billion cf/d) districts remained shut-in from Hurricane Gustav.

Thus far these shut-ins have had minimal effect on the natural gas production in other parts of the country, which have not increased production to make up for shut-in Gulf gas. "We haven't seen a large influx of supply. Everyone kind of yawned because of all of the production growth we're seeing elsewhere," BENTEK Energy's Rocco Canonica told GPR.

Canonica stated there has been an increase of about 150,000-175,000 dekatherm per day in Canadian imports into the Northeast. LNG imports also showed limited growth with the Elba Island terminal showing less than 100,000 dekatherms per day. Lake Charles LNG, which has largely been non-existent in LNG imports this year was up to about 135,000 dekatherms per day Canonica said.

"Demand has been reduced quite a bit with all of the rain and power outages that have helped things out a bit. If it heats up in the Northeast this week and Hurricane Ike wipes out a bunch of production, there could be a different situation with supply picking up," he said.

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