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Refineries hit, overall impact modest
With half million barrels-a-day off line, Texas governor says industry suffered a 'glancing blow'.
September 25, 2005: 10:41 AM EDT

NEW YORK (CNN/Money) - Two major refineries reported damage from Hurricane Rita Saturday, but Texas Gov. Rick Perry said overall damage to oil facilities appeared to be modest.

"It appears the refining industry, the oil and gas industry, (suffered) a glancing blow at worse," Perry told CNN's "Late Edition with Wolf Blitzer."

Late Saturday, the Energy Department said it was hopeful that overall damage would be minimal.

Oil prices fell in a special trading session Sunday as traders reacted to the early assessments of the storm's impact on oil and gas production. (Full story).

Valero Energy, the nation's leading refiner, said Saturday that its 255,000 barrel-a-day facility at Port Arthur, Texas, suffered "significant damage to two cooling towers and a flare stack."

Valero (Research), based in San Antonio, Texas, said it will take "two weeks to a month to implement the necessary repairs and restart the refinery."

Separately, Shell Oil said its 285,000 barrel-a-day Motiva Refinery at Port Arthur "has sustained wind damage including downed power lines and cooling water-tower damage."

Shell co-owns the refinery with Saudi Refining. Shell did not how long repairs would take or when the refinery may operate again.

Houston-based Conoco Phillips (Research) said it was assessing its 239,000 barrel-a-day Lake Charles, Louisiana, refinery. The Lake Charles area was hit hard by Rita, and suffered major flooding.

On the positive side, Exxon Mobil (Research) said initial assessments of its huge Baytown, Texas, refinery show that "damage does not appear to be severe." The company says it is making repairs to begin the process of starting up the refinery.

The Baytown facility is the country's largest petrochemical refinery, processing 557,000 barrels-a-day.

Irving, Texas-based Exxon, the nation's largest oil company, said it is still assessing damage at its Beaumont, Texas, refinery.

Other major energy facilities, especially those around Houston, appear to escaped serious damage.

More time needed for assessment

The Department of Energy was "cautiously optimistic" that refineries in Houston suffered minimal damage, said spokesman Craig Stevens, though he added it was too early to determine the effect of the storm on Port Arthur.

The Valero plant was one of seven major refineries at greatest risk from Hurricane Rita. All seven are in and around Beaumont and Port Arthur in Texas or Lake Charles. The seven together normally refine 1.7 million barrels of crude oil a day.

Energy industry analyst Peter Beutel of Camron Hanover told CNN accurate damage reports will start coming in on Sunday. That will correspond with an unusual Sunday crude oil trading session at the New York Mercantile Exchange (NYMEX).

Beutel said if it's confirmed that damage to Gulf energy production infrastructure is contained, prices for crude oil, natural gas and gasoline futures will ease. If that happens, Beutel says "the gasoline story is over," at least for the time being, and drivers won't have to worry about prices spiking higher again.

$5 gasoline likely?

Beutel had speculated earlier this week that serious damage to energy production facilities could drive pump prices to $5 a gallon. (Full story).

Crude oil for November delivery tumbled 3.5 percent to close $64.19 a barrel Friday on expectations that Hurricane Rita would be weaker than initially anticipated. (Full story)

According to the Department of the Interior's Minerals Management Service (MMS), 100 percent of offshore oil production -- 1.5 million barrels a day -- remains shut down because of Hurricane Rita evacuations, as does 75 percent of offshore natural gas production.

Energy Industry analyst Jon Kilduff of FIMAT told CNN there are reports of some missing semi-submersible offshore rigs, but no details were available.

Kilduff said that, even in the best case scenario, it will take "10 to 14 days" days to return refineries to full operations. He warned that structural damage is not the only concern; refineries depend on electrical power that may have been affected by the storm.

Four Louisiana refineries remain shut down after being damaged by Hurricane Katrina.

-- From CNN's Ali Velshi and Drew Trachtenberg

Rita poses risks to the economy far beyond Gulf Coast oil refineries. Click here for more.

For more on the chances of $5 gasoline, click here.  Top of page

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