Gulf Storm Shuts Down Oil Production As Hurricane Katia Moves West

With Hurricane Katia forecast to grow into a major hurricane in the Atlantic, and a low-pressure system building in the Gulf of Mexico expected to strengthen into a storm within the next two days, many oil and gas companies are closing operations ahead of time.

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The Gulf system has an 80% chance of becoming a tropical depression or storm, according to the National Hurricane Center in Miami, while Katia, yet to touch land as it makes its way across the Atlantic, was upgraded to a Category 1 hurricane earlier today. While Katia is still too far out to tell where the storm will touch ground, the Gulf system already has companies like BP (NYSE:BP), Anadarko Petroleum Corp. (NYSE:APC), and Diamond Offshore Drilling (NYSE:DO) evacuating Gulf rigs and platforms. The system currently stretches over the central Gulf, from Louisiana to the Florida Panhandle.

Twenty-seven percent of U.S. oil output and 6.5% of the country’s natural gas production comes out of the Gulf. About 5.7% of oil production and about 2.4% of natural gas production has already been shut down by the storm, which has a 30% chance of becoming a Category 3, according to meteorologists, which would seriously disrupt oil and gas output. The storm is “an extensive, slow-moving system, capable of affecting the same area for days with downpours, stormy seas and rough surf conditions,” says senior AccuWeather meteorologist Alex Sosnowski, who adds that the storm could dump 1o to 20 inches of rain on the north-central coast.

Today the National Weather Service issued a flash-flood watch for New Orleans through the weekend. The storm is already producing thunderstorms and gusty winds in the region. BP began removing more than 500 non-essential workers from some platforms in the Southern Green Canyon area, and plans to have all workers off Gulf platforms by Friday. Diamond Offshore is evacuating the jack-up rig Ocean Titan while removing all non-essential staff from two other Gulf rigs. Anadarko is shutting all eight of its Gulf facilities. Royal Dutch Shell (NYSE:RDS.A) has begun evacuating workers from most of its Gulf operations.

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Meanwhile, Hurricane Katia, still about 1,000 miles east of the northern Leeward Islands, is forecast to grow in strength during the next 48 hours and “could become a major hurricane by the weekend,” according to the National Hurricane Center, which categorizes a major storm as having winds greater than 110 mph. The NHC is forecasting that the storm’s path will take it north of Puerto Rico, east of the Bahamas, and south of Bermuda by September 6. However, it’s expected to turn north and out to sea, which could bring it to land in eastern Canada, a major gasoline supplier for the Northeast.