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Tropical Storm Don Forms over Gulf of Mexico

Date: 28-Jul-11
Country: USA
Author: Kristen Hays and Bruce Nichols

Tropical Storm Don, the first major Gulf of Mexico storm this year, formed over the southern part of the oil-rich basin on Wednesday on a track toward the Texas coast.

The storm forced several offshore energy operators to evacuate support workers, but was not yet strong enough to cause companies to shut in production.

Shell Oil Co, Apache Corp, Anadarko Petroleum Corp said they were evacuating support workers primarily from western Gulf operations. BHP Billiton and BP Plc were evacuating support workers from central Gulf platforms.

The storm was expected to move through the southern and central Gulf through Thursday and approach the Texas coast, the U.S. National Hurricane Center said.

That path would take it near oil and gas operations in the western and west-central part of the Gulf, largely avoiding the biggest concentrations of production platforms south of New Orleans, but near several coastal refineries.

"If the weather continues to move toward our facilities, we are prepared to remove additional personnel and shut in production at that time," Anadarko said.

Oil traders were watching the storm develop, but said it was not yet having an impact on U.S. prices, which fell more than $2 a barrel on Wednesday due to a rise in crude oil stocks and weak economic data.

Wholesale gasoline differentials on the well-supplied Gulf Coast gained a penny per gallon, but traders said upsets at refineries in the region could have as much influence on prices as the storm.

"A move to the North or Northwest could prompt precautionary shut-ins of offshore production facilities, depending on its intensity, although it will need to strengthen rapidly to pose any threat to facilities," JP Morgan analyst Lawrence Eagles said in a note.

Other producers, including BP Plc, Exxon Mobil Corp, Chevron Corp and Mexico's state oil company Pemex said they were monitoring the storm.

The Gulf accounts for 29 percent of U.S. oil production and 13 percent of natural gas output, according to the U.S. Energy Information Administration. About 30 percent of U.S. natural gas processing plant capacity also lines the Gulf Coast, the EIA said.

Refiners along the Gulf Coast, home to 40 percent of the nation's refining capacity, were also watching the system.

INSURERS WATCHING

The storm is being closely watched by the global insurance industry, which is on track for its worst year ever. Insurers and reinsurers have already lost more than $60 billion in 2011 on natural disasters, and a major U.S. hurricane landfall could become a market-changing event, letting insurance companies raise prices across the board after years of declines.

Those possibly facing the biggest short-term hit include domestic insurers such as Travelers, Allstate and Chubb -- all of which have suffered huge tornado losses this year as well as reinsurers including Berkshire Hathaway

The NHC said the system was about 755 miles east of Corpus Christi, Texas, and moving toward the west-northwest at nearly 12 miles per hour (19 km/h).

The Texas coastal bend is the most heavily irrigated cotton area of the state. The crop's harvest is set to start in early August. A storm could damage the state's cotton production at a time when large parts of Texas have been baked by drought.

(Editing by Alden Bentley, Dale Hudson and Sofina Mirza-Reid)

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