QUICK LOOK REPORT #9: Gasoline Delivery System
by Dr. Stephen Rinehart
September 1, 2005

Background:

Quick Look Reports will look at a possible dominant trend in an Index, Equity or Commodity and some possible long-term (yearly) trends which could emerge from recent events. Quick Look Report # 9 looks at some issues with gasoline delivery system in the aftermath of Hurricane Katrina.

Tonight there is concern setting in here (North Florida) as gasoline hit $3.00 a gallon and our local BP station(s) ran out of regular gas already. The gas lines were getting longer tonight. Suggest you fill your cars as soon as possible as there are coming major problems in the delivery system for the following reasons:

1. Oil refineries on Gulf Coast are shut-in (they go from Pascagoula, MS over to New Orleans (Norco, La). Three maybe flooded and there is no power to any of them. Norco, La is just West of Metarie (New Orleans, La) but is on higher ground at 15 feet but roads vulnerable to flooding.

2. Two other major refineries in Baton Rouge and Memphis are not receiving enough oil to meet capacity.

3. The majority oil workers in New Orleans over to Biloxi were probably evacuated and many have no homes left.

4. Louisiana State Road #1 to Port Fourchon may be flooded and may no longer be able to take the weight of heavy trucks as the ground is too saturated (only major way to resupply offshore industry every day). There were already problems with the road prior to Katrina. Normally about 800 - 1000 semis per day come down this road to supply offshore oil industry but Port Fourchon is probably heavily damaged from surge which wiped out Grand Isle.

5. About 650 offshore platforms have been shut-in and many may be heavily damaged (some are probably completely gone). The engineering design wave for the older legacy platforms was 35-feet and not the 50+ foot waves recorded by buoys South of Port Fourchon. This means the majority of production facilities (piping, tanks, quarters, controls/alarms) were hit by waves that exceeded design spec. This may have caused excessive platform lateral displacement which impacts (stretches) the conductor piping from the wellhead as well moving the interconnect piping. In other cases, it can cause the transport piping along the bottom seabed to either push-up against the platform threatening major oil leaks or pull away from the platform. Fortunately, steel piping can be stretched with our major damage but this needs to be carefully assessed on a platform by platform basis.

6. Thousands of miles of pipelines may have moved by the water surge and extensive pressure checks and "pigging-out" the lines will be required. This is time consuming operation to recertify the piping. Flanged piping connections may be damaged and bolts broken and some cases sand intrusion may have occurred with piping valve seals/connections.

7. The Louisiana Offshore Oil Port (LOOP LLC) offloads crude oil from supertankers around the world and pumps it into underground storage in salt dome caverns, and delivers it to refineries throughout much of the southern and mid-western US. LOOP's facilities consists of a Marine Terminal located in Gulf of Mexico 18 miles off the coast of Southeast Louisiana (where 40+ waves and surge occurred), a booster pump station located just inland near Port Fourchon, LA, and the Clovelly Dome Storage Terminal located about 25 miles inland near Galliano, LA. The Marine Terminal consists of two connected platforms in deep water to unload VLCC (very large crude carriers) and ULCC (ultra large crude carrier) which can be moored at one of three Marine Terminal single point moorings. Up to four 6600-hp pumps offload the crude into a 48-inch diameter pipeline that runs 45 miles thru the Fourchon Booster Station to the Clovelly Dome Storage (salt domes). The offshore pipeline is covered in concrete and buried. It was designed by a company I worked for in Gretna, LA in the 1970s in conjunction with the Strategic Oil Reserve at Clovelly, LA. LOOP transfers the oil to the Clovelly storage domes (which provide a big surge capacity for oil storage/transport from Clovelly but Clovelly cannot pump to the Louisiana/Mississippi refineries since they are currently out of business. The LOOP Marine Terminal was also subject to high waves but the platform designs are adequate to withstand these waves but there maybe issues with pumping station yet as there is no power. Is the single point mooring system still in position (no mention yet)? Therefore, where is the Strategic Oil Reserve at Clovelly going at this point - not any significant refining capacity and no mention as to whether the Booster Pump Station at Clovelly is flooded or not?

8. ExxonMobil/PDVSA's 187,000 b/d Chalmette refinery in east New Orleans was probably close to the eyewall and is in an area of extensive flooding and no power.

9. Chevron's 325,000 b/d refinery in Pascagoula, MS was on the wrong side of the surge (30+ feet) and Pascagoula homes are destroyed. The area is flooded and no power.

10. Valero Energy's 190,000 b/d St Charles refinery is in an area where flooding and damage has occurred (west of New Orleans) and there is no power. There is/was flood water in fluid catalytic cracking unit. Valero expects to be online within two weeks!?

11. Motiva Enterprise's 242,000 b/d Norco refinery is without power and in partially flooded area just west of Metarie,LA.

12. ConocoPhillips 250,000 b/d Alliance refinery in Belle Chase, La is in an extensively flooded and low area (South of New Orleans). It maybe an island in the Sun.

13. Murphy's Oil's Meraux plant is in flooded area but may have escaped serious damage. However, there is no power and unclear about roads left leading to refinery.

Where is the future infrastructure to support these refineries coming from? They may have to become self-contained operating units with numerous issues to resolve. Should we provide high levees to protect these assets in the future as well as hardened power transmission lines. Workers may need to live on-site in the future.

© 2005 Dr. Stephen Rinehart
Editorial Archive

CONTACT INFORMATION
Dr. Stephen Rinehart
Lynn Haven, FL USA
Email

DISCLAIMER: The author is not a registered stockbroker nor a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity, index or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, the author recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.