Status report on Oil Status report on Oil Infrastructure post Infrastructure post

HurricanesHurricanes

A presentation by Leigh PhillipsA presentation by Leigh Phillips

Biehl & Co., L.P.Biehl & Co., L.P.

IntroducingIntroducing the Gulf of Mexicothe Gulf of Mexico

► The energy infrastructure of the Gulf of The energy infrastructure of the Gulf of Mexico includes offshore oil and gas Mexico includes offshore oil and gas production, drilling rigs, platforms, an production, drilling rigs, platforms, an extensive work of pipelines, oil refineries extensive work of pipelines, oil refineries and the LOOP (Louisiana Offshore Oil Port), and the LOOP (Louisiana Offshore Oil Port), which handles almost 11% of the nation’s which handles almost 11% of the nation’s oil import.oil import.

► The Gulf coast region provides:The Gulf coast region provides: 47% of the nation’s oil refining capacity47% of the nation’s oil refining capacity 29% of the country’s oil production29% of the country’s oil production 20% of the natural gas output20% of the natural gas output

And then came the Hurricane And then came the Hurricane Season 2005….Season 2005….

► The Gulf of Mexico’s offshore platforms The Gulf of Mexico’s offshore platforms suffered severe damage by two Hurricanes suffered severe damage by two Hurricanes within a period of 4 weeks in August and within a period of 4 weeks in August and September 2005September 2005

► It is estimated that 3,050 of the Gulf’s 4,000 It is estimated that 3,050 of the Gulf’s 4,000 platforms and 22,000 of the 33,000 miles of platforms and 22,000 of the 33,000 miles of Gulf pipelines were in the direct path of Gulf pipelines were in the direct path of Hurricanes Katrina or RitaHurricanes Katrina or Rita

…….with all it’s consequences.with all it’s consequences

► The overall destruction caused by The overall destruction caused by Hurricanes Katrina and Rita is the greatest Hurricanes Katrina and Rita is the greatest natural disaster to oil and gas development natural disaster to oil and gas development in the history of the Gulf of Mexicoin the history of the Gulf of Mexico

► In 2004 the devastating Hurricane Ivan In 2004 the devastating Hurricane Ivan destroyed 7 platforms, compared with 115 destroyed 7 platforms, compared with 115 platforms destroyed in Rita and Katrinaplatforms destroyed in Rita and Katrina

Facts about Hurricane KatrinaFacts about Hurricane Katrina

► Category 5 hurricane Katrina destroyed 46 Category 5 hurricane Katrina destroyed 46 platforms and damaged 20 moreplatforms and damaged 20 more

► 100 damaged pipelines and 211 minor 100 damaged pipelines and 211 minor pollution incidents are publicly known to datepollution incidents are publicly known to date

► 36 of the damaged 100 pipelines were of 36 of the damaged 100 pipelines were of large diameter (10’’ up) and 12 of the 36 large diameter (10’’ up) and 12 of the 36 pipelines have resumed servicepipelines have resumed service

Facts about Hurricane RitaFacts about Hurricane Rita

► Category 4 hurricane Rita destroyed 69 Category 4 hurricane Rita destroyed 69 platforms and damaged 32 moreplatforms and damaged 32 more

► 83 damaged pipelines and 207 minor 83 damaged pipelines and 207 minor pollution incidents are publicly known to datepollution incidents are publicly known to date

► 28 of the damaged 83 pipelines were of large 28 of the damaged 83 pipelines were of large diameter (10’’ up) and 10 of the 28 pipelines diameter (10’’ up) and 10 of the 28 pipelines have resumed servicehave resumed service

Damages from HurricanesDamages from Hurricanes Katrina and Rita Katrina and Rita

Affect on Oil/Gas ProductionAffect on Oil/Gas Production

► 100% of Gulf oil production (approx. 1.5 100% of Gulf oil production (approx. 1.5 million barrel per day) was shut-in during million barrel per day) was shut-in during both stormsboth storms

► 94% of gas production (10 billion cubic feet 94% of gas production (10 billion cubic feet per day) was shut-in during Hurricane Katrinaper day) was shut-in during Hurricane Katrina

► 90% of manned platforms and 85% of 90% of manned platforms and 85% of working rigs were evacuated working rigs were evacuated

Affect on Oil/Gas ProductionAffect on Oil/Gas Production

► So far 396,000 barrels of oil daily and a daily So far 396,000 barrels of oil daily and a daily amount of abt. 1,804 cubic feet gas remain amount of abt. 1,804 cubic feet gas remain kept enclosedkept enclosed

► It is expected that approximately 255,000 It is expected that approximately 255,000 barrel of oil a day and 400 million cubic feet barrel of oil a day and 400 million cubic feet of gas a day will not be restored to of gas a day will not be restored to production before the 2006 hurricane production before the 2006 hurricane seasonseason

Affect on Oil/Gas ProductionAffect on Oil/Gas Production

► Cumulative shut-in production for the period Cumulative shut-in production for the period August 26, 2005 – March 8, 2006:August 26, 2005 – March 8, 2006:

Oil:Oil: 134,522,189 bbls, which is equivalent to 134,522,189 bbls, which is equivalent to 24.57% of the yearly production of oil in the Gulf 24.57% of the yearly production of oil in the Gulf of Mexico (approximately 547.5 million barrels) of Mexico (approximately 547.5 million barrels)

Gas:Gas: 672.694 BCF, which is equivalent to 672.694 BCF, which is equivalent to 18.430% of the yearly production of gas in the 18.430% of the yearly production of gas in the Gulf of Mexico (approximately 3.65 TCF)Gulf of Mexico (approximately 3.65 TCF)

Oil/Gas shut-inOil/Gas shut-in

RefineriesRefineries

► After After Hurricane KatrinaHurricane Katrina, 11% of US refining capacity , 11% of US refining capacity was shut downwas shut down

► The shut down capacity was reduced to 5% on The shut down capacity was reduced to 5% on September 16, 2005 by bringing several refineries September 16, 2005 by bringing several refineries back onlineback online

► The threat of The threat of Hurricane RitaHurricane Rita shut down almost 30% shut down almost 30% of the nation’s refining capacityof the nation’s refining capacity

► Nearly 5% of the US oil refining capacity was still Nearly 5% of the US oil refining capacity was still offline 5 weeks after Rita hit landoffline 5 weeks after Rita hit land

Shut down of Refining Shut down of Refining CapacitiesCapacities

Climatic DevelopmentClimatic Development

► Possibility of increase of hurricane activity in Possibility of increase of hurricane activity in the Gulf of Mexicothe Gulf of Mexico

► Experts explain that certain climatic Experts explain that certain climatic phenomenon favor increased tropical storm phenomenon favor increased tropical storm activity in multi-decadal cycles (20-30 activity in multi-decadal cycles (20-30 years)years)

► According to the According to the National Oceanic and National Oceanic and Atmospheric AdministrationAtmospheric Administration a continuation a continuation of above-normal seasons for another decade of above-normal seasons for another decade or longer is to be expectedor longer is to be expected

Climatic DevelopmentsClimatic Developments

SourcesSources

US department of the Interior, Minerals Management US department of the Interior, Minerals Management Service report (www.mms.gov)Service report (www.mms.gov)

Federal Deposit Insurance Corporation (Federal Deposit Insurance Corporation (www.fdic.govwww.fdic.gov))

OCS Bulletin Board System (www.ocsbbs.com)OCS Bulletin Board System (www.ocsbbs.com)