Texas Oil Industry Braces for Rita

With Rita heading toward the coast, Texans are preparing their oil infrastructure for the worst. Steve Inskeep talks with David Purcell of Pickering Energy Partners, who notes that flooding is probably less likely for Texas refineries than for those in Louisiana.

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STEVE INSKEEP, host:

Now major disaster along the Texas-Louisiana coast would also affect the oil industry. That could lead to a spike in prices on everything from gasoline to groceries. We reached energy expert David Purcell of Pickering Energy Partners at his office in Houston.

Mr. DAVID PURCELL (Pickering Energy Partners): In the Houston area, this upper Texas Gulf Coast, almost 2.3 million barrels a day of refining capacity in Houston, that's 15 percent of the US refining capacity.

INSKEEP: This could be bigger than Hurricane Katrina in terms of knocking refineries offline?

Mr. PURCELL: It could. The difference between the Texas refineries and the New Orleans-area refineries--we're above sea level for the most part. The Barrier island change off the Texas coast are a bit more robust than the Barrier islands offshore New Orleans, so what's impacted the refining capacity in New Orleans with Katrina was massive flooding of the refineries. That is probably less likely. That said, you could still have these refineries down for three or four weeks if you have some significant wind damage.

INSKEEP: Now I suppose we should mention we're not just talking about an oil industry; we're talking about a natural gas industry in your part of the world.

Mr. PURCELL: Right. And, in fact, if you think about the residual impact from Katrina, we still have 7 percent of US natural gas production shut in. We have another 7 percent of production at risk off the Texas Gulf Coast. So let's say even just a small portion of the Texas production is impacted for two or three months, and you have a situation where that limits our ability to get natural gas in the ground to meet peak winter heating demands.

INSKEEP: When oil and gas companies make their projections for the coming months and years, do they assume that refineries and wells will likely be offline for some period of days or weeks or months, depending on the weather?

Mr. PURCELL: I'll say no, but I think the answer, if you're a Gulf of Mexico producer, I think you have some average in there that says yes, but that's like the old saying, `I have my feet in the oven and my head in the refrigerator, and on average I'm OK,' right? It's, you know, some years there's a lot of production offline and other years you hit smooth sailing. So it's really tough to model this and to predict it.

INSKEEP: Can you lay out the state of the oil industry and the gas industry and its inventories at this moment as this hurricane approaches?

Mr. PURCELL: Yeah, the state of inventories are OK. We're close to where we typically are at this time of the year, but with really six to eight weeks left before cold weather really hits, that's a time period where you really like to stock up and build inventories. It's like the bear, the squirrel who's trying to eat as much as they can before they hibernate. And with this production offline offshore, both oil and gas production and refineries, the ability to kind of get that last little bit in storage is really hampered here.

INSKEEP: I got to tell you, Mr. Purcell, you seem awfully calm for a man in the path of a hurricane.

Mr. PURCELL: Well, my wife would use a different adjective, I think, but...

INSKEEP: Because she went away...

Mr. PURCELL: Because she went away, so, you know, she's smart and I'm not.

INSKEEP: Well, Mr. Purcell, best of luck to you.

Mr. PURCELL: Thank you very much.

INSKEEP: David Purcell is with Pickering Energy Partners.

You're listening to MORNING EDITION from NPR News.

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