Katrina Disrupts Gulf Coast Industry

The effects of Hurricane Katrina suspended many industrial plant operations in at least eight different counties in Louisiana, Mississippi and Alabama. According to Houston's Industrialinfo.com (Industrial Information Resources), there are over 260 industrial plants located in the counties of Mobile and Baldwin, Ala.; Harrison, Hancock and Jackson, Miss.; and Jefferson, Saint Charles and Plaquemine, La.

Many large petroleum refiners and petrochemical producers began reducing production rates and preparing for a controlled shutdown on Aug. 26. By Aug. 27 most had shut down completely. A small number of industrial plants in the affected region resumed some small level of production by Sept. 3, the date of this report, although several major natural gas and product pipelines serving these plants with feedstock remained out of service, limiting production. Pipeline companies were aggressively evaluating the level of damage to determine what repairs were necessary to restore operations safely, and as of this writing some limited supply on the Colonial and Plantation Pipeline crude oil pipeline systems had resumed.

Many companies worked the Labor Day holiday to repair damage and return to production. New Orleans-based power generator, Entergy Corp., worked around the clock to repair damaged transmission lines, electrical substations, and power plants that were damaged during the hurricane. Entergy serves 2.7 million customers in Arkansas, Louisiana, Mississippi, and Texas. About half of those customers lost power due to the storm. Entergy also provides electrical service to 11 petroleum refineries in the impacted area. Three of the refineries did not lose electrical service and the company had reestablished power to five others. The remaining three are downriver from New Orleans and suffered from flooding. The company hoped to restore service to those flooded refineries within 10 days.

Of the 10 petroleum refiners and two major ethylene producers in the region that Industrialinfo.com identified as offline due to the hurricane, almost half will remain down for several more weeks, while three refiners already returned to service and at least one other was in the process of ramping up for production by the following week. At least 43 power plants were located in the path of Katrina, and still hundreds of thousands remained without electricity. The process of identifying electrical substation damages and transmission line failures could take weeks and even longer to repair, many months in some cases.

Silver linings

windfall potential in the rebuilding efforts to come months down the road. The refining industry in particular seems poised for massive investments not only to repair facilities damaged by Katrina and the flooding aftermath, but to increase capacity to keep up with burgeoning demand.

Before the hurricane, many refineries were straining full throttle, operating at capacities as high as 98%. The federal government's Energy Information Administration estimated the world spare petroleum production capacity in 2005 at just over one million bpd, roughly equivalent to production lost due to Katrina's impact on refineries on the Gulf Coast.

According to Industrialinfo.com, the oil industry sits on a corporate cash pile estimated at about $500 billion, thanks to price increases stemming from tight supplies. Some observers say that the windfall has caught the major oil producers by surprise, and they are scrambling to develop short- and medium-term projects to invest the cash. Not only is it sound business to put that money to work productively, the oil industry is suffering a major PR problem making so much money amid so much suffering.

As SUPPLY HOUSE TIMES raced to meet this issue's deadline, many PVF firms were still trying to locate some employees and assess the extent of damage to their operations in the affected Gulf Coast areas. It wasn't until Sept. 8, about two weeks after Katrina struck, that McJunkin Corp., based in Charleston, W.Va., finally got in touch with all of its personnel.

Ferguson Enterprises, Newport News, Va., also breathed a sigh of relief that all of its employees in the area were accounted for. Tulsa, Okla.-based Red Man Pipe & Supply reported all people accounted for as of Sept. 6, although many employees suffered loss of homes and possessions. According to Red Man Vice President - Purchasing & Alliances Dennis Niver, the near-term business outlook was unclear.

Five of Red Man's branches were out of operation as of Aug. 31, but four were back open as of Sept. 6. The facility in the city of Harvey, La., remained closed as the city was evacuated.

Addressing the near-term outlook for Red Man's business in the Gulf Coast, Niver said, “I don't anticipate any shortages of material, but this will put a lot of stress on us to get products to people quickly. I just don't know what level of demands will be put on us, because there will be a ripple effect throughout our economy.”

Also in the “silver lining” category is the extraordinary generosity of PVF firms in responding to the catastrophe with donations of money and services. Particularly notable is steel pipe producer IPSCO's donation of $500,000 to the Alabama Gulf Coast Chapter of the American Red Cross to be used in Hurricane Katrina relief work. The aid will be focused on hard-hit communities along Alabama's gulf coast, including Mobile and Baldwin Counties where IPSCO's Alabama steelworks is located and most IPSCO employees live. In addition to money, IPSCO provided trucks filled with fuel, cases of bottled water, high protein foods, generators and ice to the Alabama steel plant to further assist in the recovery process.

Also, the company announced a matching grant program to magnify the impact of employee donations. IPSCO will match every dollar contributed by all its employees to registered charities of their choice established for Hurricane Katrina.

Flowserve Corp. is another PVF manufacturer making a sizable contribution with a pledge of $150,000 to the American Red Cross Hurricane Katrina relief efforts. Flowserve also said it will additionally match dollar-for-dollar the first $50,000 in contributions donated by employees in a fundraising drive. Flowserve selected the American Red Cross because of the immediate positive impact the organization can have on the victims and because of their advanced distribution system.

We apologize for not reporting other major contributions. These were the ones that became immediately known to us as we went to press.