Gustav Threat Keeps Gas Market Prices Riding Higher, NGI Reports

DULLES, Va.--(BUSINESS WIRE)--Only a few flat Rockies points were left out of continuing double-digit gains in the rest of the cash market Wednesday. Initial evacuations of nonessential personnel were beginning at offshore installations as the expected path of Tropical Storm Gustav made it appear more and more likely that the storm will plow through the central Gulf of Mexico's (GOM) production infrastructure.

And right behind Gustav, two more Atlantic systems have the potential to acquire a name, creating the possibility that there could be three named storms being tracked by early next week, AccuWeather.com Senior Meteorologist Ken Reeves told NGI Wednesday afternoon.

Tuesday's run-up of 45.3 cents by September futures on their penultimate trading day also helped boost quotes for physical gas. Thursday's cash market likely will also have positive screen guidance, although not as much as it appeared Wednesday morning. The September natural gas contract peaked at $8.777, but about 2:50 p.m. EDT it was down to $8.420, a gain of slightly more than 14 cents.

Gains in physical gas prices across the country ranged from a little more than 15 cents to about 80 cents and tended to be smallest in the West.

Tuesday evening's passage over the southwestern peninsula of Haiti diminished Gustav's maximum sustained winds to about 60 mph, therefore leading to a status downgrade to tropical storm. But the storm was expected to restrengthen over warm Caribbean waters to a hurricane again by the time it's expected to thread the needle Thursday between Cuba and Jamaica.

The National Hurricane Center's latest "five-day cone" of projected tracking had Gustav crossing the western end of Cuba sometime Saturday and emerging into the open GOM on a path directly toward the southeastern corner of Louisiana. If that path turns out to be correct, the central GOM, along with New Orleans and the surrounding area, may face travails similar to those caused by Katrina almost exactly three years ago.

Accuweather.com's most likely scenario has Gustav hitting the Gulf Coast somewhere between the extreme northeastern Texas coast and southeast Louisiana as a Category Three hurricane (winds 111-130 mph) Tuesday night. "It could get as strong as a Five" (winds over 155 mph) during its trip across the Gulf, as did Rita in 2005, then lose some steam as it hits the shoreline, Reeves said. If the other two tropical weather systems, one near Puerto Rico and another farther out in the Atlantic, materialize early next week it would be the first time since 2005 there was a named threesome operating at the same time. Gustav is expected to hit the Gulf in between the times that Katrina and Rita hit three years ago. "This is on average the busiest time," Reeves said.

Shell said it expected to bring in about 300 workers not essential to production and drilling operations Wednesday, but that will not have any production impact. No one was reporting any shut-ins yet.

Anadarko Petroleum Corp., which has extensive Gulf of Mexico operations and operates Enterprise Products Partners LLC's deepwater Independence Hub, was preparing to evacuate nonessential workers Wednesday. The Houston-based independent, which produces more than 150,000 boe/d net from the GOM, has 600 employees and contractors currently working offshore. "We are monitoring Gustav on a continuous basis and are preparing to begin evacuating our employees and contractors as the storm continues to move toward our operations," said spokesman John Christiansen. Anadarko plans to provide continuous updates to its GOM operations on its website, www.anadarko.com, under "Weather Bulletins."

Devon Energy Corp., which has, among other things, two deepwater rigs in the Gulf of Mexico, is "monitoring the storm in the event of preparing for evacuations," said spokesperson Alesha Leemaster. "The storm's path is uncertain at this point, but we will take action as necessary. We have planned no shut-ins at this time."

The Weather 2000 consulting firm said it was quite possible that Gustav had already survived its "most challenging terrain obstacle" in Haiti. But like the ball in a pinball machine, "Gustav may approach, skim or clip Cuba and Jamaica in the days ahead." The final likely obstacle before entering the Gulf of Mexico, Weather 2000 said, will be the western tip of Cuba and the Isla de la Juventud. However, "these have the least imposing mountains compared to the previously mentioned obstacles, and often do little more than cause a minor dip (or plateau) in sustained winds."

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