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EFFECT OF HURRICANE ANDREW ON NATURAL GAS

 EFFECT OF HURRICANE ANDREW ON NATURAL GAS
 WASHINGTON, Aug. 31 /PRNewswire/ -- Hurricane Andrew should not


have any significant impact on the availability of natural gas or other fuels during the upcoming winter season, according to Dr. Calvin A. Kent, administrator of the Department of Energy's Energy Information Administration (EIA). Calling reports on possible problems "unjustifiably alarmist," Kent, who heads the independent analytical agency noted that there will be short-run effects and dislocations but supplies for the winter should not be affected.
 Natural gas production capacity in the Gulf has been impacted only in the short-run. Repairs are already under way and only a small number of platforms sustained major damage. EIA's figures show that the Gulf produces some 15 billion cubic feet (Bcf) of the 50 Bcf per day U.S. production. "Even in the short-run there is additional onshore capacity which can be brought on line to help alleviate temporary problems," he said.
 Gulf of Mexico offshore oil and gas well operators have advised EIA that most producing platforms were undamaged by Hurricane Andrew. However, a limited number of the approximate 4,000 platforms showed damage ranging from minor to total loss. One drilling rig (Zapata Saratoga) broke loose from its moorings and had drifted some 50 miles from where it was operating. Essentially all of the platforms that had minor or no damage have returned to production.
 EIA reports that several major gas transporters had to shut down their operations due to Hurricane Andrew, causing short-term disruptions in service in some parts of Florida and Louisiana for as long as four days. Some local distribution companies had to buy from back-up pipelines. Spot prices throughout the country increased as a result of expected reductions in production from the Louisiana area. While production lost from the offshore area can be replaced by gas from onshore wells, the price of this replacement gas will be higher than gas from the Gulf. Companies have covered all their firm delivery commitments from alternate supplies.
 As the storm approached, offshore production was shut down. The key Henry Hub facility in South Louisiana was shut down Tuesday, Aug. 25, because of evacuation of personnel. This resulted in some non-delivery of natural gas under the normal terms of the futures contract. On Thursday, the NYMEX announced that it would not declare a force majeure for those August deliveries. Recognizing that physical delivery at the Henry Hub would be difficult or impossible, the NYMEX noted that delivery of gas can occur under the Alternate Delivery Procedure (ADP) methods. Under ADP, buyers and sellers agree to delivery of gas at locations other than the Henry Hub. Henry Hub is already back on line but not at full capacity.
 The initial impact on natural gas before the storm hit was to increase uncertainty about supplies and prices. On Monday, Aug. 24, the closing price for the September contract closed at $1.99 per million Btu, 14 cents higher than it had been on Friday. During the day, the price had been as high as $2.04. On that Monday, the October contract increased by 8 cents per MMBtu. For the rest of the week, futures prices fluctuated as the storm hit and its impact was assessed. On Friday, Aug. 28, prices again surged, rising by 17 cents per MMBtu for September delivery and 10 cents per MMBtu daily NYMEX limit for delivery through January 1993.
 -0- 8/31/92
 /NOTE: This release was prepared by the Energy Information Administration, the independent statistical and analytical agency within the Department of Energy. The information should not be construed as advocating or reflecting any policy position of the Department of Energy or any other organization./
 /CONTACT: Dr. Calvin A. Kent (program contact), 202-586-4361, or Thomas Welsh (press contact), 202-586-1178, both of the Energy Information Administration; or Philip Keif of the Department of Energy, 202-586-5806/ CO: Energy Information Administration; Department of Energy ST: District of Columbia, Louisiana IN: OIL SU: EXE


DC -- DC018 -- 5104 08/31/92 16:34 EDT
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Date:Aug 31, 1992
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