Business

Smaller oil producers suffering

HOUSTON — For the second time in three years, Tim Washington and hundreds of other small oil and natural gas producers are literally picking up the pieces after back-to-back hurricanes in the Gulf of Mexico.

Even though most people typically associate U.S. oil and gas production with ExxonMobil Corp., ConocoPhillips and other well-known behemoths, the majority of crude and natural gas is supplied by smaller, independent companies like Washington's Alpine Exploration Cos. Most have fewer than 20 employees.

As the industry continues to assess damage from hurricanes Ike and Gustav, many of those mom-and-pop shops appear to have taken a beating. Of the 49 platforms destroyed last weekend by Ike, 44 produced less than 1,000 barrels of oil a day, according to assessments from the U.S. Minerals Management Service.

"Anytime a hurricane comes through, we average a minimum of two weeks getting back on line, and that's on a best-case basis," said Washington, whose Dallas-based outfit operates several production facilities along the Louisiana coast. Most produce 100 to 300 barrels a day.

That's just a sliver of the Gulf's total daily offshore production of 1.3 million barrels. But combined, the nation's roughly 5,000 independent operators account for 68 percent of oil and 82 percent of the natural gas produced in the United States, according to the Independent Petroleum Association of America.

Independents concentrate solely on exploration and production, forgoing refining and marketing operations. They include large publicly traded companies such as Anadarko Petroleum Corp., but most are much smaller operations that might drill only a few wells each year.

"It's tough. It's expensive. But we're the backbone of the industry," Washington said. "We ushered it in, and we'll usher it out."

Oil companies, rig and pipeline owners and others are still calculating damage to the industry caused by Gustav and Ike, but some risk experts say the energy sector's insured losses for Ike alone could rise to nearly $2 billion.

The good news is that Ike and Gustav caused far less damage than Katrina and Rita in 2005, a one-two punch that destroyed 108 production platforms, damaged hundreds of others and shut down production for months, in some cases, in a region that accounts for 25 percent of domestic oil production and 15 percent of natural gas output.

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