(Adds details on Mars crude exports, impact on smaller
operators)
By Arathy S Nair and Sabrina Valle
HOUSTON, Sept 20 (Reuters) - Royal Dutch Shell, the
largest U.S. Gulf of Mexico oil producer, said damage to
offshore transfer facilities from Hurricane Ida will cut
production into early next year, slashing deliveries of a type
of crude oil prized by refiners.
Shell was the hardest-hit producer from Ida, which tore
through the U.S. Gulf of Mexico last month and removed 27
million barrels overall from the market. The ongoing disruptions
have hampered export activity and raised crude prices around the
world, as Asian buyers searched for substitutes for the popular
Gulf Mars grade.
Three weeks after the storm, about 40% of Shell's production
from the offshore region is still offline. Shell is the largest
U.S. Gulf producer with eight facilities pumping about 476,000
bpd, according to researcher Rystad Energy. Overall, the U.S.
Gulf produces 1.8 million bpd, or about 16% of U.S. oil output.
Shell's damaged transfer facility, West Delta-143, carries
oil and gas from three major fields for processing at onshore
terminals. The company previously suspended numerous contracts
to supply crude from the fields, citing hurricane
losses.
The fields are a key source of Mars sour crude, a grade
prized by oil refiners in the United States and Asia. Rystad
analyst Artem Abramov estimated the lost production will remove
200,000 to 250,000 barrels per day (bpd) of Gulf of Mexico oil
supply for several months.
"Disruptions are now having an impact on total available
crude for export from the U.S., not just the offshore grades,"
said Krista Kuhl, an analyst with consultancy firm Facts Global
Energy.
Mars prices had soared to a one-year high earlier this month
then eased as other oil supply constraints lifted. On Friday,
the grade traded at a $2 per barrel discount to the U.S.
benchmark <WTC-MRS>, down from a premium.
"Based on current pricing there is likely to be much less
crude exported," Kuhl added.
A Shell spokesman declined to comment further.
Shell's Mars and Ursa oilfields, which supply about 200,000
bpd combined, would be affected into the first quarter of next
year. The third oilfield, Olympus, produces about 100,000 bpd
and will be able to resume production sometime in the fourth
quarter, Shell said.
Mars crude exports averaged 150,000 bpd in the first eight
months of 2021, accounting for about 5.5% of total U.S. crude
exports of 2.75 million bpd, according to data from Kpler. The
United States exported about 3.21 million barrels of oil per day
in 2020, according to the Energy Information Administration.
Wood Mackenzie analyst Mfon Usoro said that the prolonged
shut-in of the WD-143 platform would also affect smaller
operators such as LLOG Exploration Co LLC which use the Mars
pipeline.
LLOG did not immediately respond to a request for a comment.
(Reporting by Arathy S Nair in Bengaluru; Editing by Aditya
Soni, Nick Macfie and David Gregorio)
