Tuesday PM August 21st, 2007

Hurricane Dean misses Texas, but threatens drilling rigs in Bay of Campeche; Pemex production platforms operate with skeleton crews...Continental Airlines resuming normal flight schedule to Cancun and Merida, Mexico...Home foreclosures up at alarming rate...

Texas is breathing easier when it comes to weather. The southern part of the state had been on alert as Hurricane Dean moved westward. But now, Dean is on a path that's expected to bring nothing more than some higher surf to Texas. So Texas National Guard soldiers are being released from hurricane duty. And a mandatory evacuation of trailers and recreational vehicles on South Padre Island is being lifted--along with a countywide voluntary evacuation. Dean, which weakened from Category 5 to Category 2 strength as it moved across Mexico's Yucatan Peninsula, is expected to make a second landfall in Mexico on Wednesday, after crossing Gulf waters. But a forecaster says Texas won't even get rain from the storm's outermost band, and that there's no risk of significant flooding. Much of Texas is water-logged from recent storms, and another heavy rain could have caused additional flooding.

Although Hurricane Dean weakened as it crossed Mexico's Yucatan Peninsula, it's expected to become powerful once again by drawing fuel from the warm waters of the lower Gulf of Mexico. More than 100 offshore oil platforms there have been evacuated. Houston-based Noble Corporation has several drilling rigs in the Bay of Campeche, leased to Pemex and other oil companies. Noble's Gene House is at their Mexico office in Ciudad del Carmen, on the west side of the Yucatan Peninsula, just north of the path of the hurricane.

"We have eight rigs active in Mexico right now. Seven of them are in this area. We have evacuated about 685 people from these rigs. That's including Pemex, third parties and ourselves. We have about 86 Noble people in hotels in Villahermosa, where we have evacuated to--that's crew members--and then we have another, I guess there's about six or seven of us in another hotel here in Villa, which is where I am speaking from right now."

House says Noble and other companies have increased the height of drilling structures, after studying problems with the storms of 2005.

"We have I guess probably two major issues. One is the air gap--in other words, the distance that the bottom of the hull is from the water line. And after Hurricane Rita and Katrina, we are following MMS regulations and all of our rigs are between 60- and 70-foot air gap, so that's more than sufficient. And the other is wind load and storm load, and what we do to pre-empt problems there is we pre-load these rigs. In other words, we simulate the loading of storm conditions when we move them on location and we pre-load these rigs to the maximum allowed by their design criteria."

Shell has made plans for redeployment of personnel beginning today, and production is being brought back on line. Skeleton crews of hard-hatted Pemex employees manned seven crude-oil production platforms in the path of Hurricane Dean. The platforms, from which 18,000 barrels of crude oil are usually extracted each day, are built to withstand hurricanes that blast through the Gulf of Mexico. But experts say there's always a risk. Pemex spokesman Enrique Matus Bocanegra says normally up to 250 workers labor on each of the platforms. Those sites are linked to 32 underwater wells in what Pemex refers to as its northern region. But Matus says less than one dozen workers remain on each platform. More than 18,000 workers were evacuated from Campeche Sound platforms this week--shutting down 80 percent of the Pemex production.

Continental Airlines is operating its normal flight schedule to Cancun and Merida, Mexico. The Houston-based air carrier is providing ticketing flexibility for customers whose travel plans may be affected by the hurricane. Customers may reschedule or reroute travel once without a penalty.

Home foreclosures are up at an alarming rate. Research firm RealtyTrac reports that filings increased nine percent from June to July. They have surged 93 percent from this time a year ago. The filings include default notices, auction sale notices and bank repossessions. The national foreclosure rate was one filing for every 700 households in July. Nevada, Georgia and Michigan account for the highest rates nationwide. The mortgage industry has been battered by rising defaults and foreclosures, primarily driven by borrowers with sub-prime loans and adjustable rate mortgages. Lagging home sales and flat or sinking home prices have made it more difficult for homeowners who fall behind on payments to sell their homes and clear the debt.

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