Wednesday October 5th, 2005

Interior Secretary Gale Norton warns it may take months to return offshore natural gas production to pre-hurricane levels…Wood Mackenzie report says oil companies no longer replacing reserves through new discoveries…All-day job fair set for Thursday at George R. Brown Convention Center… Heavy damage by Hurricanes Katrina and Rita mean months will probably be needed to […]

Interior Secretary Gale Norton warns it may take months to return offshore natural gas production to pre-hurricane levels…Wood Mackenzie report says oil companies no longer replacing reserves through new discoveries…All-day job fair set for Thursday at George R. Brown Convention Center…

Heavy damage by Hurricanes Katrina and Rita mean months will probably be needed to return offshore natural gas production to normal levels. Interior Secretary Gale Norton said today that while the production shortfall will mean high prices for natural gas this winter, there should be no widespread shortages of the fuel. The Gulf Coast produces about one-fifth of the natural gas used by industry and to heat homes, especially in the country’s midsection. The Interior Department said only ten percent of the Gulf region’s offshore oil production and 28 percent of the gas production has been brought back on line. While most drilling rigs and platforms survived the storm, Norton said repairs clearly will be in the billions of dollars. Because of strong storm surges, Hurricane Katrina heavily damaged a number of gas processing plants in the New Orleans area. Rita had less of a surge but damaged some onshore facilities in Southeast Texas.

Shell reports that production in seven of its Gulf of Mexico fields is flowing again, ramping up to pre-hurricane rates. Two other fields are expected to resume production over the next few weeks, as well as partial production at two others. The company says one of its 12-inch gas export lines was damaged at two locations on the ocean floor. Repairs will take four to six weeks, weather permitting. BP reports that most facilities in Louisiana, Texas and the Gulf of Mexico are resuming operations. BP continues working on repairing and restarting the company’s Texas City refinery. BP has reversed its marine export pipeline and is importing gasoline components from ships brought into the refinery’s dock.

Oil companies are no longer replacing reserves through new discoveries, according to a Wood Mackenzie study of 28 oil companies. The new study says industry reduced its exploration investment in recent years as a response to growing technical risks and uncertain oil prices. But the report says high oil and gas prices now create an opportunity for companies to step up exploration activity. The report “Exploration Strategy and Performance” also addresses the short-term impact of the Gulf hurricanes. Wood Mackenzie’s Eugene Kim says Hurricane Rita impacted some very productive Central Gulf of Mexico producing areas in east Texas and western Louisiana.

Eugene Kim audio 1

Kim says post-Rita shut-in levels increased and then stabilized at that level.

Eugene Kim audio 2

The Wood Mackenzie report indicates deepwater damage from Katrina and Rita is on par with Hurricane Ivan. Shelf production damage is greater than Ivan.

Eugene Kim audio 3

The exploration investment of supermajors peaked in 1998, and now sits at two-thirds of its previous level, leading to a 50 percent decline in overall reserves replacement.

Ziff Energy Group says North American natural gas demand will grow by almost 10 Bcf/d by 2012. The consulting company says the largest gas demand sector–a third–will be for gas-fired electricity generation.

At least 200 local employers are taking part in Thursday’s job fair, in conjunction with The Work Source, at the George R. Brown Convention Center from 7 a.m. to 7 p.m. The event, designed to help hurricane victims, is open to anyone seeking employment. The mayor’s office says most of the employers represented at the fair have at least ten jobs to offer, and 20 percent of the companies have at least 100 jobs available.

The Port of Houston Authority is partnering with the Economic Alliance Houston Port Region, the Greater Houston Coffee Association and the City of Pasadena for the first Coffee and Cocoa Symposium on October 20th at the Pasadena Convention Center. The day-long event will spotlight business development opportunities within Houston’s coffee and cocoa supply chain, from shipping, warehouse storage and distribution to roasting, packaging and retail marketing.

The WorkSource and Recruitment Enhancement Solutions have teamed with the Houston office of Bernard Hodes Group to launch a not-for-profit Web site to help workers displaced by Hurricanes Katrina and Rita. RES President Barry Siegel says employers across the nation have already pledged to utilize the database as part of their recruiting efforts.

Barry Siegel audio 1

Siegel says evacuees won’t find job listings on the site–the site is for the posting of credentials.

Barry Siegel audio 2

Workers displaced by the hurricanes can add their candidate profile to the site’s database free of charge.

Entergy says its damages from Hurricane Rita will range from $400 million to $550 million. The electric and natural gas utility’s bill comes on top of damages to its facilities from Hurricane Katrina a month before that could surpass $1 billion. The New Orleans-based company says it believes it has enough cash to meet its obligations and fund rebuilding. Entergy says it would pursue insurance payments, federal relief and rate increases. Most of the Rita-related damage hit the Entergy Gulf States unit, which serves Southeast Texas and Southwestern Louisiana. Damage to that unit is estimated at $365 million to $500 million. Entergy Louisiana sustained $30 million to $40 million in damages, while the rest of the damage to Entergy properties ranged from $5 million to $10 million. Entergy’s New Orleans unit filed for bankruptcy protection after Katrina. It cited $325 million to $475 million in damages to power and natural gas transmission systems and the loss of most of its customer base. The company estimated total damage to all of its operating units at $750 million to $1.1 billion.

TXU Energy says it has asked the State Public Utility Commission for permission to raise rates an estimated 12 percent through the end of the year. TXU Corporation announced that it filed a fuel factor adjustment request for TXU Energy’s price-to-beat electricity rates. TXU cites increases in natural gas and wholesale power prices, but says it delayed filing the request as part of a September agreement with the commission and the office of Public Utility Council. If approved by the commission, the increase will be effective October 28th. The company says that if the increase is approved, it would voluntarily adopt an across-the-board discount for its price-to-beat customers. TXU says the typical customer will see an increase of about $15 on the monthly bill.

Higher oil and gas prices seem to be taking a toll on the services sector of the economy. The Institute for Supply Management reports its Non-Manufacturing Index, which is made up mostly of service-related companies, came in at 53.3–down from 65 in August. Still, non-manufacturing business activity increased for the 30th straight month in September. Economists polled by Dow Jones Newswires had expected a reading of 60. The chairman of the ISM committee that conducts the survey, Ralph Kauffman of the University of Houston-Downtown, says many of those polled expressed concern about the continuing rise in oil and gas prices and the hurricanes, and their impact on prices and economic activity. Index readings above 50 indicate expansion of activity.

The nation’s insurers are out with their first survey of Katrina insured losses. They expect the hurricane to result in at least $34.4 billion worth of personal and commercial property loss claims. Analysts say the preliminary estimate of damages to homes and businesses in six states would make Katrina the most costly U. S. natural disaster ever. Hurricane Andrew, in 1992, held the previous record, with inflation-adjusted $20.8 billion in losses. Policyholders in Louisiana, Mississippi, Alabama, Florida, Tennessee and Georgia are expected to file more than 1.6 million claims for damage to personal and commercial property, automobiles, and boats and yachts.

Bank of America is making $100 million available for loans and investments, primarily for affordable housing, in Gulf Coast areas slammed by Hurricanes Katrina and Rita. It includes $60 million in loans for new construction and redevelopment of affordable housing in the region. The bank has also set a goal of at least $40 million for affordable housing development and community revitalization through tax credit investments. In addition, Bank of America said it will make more than 200 apartments it owns available to house displaced families in Georgia, Florida, Tennessee and Texas.

Former executives who pleaded guilty to Enron-related crimes after the energy company crumbled could finally be sentenced next year. Sixteen executives have pleaded guilty. But most have had sentencing postponed as the government pursued criminal charges against former top officers. Their sentencing could now fall during or after the conspiracy and fraud trial of Enron founder Kenneth Lay and former CEO Jeffrey Skilling. Those expected to testify in the January trial have sentencing dates throughout 2006 that are likely to stand if prosecutors no longer need their cooperation. Skilling, Lay and former top Enron accountant Richard Causey are accused of trying to fool investors into believing Enron was healthy. The company crashed in December 2001. All three have pleaded innocent. Former executives who have admitted to crimes and are expected to testify include: former Enron finance chief Andrew Fastow; Arthur Andersen’s former top Enron auditor, David Duncan; Kenneth Rice, a former top trader and CEO of Enron’s defunct Broadband unit; and Mark Koenig, Enron’s former head of Investor Relations.

Former executives who have pleaded guilty to Enron-related crimes and their 2006 sentencing dates: Andrew Fastow, former chief financial officer, pleaded guilty to two counts of conspiracy in January 2004. Originally charged with 98 counts of fraud, conspiracy, insider trading and others. Sentencing: June 13th; David Duncan, former top Enron auditor for Arthur Andersen. Pleaded guilty to obstruction of justice April 2002. Sentencing: June 16th; Mark Koenig, former head of Enron Investor Relations. Pleaded guilty August 2004 to aiding and abetting securities fraud. Sentencing: May 19th; Kenneth Rice, former CEO of Enron’s Broadband unit. Pleaded guilty July 2004 to securities fraud. Sentencing: December 4th; David Delainey, former head of Enron’s Trading and Retail Energy units. Pleaded guilty October 2003 to insider trading. Sentencing: July 10th. Michael Kopper, former top lieutenant to Fastow, pleaded guilty August 2002 to two counts of conspiracy. Sentencing: June 9th; Ben Glisan, Jr., former Enron treasurer. Pleaded guilty September 2003 to conspiracy. Serving five years in prison. Kevin Hannon, former COO for Enron’s Broadband unit. Pleaded guilty in August 2004 to conspiracy. Sentencing: December 4th; Paula Rieker, former number two executive in Investor Relations. Pleaded guilty May 2004 to insider trading. Sentencing: July 28th; Timothy Despain, former assistant treasurer. Pleaded guilty October 2004 to conspiracy. Sentencing: March 24th; Christopher Calger, former vice president of West Power Origination in Enron’s Trading unit. Pleaded guilty July 2005 to conspiracy. Sentencing: August 10th; Larry Lawyer, former mid-level Broadband executive. Pleaded guilty November 2002 to filing a false tax return. Sentencing: June 26th; Timothy Belden, Jeffrey Richter and John Forney: former top Enron traders. Pleaded guilty in October 2002, February 2003 and August 2004, respectively, to wire fraud in federal court in San Francisco. No sentencing dates set; Lea Fastow. Pleaded guilty in May 2004 to filing a false tax form. Released from prison in July after having served the maximum 12-month sentence.

The signs at some 223 Bank One locations in Texas officially change to Chase next week. With Chase’s 182 existing branches, the combination of Bank One and Chase from last year’s merger of the parent companies will result in 405 branches and 850 ATM’s statewide. The re-branding includes the replacement of some 9,000 signs.

Hewlett-Packard is buying Spring-based RLX Technologies for an undisclosed price. RLX develops management technology for rack-mounted servers. HP plans to combine RLX technology with its server, storage and enterprise management software. California-based HP acquired Houston-based Compaq Computer in May 2002.

El Paso Corporation is proposing a natural-gas pipeline project to link its western pipelines with pipelines in the south and east. It’s called the Continental Connector. The project would also provide a link to production in north and east Texas. Western pipelines bring supply from the Rocky Mountain and Mid-Continent regions. The pipelines in the south and east serve the East Coast and the Midwest. Houston-based El Paso said the project would involve the construction of more than 1,000 miles of pipe. El Paso anticipates the project could be in service as early as November 2008.

El Paso is selling its 50-percent stake in Budapest, Hungary-based EMA-Power to Dunaferr Corporation for $39 million. The power generation complex sells electricity, turbo air, steam and softened water to an adjacent steel mill. The deal wraps up the sale of El Paso’s European assets.

Moody National Office II has purchased the 11-story 3700 Buffalo Speedway office building one block north of the Southwest Freeway in Greenway Plaza from LNR Partners, according to the Houston Business Journal. The site includes a 496-space underground parking garage. Meanwhile, Denver-based Dividend Capital Group has purchased the Gateway at Central Green warehouse near George Bush Intercontinental Airport from Connecticut General Corporation.

North Carolina’s economy officially got a boost today when state officials attended the formal opening of a Dell computer assembly plant near Winston-Salem. The invitation-only ceremony featured a presentation by Chairman Michael Dell. The new plant in Forsyth County, North Carolina will be the company’s largest. The first personal computer built for a customer also will come off the assembly line. When the plant is at full production, it expects to make 700 computers an hour for sale on the East Coast. Currently, the plant employs 350 people. Travis Simpson, the vice president of Dell’s North Carolina operations, says offers are being made to 250 more applicants. Round rock-based Dell expects to have at least 700 employees by September 2006.

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