Colonial Pipeline partially resumes as Nicholas brings rains, wind

By Laura Sanicola and Marianna Parraga

HOUSTON (Reuters) -The largest U.S. fuel line partially resumed operating after Nicholas made landfall as a hurricane before weakening on Tuesday, the second U.S. Gulf storm in as many weeks.

Rains, flooding and power outages were affecting Texas and Louisiana, which were still trying to recover from Hurricane Ida, which knocked most U.S. Gulf offshore oil and gas production offline. Power outages in the Houston area caused Colonial to pre-emptively shut down its main gasoline and distillate fuel lines, the company said in a notice to shippers.

Colonial Pipeline on Tuesday said it had resumed operations on its main gasoline Line 1, while distillate Line 2 remained down due to a power outage in the Houston area after Hurricane Nicholas made landfall.

Royal Dutch Shell (LON:RDSa) halted production its Perdido offshore oil platform due to heavy winds, and U.S. liquefied natural gas producer Freeport LNG said processing at its Texas coast facility was halted, likely due to a power outage.

The storm caused widespread power outages as it crossed over the Houston metropolitan area late Monday night and early Tuesday morning, but that number shrank throughout Tuesday.

Colonial supplies roughly 2.5 million barrels a day of refined products to some of the busiest U.S. fuel markets, mostly in the Southeast and East Coast. The line also shut during Hurricane Ida, but was restarted without incident a few days after the storm landed.

More than 40% of the U.S. Gulf of Mexico's oil and gas output remained offline on Monday, two weeks after Ida slammed into the Louisiana coast, according to offshore regulator Bureau of Safety and Environmental Enforcement (BSEE).

Shell said it was ready to restart production at its offshore Perdido platform once power is restored to a receiving facility. The company had no plans to return staff to the offshore facility on Tuesday.

Some 14 inches of rain fell in Galveston while Houston got almost six inches overnight and into the morning, the National Weather Service reported. Nicholas, which landed in Texas, had a much less pronounced effect than Ida on Gulf Coast refining capacity.

Most Texas refiners were operating on Tuesday. Motiva Enterprises' 607,000 barrel-per-day (bpd) Port Arthur, Texas refinery - the largest in the United States - was operating normally as Nicholas was passing over the area on Tuesday morning, said sources familiar with plant operations.

Royal Dutch Shell Plc's 302,800 bpd joint-venture Deer Park, Texas refinery was also operating normally on Tuesday, as was Exxon (NYSE:XOM)'s Baytown and Beaumont refineries.

Texas energy company CenterPoint Energy Inc (NYSE:CNP) said on Tuesday that about 400,000 homes and businesses in its Houston-area service territory were without power.

Vessel traffic was idled on Tuesday morning at the Houston Ship Channel and the Calcasieu Ship Channel. The ports of Houston, Freeport, Galveston and Texas City were open with restrictions, however, according to the U.S. Coast Guard.

Some shippers expect the restrictions set by Texas and Louisiana ports while Nicholas passes through will add to ongoing import and export delays from Ida.