By Kristen Hays and Erwin Seba
HOUSTON (Reuters) - Energy companies evacuated offshore oil rigs and shut down U.S. Gulf Coast refineries on Monday as Tropical Storm Isaac threatened to batter the country's oil refining belt at hurricane strength later this week.
The National Hurricane Centre (NHC) said Isaac, currently a tropical storm in the Gulf of Mexico, was projected to strengthen into a Category 1 hurricane before making landfall in Louisiana by Wednesday, the seven-year anniversary of devastating Category 3 Hurricane Katrina.
U.S. gasoline futures rose 2.7 percent on fears the storm could affect low-lying Louisiana refineries and tighten supplies. Crude futures fell 1.4 percent, on concerns Isaac could lower oil consumption once refineries are idled.
Isaac, currently around 300 miles (490 km) southeast of land, packed 65 mile-per-hour (100 kilometre-per-hour) winds on Monday but was expected to strengthen before reaching land, when it could cause storm surges of six to 12 feet in parts of Louisiana, Alabama and Mississippi, the NHC warned.
"Isaac looks like a smaller storm event than Katrina was, but energy companies are following their emergency drill, which means we will lose some production and some refineries will be shut," said Citi energy analyst Tim Evans.
"They have learned their lesson from past storms."
The Gulf of Mexico and U.S. Gulf Coast region accounts for nearly a quarter of U.S. oil production and around 45 percent of U.S. refining, part of which was being idled.
Louisiana plants usually process around 3.25 million barrels per day. On Monday, companies including Marathon Petroleum, Chevron, Valero, and Phillips66 had closed -- or were in the process of closing -- nearly 1.4 million barrels per day (bpd) of the state's capacity, according to industry and government estimates.
Those closures follow evacuations from over a dozen major offshore oil and gas platforms since last week.
The Gulf of Mexico accounts for 23 percent of U.S. oil production and 7 percent of natural gas output. Its ports are major crude import centres, and a vast pipeline network criss-crosses the Gulf Coast region, which is also the site of 30 percent of U.S. natural gas storage.
If Isaac continues on the trajectory forecast by the NHC, it would be the first hurricane of 2012 to make landfall, albeit a much weaker one than Katrina, which hit Louisiana as a Category 3 storm.
In 2005, Katrina took out around 4.5 million barrels per day of refining capacity, some of which was idled for months, driving up fuel costs.
KEY SHUTDOWNS
As of Sunday, 24.2 percent of the Gulf's oil output was shut in and 8.2 percent of its gas production was offline, according to the U.S. Bureau of Safety and Environmental Enforcement.
Industry-tracking meteorologists put their estimates far higher on Monday.
According to Thomson Reuters division Weather Insight, around 88 percent of U.S. Gulf offshore crude output -- or 1.16 million bpd -- was shut in, while 80 percent of offshore natural gas production was idle.
Isaac's approach had a muted effect on oil prices on Monday. U.S. futures fell 1.3 percent to $95.50 a barrel as of 12:32 p.m. EDT (1632 GMT). Gasoline futures shot up 2.7 percent to nearly $3.16 a gallon.
Gasoline inventories in the Gulf Coast remain at seasonally high levels. For the week to August 17, they stood at 70.2 million barrels, or 1.1 million barrels above their five-year average level for the week, according to Department of Energy figures.
Marathon Petroleum Corp said on Monday it was initiating the shutdown of its 490,000 barrels-per-day (bpd) refinery in Garyville, Louisiana.
Phillips66 said it was in the process of shutting down its 247,000 barrel-per-day (bpd) Alliance refinery in Belle Chase, Louisiana, and that the plant would be offline by late Monday.
Louisiana Governor Bobby Jindal said on Sunday that Chevron Corp is "in the process" of shutting its 330,000 barrels-per-day (bpd) refinery in Pascagoula, Mississippi. Chevron declined comment.
The largest U.S. offshore producer, BP PLC, has shut in at least seven offshore projects since Friday.
Since 2005, billions have been spent on new levees and pumping stations to lessen the blow from tidal surges like those that destroyed part of New Orleans seven years ago during Katrina.
"It's too early to know, but if all goes well this storm will only be a test of the emergency drill," said Citi's Evans. "In that case, energy infrastructure could be back up and running soon."
(Additional reporting by Jeanine Prezioso, Janet McGurty, Selam Gebrekidan and Robert Gibbons in New York. Writing by Joshua Schneyer; editing by Sofina Mirza-Reid, Gary Crosse and Andrew Hay)
