"Although Hurricane Katrina moved through a core area of offshore operations and damaged many production and exploration facilities, early reports indicate that the vast majority of facilities could be ready to come back on line in days and weeks, rather than months," Assistant Secretary for Land and Minerals Management Rebecca Watson said last week as she testified before the U.S. Senate Energy and Natural Resources Committee about the status of offshore oil and natural gas production in the Gulf of Mexico.

Gas prices are likely to remain above average due to a decrease in the nation's refining capacity.

"There is now a greater realization that we don't have much extra capacity," Edward H. Murphy, a refining specialist at the American Petroleum Institute, said.

As peak winter demand looms, the slow recovery in the aftermath of Katrina's fury leads industry analysts to fear supplies could remain tight for the consumer.

Without a functioning energy infrastructure, gas supplies will be challenged in meeting demand as oil refinement is delayed. Four producing refineries, which account for approximately 5 percent of total capacity, are expected to remain off line for several months, the Energy Department said. This is enough to make a difference in the skittish market.

Some 11 percent of the facilities were damaged during Katrina's wrath. Supplies from the Gulf of Mexico provide 29 percent of U.S. domestic oil production and 21 percent of U.S. domestic gas production.

Katrina's initial impact was greater than that of Hurricane Ivan and the pace of restoration is proceeding at a slower pace than after Ivan.

At this point after Ivan, approximately 64 percent of the shut-in production of gas and 68 percent of the oil production has been restored. The progress after Katrina, however, is slower with 54 percent of the gas and 40 percent of the oil back on line.

At its peak on Aug. 30, 95 percent of daily oil production and 88 percent of daily gas production was shut down for environmental and human safety. Those figures currently stand at 58 percent of oil production and 42 percent of natural gas production.

"A full assessment of the damage from Hurricane Katrina will require several more days," Watson said. "Many facilities have still not been inspected by their operators."

No significant spills have yet been reported.

"All safety systems worked to successfully shut down production on the OCS (Outer Continental Shelf) platforms," added Watson.

Katrina destroyed 4,000 U.S. Outer Continental Shelf production facilities and 37 shallow water platforms and four large deep-water platforms. The latter could take between three to six months to bring back on line.

Some pipelines suffered damage that could take months to repair, while others have been inspected, tested, and have already commenced operations.

"Despite this damage, about 90 percent of Gulf oil production could return to the market in one month, if refineries, processing plants, pipelines and other onshore infrastructure are in operation to receive, prepare and transport it to the consumer," Watson told the Senate Committee.

Despite a demand increase for refining, crude demand dropped.

In London, Brent crude Monday slipped $1.62 to settle at $62.28. West Texas Intermediate also slipped $1.43 to end At 63.70. Crude prices are now $8 below the Aug. 30 record of $70.85.

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