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Irene to deal blackouts, oil disruptions to U.S. East

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NASA satellite image of Hurricane Irene moving through the Bahamas
NASA satellite image of Hurricane Irene moving through the Bahamas

By Joshua Schneyer and Janet McGurty

NEW YORK (Reuters) - Energy companies on Friday activated emergency plans as the densely populated U.S. East Coast braced for blackouts from Hurricane Irene that could affect millions.

Oil refineries in the U.S. Northeast scaled back operations and pipeline operators warned of potential delays for fuel distribution. The Coast Guard said it had no plans yet to shut the New York Harbor, but energy traders said delays could affect the delivery hub for millions of barrels a day in crude and oil products, by pipeline, barge and ship.

Storm-caused blackouts could be a huge menace, energy experts, meteorologists and U.S. officials warned.

"The range of possibilities from this storm is enormous," said energy analyst Tim Evans at Citi Futures in New York.

"We could see anything from blackouts putting the entire Northeast in the dark, to only very localized problems."

At 2 p.m. (1800 GMT), Irene's center was 300 miles south-southwest of Cape Hatteras, North Carolina, churning northward. It weakened early Friday to a Category 2 hurricane from a 3 on the five-step Saffir-Simpson scale, but was expected to retain hurricane force and scour the length of the mid-Atlantic coast on Sunday.

The Federal Emergency Management Agency said power outages could last days, with flash flooding in coastal areas and strong winds expected to reach far inland.

Irene may leave 5 million to 7 million people without electricity, a Deutsche Bank meteorologist wrote in a report, adding high tides due to a new moon on August 28 could exacerbate storm surges.

Although the East Coast does not have major offshore oil and gas production like the hurricane-prone Gulf Coast, its huge power and pipeline networks, nuclear plants and refineries mean the energy stakes are high as Irene bears in on North Carolina.

The storm threatens to tear up to the Northeast starting Saturday.

KATRINA AS PRECEDENT

Hurricane Katrina in 2005 knocked out Gulf Coast refining for weeks, months for some plants, while the last major hurricane to batter the East Coast, Gloria in 1985, left millions without power but caused little lasting damage to energy infrastructure.

As a category 2 storm, Irene already packs winds between 96 and 110 miles per hour and storm surges of 6 to 8 feet.

East Coast utilities were lining up thousands of workers from as far away as Texas to descend on storm-ravaged areas through the power industry's mutual aid program. Crews would clear fallen trees and debris and restore power as quickly as possible after Irene passes.

"If the storm tracks anywhere close to the worst-case scenario, it will be a very major mobilization," said Jim Owen of trade group Edison Electric Institute.

East Coast oil refineries, which process up to 1.6 million barrels per day (bpd) of crude, planned to brave Irene without total shutdowns. But some were scaling back, the National Petrochemical and Refiners Association (NPRA) said.

Sunoco's Marcus Hook refinery in coastal Pennsylvania has cut rates by 25 percent to 140,000 bpd, a source familiar said.

Irene's severity had nuclear power plant operators near the coast securing equipment and battening down the hatches.

Dominion Resources Inc, which shut its Virginia-based North Anna nuclear plant on Tuesday following an earthquake, said the plant would remain closed through the storm.

Hurricane winds may cause Dominion to idle other reactors along the seaboard over the weekend, the company said, even though they are built to withstand winds of up to 360 miles per hour.

POTENTIAL DISRUPTIONS

Any closure of the New York Harbor could create backlogs of ships waiting to deliver crude or fuels, but would not be likely to cause a prolonged supply crunch.

Oil terminals in the East Coast region had around nine days of crude supply on hand last week.

The consumption region, known as PADD 1 in the refining industry, depends largely on imports of fuel, and its depots currently hold enough gasoline to cover 23 days of regional demand, 46 days for heating oil, according to the NPRA.

The largest U.S. refined products pipeline, 2.37 million bpd Colonial line, continued to operate normally on Friday but said it expected deliveries to be partially affected by Irene.

Colonial ships fuels including gasoline and diesel to terminals in Irene's projected path, including Virginia, Maryland, and New York Harbor, where the line ends.

"This is not Katrina," said Jim Beck of the U.S. Energy Information Administration.

"PADD 1 has plenty (of crude) to ride out any kind of supply disruptions. We are well-covered with (oil) products for this time of year."

Several oil terminals were due to close temporarily. Pipeline and terminal operator Magellan Midstream partners was shutting oil terminals in North Carolina and Virginia on Friday. Enterprise and Kinder Morgan planned to close some coastal terminals.

Prices of front-month gasoline futures in New York Harbor retreated 1.1 percent on Friday. They had gained more than 3 percent Thursday on concerns over supply disruptions.

In the Bahamas, which was pounded by Irene on Thursday, Buckeye Partners said its massive 21.6 million barrel Borco oil shipping terminal was restarting on Friday.

(Reporting by Janet McGurty, Selam Gebrekidan, Jeanine Prezioso, Eileen O'Grady, Joe Silha, Eileen Moustakis, David Sheppard, Robert Gibbons, and Kristen Hays; Editing by Marguerita Choy, Alden Bentley and David Gregorio)

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