The delay will keep a large amount of gas off the market longer and deprive Exxon and its partners of revenue at a time when plunging commodity prices are putting pressure on energy producers.

The liquefied natural gas, or LNG, facility was inundated by seawater during Hurricane Ike, and assessing the damage has taken weeks. People briefed on the matter said the scheduled mid-2009 commissioning of the terminal will be delayed.

Exxon spokeswoman Kimberly Brasington declined to provide any estimate of costs or when the facility would be ready for business. "Construction at the terminal is progressing as the project team continues to assess the full impact and determine any restorative work that will be needed," she said.

The setback for Exxon's Golden Pass LNG terminal project comes at a critical juncture. Oil and natural gas prices have sunk to their lowest level in years amid the global economic recession, and energy companies are trying to avoid additional costs in the difficult economic environment. Meanwhile, natural gas demand and prices have fallen sharply this year, so the additional imported gas likely would have added to oversupplies next year and helped push prices down further.

When Exxon opens the terminal, it will be the third-largest U.S. LNG import facility and be capable of adding about 2 billion cubic feet of gas daily, or about 3% of current consumption.

The impact of the September storm underscores the vulnerability of the massive energy infrastructure along the U.S. Gulf Coast to hurricanes in the Gulf of Mexico. Hurricanes over the past few years have destroyed pipelines, gas processing plants, offshore platforms and flooded refineries, sending crude oil, gasoline and natural gas prices up in their wake.

Exxon Mobil had previously said it suffered "some hurricane impacts" from the storm, but has not disclosed the extent of the seawater intrusion.

Mark Robinson, director of the office of energy projects at the Federal Energy Regulatory Commission, which regulates LNG import terminals, said the facility was swamped by 14 feet of seawater after Hurricane Ike swept ashore near Galveston, Texas, 65 miles to the west. "There was a fair amount of damage associated with the [storm] surge," said Robinson. "Each and every part of that project needs to be assessed to determine if there was corrosion."

Exxon filings with FERC also suggest substantial damage. Beginning in mid-November, Exxon began removing specialized steel-nickel plates from four massive storage tanks, according to weekly reports. These tanks are where super-cooled liquefied natural gas, or LNG, is stored and allowed to warm and expand before it is distributed by pipeline. When the temperature of natural gas is lowered to about 260 degrees below zero degrees Fahrenheit, it turns into a compressed liquid and can be shipped overseas on specialized thermos-like boats, then offloaded into the storage tanks at the terminal. The company also began to replaced damaged insulation at that time.

Robinson said there was a 16-foot sea wall around the facility, but that Exxon had not closed it off yet. This allowed Hurricane Ike to push a wall of sea water into the construction facility.

Exxon Mobil is building the Golden Pass LNG terminal to take shipments from Qatar, a Middle Eastern nation that is one of the world's largest suppliers of natural gas and a key business partner of the Texas-based Exxon. Qatar Petroleum will own 70% of the terminal, with Exxon and ConocoPhillips (COP) sharing the rest.

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