The potential success of Louisiana’s energy industry during the next few years largely depends on how determined industry leaders are to get crude oil and natural gas to the state’s refineries and manufacturing plants, an industry economist said Thursday.
Greg Upton, an assistant professor at LSU’s Center for Energy Studies, was guest speaker during the Atchafalaya Chapter of the American Petroleum Institute’s meeting at the Petroleum Club of Morgan City.
He discussed the center’s Gulf Coast Energy Outlook, a project started in 2017 designed to give synopsis of the energy industry in Louisiana and the entire Gulf Coast region. Researchers hope to make the report an annual one.
The world “is seeing historically low oil and gas prices” due to technological innovations in the United States that allowed for more production, he said.
During the past decade, “everything we know about the energy industry has changed,” Upton said.
Advances in technology have affected where hydrocarbons are produced.
Though total U.S. natural gas production has increased over the years, the relative share of production in the Gulf Coast region has been on the decline due to the boom in the Marcellus shale in the Pennsylvania area, he said.
Nearly all of the large increase in crude oil production has come from the Gulf Coast, but it’s mostly from Texas.
“This creates significant opportunities both for pipeline infrastructure as well as for the downstream sector,” Upton said.
Louisiana has seen about a $100 billion expansion in the downstream sector during the past decade.
Industry leaders must find a way to get oil and gas from out of state and into Louisiana if they hope to keep the state’s refining industry flourishing, he said.
Nearly Louisiana’s entire boom associated with shale plays, with the exception of the Haynesville shale in north Louisiana, has been in the refining and petrochemical industry, Upton said.
Low natural gas prices aren’t good news for oil and gas producers, but they’re excellent for the vast expansion of chemical plants, Upton said. In 2017, prices ranged from $2.50 to $3.50 per million cubic feet, according to Upton’s report.
“Gas is their feedstock and if they have access to inexpensive gas and they think that that’s going to continue into the future, that’s what allows them to make these really large investments in the southern part of our state,” he said.
Researchers are still projecting “relatively low” natural gas prices for 2018 with the highest projected price at $3.73 per million cubic feet, Upton said.
For crude oil, 2017’s average prices ranged from about $45 to $58 per barrel. Projections for 2018 range from $55 to $75 per barrel.
“Prices are definitely rebounding and staying steady,” he said.
The positive side of stable prices is that companies can plan. Significant technological advances have occurred more in different shale plays across the United States than in south Louisiana due to more opportunities in other areas. U.S. natural gas production is forecast to increase for many years, but that production has shifted from the Gulf Coast to the northeast.
“We’ve got to have the pipeline infrastructure to get the gas down here if we want to support the refining and chemical industry,” Upton said.
Louisiana dropped from roughly 50,000 workers in the upstream oil in January 2016 and gas industry down to 33,000 in January 2017.
“The good news is with stabilizing prices, we’re expecting it to creep back up over the next few years,” he said. “But we’re not expecting to get back to the level we were at in 2015 for quite some time.”
Conversely, Louisiana “bottomed out” around 2007 at 32,000 jobs in the refining and chemical manufacturing sector, he said. The jobs in that sector have risen to about 38,000 today because of cheap natural gas and refinery upgrades that are taking place.
“We’re expecting that to grow into the future,” he said.
Despite that state’s shift from more oil and gas production jobs to more refining and manufacturing jobs, Louisiana is still “an oil and gas state” with 10 percent of the state’s payroll coming from this industry, Upton said.
“But it’s not historically the kind of oil and gas state that we’ve … thought of. It’s the refining and the chemical plants that we’ve seen the growth in,” he said.
