Slump? Yes. But hope remains: Officials optimistic that oil and gas can recover
September 27, 2017
Galliano airport booming: Facility setting records for passengers
September 27, 2017
Chett Chiasson has seen every end of the spectrum in his many years as the executive director of Port Fourchon.
He’s seen the good times – the days when oil was priced at $100 a barrel and work was plentiful. In those times, companies were making money hand over fist, which spilled out to employees and ultimately the local economy.
“Those were the good days,” Chiasson said. “Everyone was happy.”
But he’s also seen the bad – like right now. At press time, oil hovers just north of $40 a barrel, but usually south of $50 – a place where companies fight to create enough profit in their drilling endeavors to get above their break-even point.
As a result, work at the port has slowed, and folks living in Southeast Louisiana, Chiasson included, are clinging to hope that things might soon be back to normal.
Chiasson said leasing at the port remains good but added that customers within those leases are struggling and are hanging on with hopes that the future will be better than the current rut the local economy is in.
“Things have been interesting for us from a new lease standpoint. We’re excited about that,” Chiasson said. “But it’s been pretty slow for our customers. They’re still struggling to hang in there. There’s just not much work right now. It’s been pretty slow.”
The good news is that the port has been proactive to help tenants out in their time of need.
When the economic downturn first started, officials with the Greater Lafourche Port Commission voted to reduce rent in an effort to make it easier for businesses to stay invested in the port.
That rent reduction has been huge for companies, according to Louisiana Oil and Gas Association President Don Briggs, who applauded the decision as it happened.
“Any help is welcomed help,” Briggs said. “I think that’s a good decision and it will help make sure companies can stick around for the long haul while we ride out this wave.”
But the “wave” has turned into more of a tsunami, and the downturn has lasted far longer than anyone has expected.
Chiasson said the root of the problem comes down to supply and demand.
Right now, there’s a glut of Middle Eastern oil on the market, and the global demand for oil hasn’t risen to keep up with the excess supply, which has caused the drop in price.
Chiasson said he believes the industry will recover – like it has in the past. But the good news stops there, because he believes the slump will continue now and into the immediate future.
“I wish I knew,” Chiasson said when asked when things will get better. “I would say we’re going to be living with this through 2018 barring anything outstanding that happens worldwide on the global market. It just looks to be a struggle for a little bit – unfortunately. I think we will be dealing with this for several months longer.”
Chiasson said the rent reduction will also stick in place as long as the slump continues, adding that the port is committed to working with tenants to keep business moving forward.
“The reduction is still in place,” he said. “And it’s going to continue until something changes. It was a 20 percent basic land rental reduction and we’re committed to that until the price can rise and work can come back.”
Now, for a little good news – companies aren’t giving up on the hope that brighter days are ahead.
Chiasson said the port recently changed its leasing plan for waterfront sites, switching from a 10-year to a 15-yard primary term, which expanded some of the costs involved with having a bulkheaded site.
Because of that, businesses have bought in and are expanding their services with an eye toward the future.
“Ever since we changed that five months or so ago, we’ve leased three new sites at the port,” Chaisson said. “We’re very excited about that. Those companies are expanding. Oceaneering is expanding. They have a need for a larger site than their current site. Omni also has a new lease. That’s another expanding company. FCC Environmental Service is another expanding company. Oceaneering has a 1,200-foot dock lease. Omni is at 950-feet and FCC is at 939 feet. That’s all in Slip C and that’s all very exciting news for us.”
The port is also on the back-end of its Section 203 Feasibility Study, which seeks to investigate utilizing deeper drafts at the port.
Chiasson said a draft of the report should be done by November and the full thing should be ready by April 2018.
“We’re really excited about that,” Chiasson said. “What that’s going to tell us is the environmental and economic justification for going to depths of 35 feet, 40 feet, 45 feet and 50 feet. We’re excited about that report coming out and right now, things are looking good that all those depths will have both environmental and economic justification.”
But all the future planning and expansion projects mean little to workers who are struggling right now, so Chiasson said he knows a lot of companies are in need of a boost.
He said he’s grateful to the loyalty the port’s tenants have showed, which reinforces to him that Fourchon is providing the best services possible for the industry.
“We’ve been fortunate that our tenants have stayed with us and their customers have stayed with them in utilizing Fourchon as a service base,” Chiasson said. “That tells me our Port and our tenants are providing the best services in the world in the oil and gas industry. This is important to drilling, production, special projects and in general, just to providing energy to the nation. That’s what we’re seeing right now – that there are world class services out of Fourchon and people are sticking with it. We’re grateful to them for that.”
WHAT HAS TO HAPPEN IN THE FUTURE
Chiasson said that while everyone would love for the price of oil to go back to $100 a barrel, that’s actually not the point it needs to be for businesses to be making money again.
Chiasson said the industry leaders can work with a number far less than that and still be prosperous, adding that sustainability isn’t too far off from the current $45-50/barrel levels – a cause for optimism in the industry.
“We’d all take $90, $100 or $110, obviously,” Chiasson said with a laugh. “But we just need a boost. I think everyone can manage $65 to $70 a barrel. I think if we can get back to that point consistently, the majority of the work would come back.”
The executive director also said that politics plays a role in the business of oil, adding that President Donald Trump has proven willing to work with the oil and gas industry to make business easier.
Chiasson said concrete changes haven’t yet been put into place, but oil and gas regulations are widely expected to be restricted in the future, which will bring down the cost of doing the work, thus, making it easier to turn a profit.
“The less restrictive you can make it while still being safe and good to the environment, the cheaper it makes the cost per barrel,” Chiasson said. “So that’s been what’s keeping people around in my opinion. There’s willingness of this administration to limit the regulatory process so that it’s more efficient so that allows for a cheaper way to provide the safety features that are necessary. … That is where we might see some fluctuation. The break-even point will be lower. We haven’t seen it yet, but it’s in the process. That will make the prices of projects better, which will help our business.” •
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