Economist: Oil, gas industry booming in La.

The economic outlook for the oil and gas industry locally and statewide is impressive, according to economists and tax assessors.

A combination of historically high prices, new oil discoveries, and the expiration of the Congressional ban on offshore drilling in parts of the Outer Continental Shelf should keep energy companies busy and profitable.

“You can expect any city with a heavy emphasis on oil and gas to do well for the next couple of years,” said Dr. Loren C. Scott, LSU economics professor and president of the Baton Rouge-based economic consulting firm Loren C. Scott & Associates.

While the price per barrel of oil has dropped from its $143 high this summer to under $100, Scott forecasts it will stay in the $80 to $100 range next year.

He also forecasts natural gas prices in the $6.50 to $8.50 range, which is very good for that industry.

However, Scott warns that predicting oil and gas prices is “the most difficult thing to forecast.”

That is because two-thirds of the world’s oil is in countries where the market is not allowed to work or the government is running the oil companies.

“Imagine for a moment if employees of the state of Louisiana ran ExxonMobil,” he said. “That gives you an idea of what’s going on over there.”

Scott also said consumers can look forward to a slight decrease in the price of gasoline in 2009. Even though gas prices are down about 40 cents from their summer peak, it does not match the decline in oil prices because most of that oil has not reached the refineries yet.

“It takes about six weeks for oil to be put on a tanker in Saudi Arabia and come over here to be refined,” he said. “We’re not yet seeing at the pump the lower oil prices that we’re seeing right now.”

The 370-mile long Lower Tertiary oil find in the Gulf of Mexico is over 28,000 feet deep and is about 200 miles from the Louisiana and Texas coastlines. That has laid the foundation for even more exploration in the Gulf of Mexico.

“At one time, we were getting worried that the Gulf might be matured and there wasn’t much new to explore out there,” Scott said. “Now with the Lower Tertiary being discovered, we know we have years of work to go explore, service and produce in that area.”

Exploration and production at the Haynesville Shale natural gas field in northwestern Louisiana has doubled and may soon quadruple as more leasing takes place, according to Scott.

“A lot of people are being made millionaires overnight,” he said.

There may be a short-term boom for local oil and gas service companies as well.

Hurricane Ike has shut down much of the oil field services in Galveston when it struck the Texas coast last month.

That could mean increased demand for services from Port Fourchon.

“Port Fourchon is servicing over 90 percent of the entire U.S. Gulf of Mexico’s deepwater exploration and production activity,” said Henri Boulet, executive director of the Louisiana Highway 1 Coalition. “It may be 100 percent right now because Galveston has been hit pretty hard. It will be relied upon tremendously in the next few weeks.”

The oil and gas industry directly employs about 10,000 workers and facilitates another 5,000 on boats in the Tri-parishes, according to Dr. R. Morris Coats, economics professor at Nicholls State University.

Oil and gas sales in the area totaled $2.5 billion in 2007, Coats said. That is over 11 percent of the $22 billion in total sales output.

“It (oil and gas industry) is almost everything in this area,” Coats said.

The Tri-parishes have collected handsomely from the recent oil and gas boom.

Lafourche Parish has accumulated over $81 million in tax revenues from the industry since 2005, including $29.7 million last year.

Terrebonne collected $17 million in 2007.

Calls for figures from St. Mary Parish went unreturned as of press time.

Using an Amherst, Mass. based Regional Economic Models Inc. (REMI) forecasting model, Coats illustrated how depended the local economy is on oil and gas.

“If we had an additional $1 billion in oil and gas sales, that would bring in an additional 12,000 workers to the area,” he said. “It would also increase the average pay of all workers, not just oil and gas workers, by about $800 a year.”

The model also ran a scenario of what the local economy would be like if the industry was removed.

“Losing that would not only cost those 10,000 direct jobs, but it would also cut 17,500 jobs from the area,” Coats said. “That’s the immediate impact, and it would get worse from there.”

Dr. Scott will present his “Louisiana Economic Outlook for 2009-2010” at a luncheon Thursday, Oct. 16 at Noon, at The Cypress Columns hosted by the South Louisiana Economic Council.

To register, visit www.bayouregion.com.

The cost is $40 and the deadline for registration is Thursday, Oct. 9.