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September 28, 2016
A state oil and gas advocate gave local industry leaders an update on the sluggish energy sector’s current state and future outlook.
Louisiana Mid-Continent Oil and Gas Association President Chris John talked about the state of the oil and gas market at last week’s South Central Industrial Association meeting. He covered the challenges and opportunities facing the industry on the state, national and local levels.
John examined the depressed price of oil, currently sitting at around $46 per barrel, which represents the commodity’s peak over the last year and a far cry from the $93 per barrel price from two years ago. He pointed to the global market’s effects on the low prices, high-lighting the Organization of the Petroleum Exporting Countries’ flooding of the oil market to harm United States shale production.
John expressed optimism the price would soon rise, saying the median price of oil since the 1970s has been in the $70-80 range, which he thinks is a range where the world market is comfortable. According to him, the current sub-$50 price of oil is unsustainable.
“We’re on the bottom end of what a price of oil should be, and I think there’s some reason to be optimistic about where we’re going now,” John said. “It’s bottomed out; it’s basically hovering on the bottom, so I don’t think it can go any lower. It has to go higher.”
The LMOGA president looked at upcoming elections as the most imposing national challenge. He said he thinks either president would be more amenable to the oil and gas industry than President Obama, although he bemoaned the choice Americans must make between the two main candidates. John said if industry leaders had interests in maintaining oil-friendly Republican influence, it should look toward the Senate, where a flip of five seats would return a majority to the left.
On the local level, John noted the legal challenges the industry is facing from parish and state entities. He pointed to lawsuits from a host of parishes including Jefferson, Plaquemines, Vermillion and Cameron alleging oil companies violated coastal use permits from decades ago. The lawsuits seek damages for environmental harm the energy companies caused through dredging canals and other means during oil exploration. The state, under the Gov. John Bel Edwards administration, is trying to intervene and join the suits, although pro-oil state attorney general Jeff Landry has tried to hamper the case.
Terrebonne and Lafourche parishes have yet to enter the fray of those lawsuits, although Lafourche Parish has hired the Block Law Firm of Thibodaux to quantify any damages it would be due. Lafourche Parish President Jimmy Cantrelle said the parish has no plans to sue the oil and gas companies unless the state does indeed file suit on behalf of all the affected parishes. If the state were to file suit without Lafourche joining, the state would get 75 percent of the damages for itself, according to Cantrelle.
Last month, a Jefferson Parish judge dismissed one of the Jefferson Parish lawsuits, saying Jefferson had not exhausted all state department remedies regarding the damage. If the parish does go through all avenues of state remedies and is not satisfied, it is able to re-file its lawsuit. John said the dismissal was good news for LMOGA, of which many members are defendants in these suits, as it will apply the same logic to the other cases.
“That’s what we in the oil and gas industry have been saying all along. If we violated some permits, let’s talk about the permits. Let’s go find the permits and deal with them,” John said.
The LMOGA president presented even further optimism for oil production in Louisiana, noting prognosticators had previously questioned the viability of gulf exploration.
“They basically said that the Gulf of Mexico, 15 years ago, was sold off for dead. Nothing’s going to happen, all the oil’s gone,” John said. “Well, they were very much proven to be wrong. It’s the hottest offshore oil market today. If you’re drilling offshore, you’re drilling in the Gulf of Mexico today.”
Louisiana Mid-Continent Oil and Gas Association President Chris John speaks to SCIA members this past week at the Quality Hotel in Houma. He expressed optimism about the industry.
