Jerry ThibodeauxJune 1, 2017
STILL FINDING DEALSJune 1, 2017
For nearly four years the Bayou Region has suffered from falling jobs, failing businesses and dismal predictions, largely attributed to low oil global prices.
But close examination reveals that what was once described as a global oil glut is only part of the picture. Other factors – including the boom in upland extraction of oil and gas from shale – have played major roles in the region’s decline but may also aid a new rise in fortunes.
Local industry voices recognize the signs of what’s gone wrong, but express hope in what is yet to come.
“Our marine industry is still in flux,” said Jane Arnette, executive director of the South Central Industrial Association, a leading regional business organization. “We are at a critical point where every local, state and federal issue must be taken seriously. What happens all over the world has repercussions for the industry. We are a resilient group and will survive. It will be a slow process to recovery.”
Marine transportation and other oilfield services – tool rental, personnel management to name just a few – are the lifeblood of local economies. Locally, they have developed product lines, workforces with specific skills sets, and rolodexes tuned for responses best married up with the traditional deep-water oilfield. But while the economies in some communities slide, those of others not so far away boom further upward.
Pat Gordon is planning director for South Central Planning and Development, which aids businesses throughout the Bayou Region, of necessity keeps track of such things.
“We do see the entire economy of our region and we see those parishes dependent on oil and gas, St. Mary, Terrebonne and Lafourche, with sales taxes going down and the economy not nearly as good as 10 years ago. But the parishes along the Mississippi River, St. James, St. Charles, those with petrochemical plant, with the low price of natural gas all their industry runs are doing extremely well. Right now St. Charles is blowing and going.”
The news is not all bad from Terrebonne, Lafourche and St. Mary, however. There are signs that things are picking up, though not in the way people might have thought.
“In Terrebonne the sales tax is stabilizing compared to last year,” Gordon said, noting that sales tax and associated retail businesses are a marker for the good fortune other parishes are having. “They are not seeing the sales tax collections beginning to plummet.”
Terrebonne Parish records bear that out.
Four months of sales tax collections ending at April in 2014 measured $47,728,775.20. A year later for the same period, sales taxes had dropped to $43,046.562.97, then in 2016 to $41,099.830.02.
This year, however, gross sales tax collections fell to $40,290,736.77. That means the gap, from a fall of nearly $5 million two years ago, had fallen by a comparatively mild $2 million the following year, and finally by just a million the year after that.
One reason for the break-fall, Gordon opines, is the continued surge of jobs in surrounding areas.
Consumers working in St. Charles are traveling to Houma for their shopping in some instances, rather than New Orleans or Jefferson Parish. While the observations of planners and growth experts might not appear on target to local workers who have lost jobs or hours due to the economic slowdown, Gordon said the hard times need to be kept in perspective.
“I remember the 1980s with 25 percent unemployment,” Gordon said. “More welders become crabbers than ever before. Everyone had to find some job to pay their bills. We are currently looking at 7.2 percent unemployment.”
The region, he said, has been cushioned this time around by diversity.
“The medical industry has developed much greater than in the 1980s,” Gordon said. “Highway 90 is completed and more people living in Assumption and St. Mary come to Terrebonne to shop. “
A lot of the oilfield jobs lost in Terrebonne and Lafourche, Gordon noted, were held by people who were not residents of Lafourche or Terrebonne, which also lessens the economic impact to a degree.
A study done by the Terrebonne Economic Development Authority around 2010 showed that 45 percent of people employed in key oilfield service sectors were not from Terrebonne Parish, even though they worked there.
The difference in how fortunes are recorded in energy is upstream vs. downstream. Upstream – locating and sending oil or gas into the market from this area – is what has been doing poorly. Downstream – becoming a recipient of oil and gas and then processing it from points north – is what is doing well.
Making change from one to the other isn’t always easy.
“We have companies that are reaching out into that downstream sector,” said Katherine Gilbert, the Terrebonne Economic Development Authority’s director of business retention and expansion. “There are some with varying degrees of success. Our people here can build anything. It’s more about being able to make those connections. Plants have existing relationships and companies they work with routinely. It’s a challenge to become one of those go-to places or calls.”
In essence, Gilbert and others agree, a big part of the challenged is about the Rola-Dex, getting new companies into your own and getting yourself into those of the companies who might buy what you sell, but maybe never have before.
From Gilbert’s perspective the news is not bad, at this point, or not as bad as it has been.
“I do see, and even the labor department numbers show, some companies have begun picking up a few employees at a time,” Gilbert said. “I don’t want to call it growth. It’s more a reconstitution and it depends on what sector that company works in or can work in. Maintaining pipelines, the work is steadier because there is going to be some degree of maintenance . Upstream it’s a little slower. If you can work on the downstream, the refining side, there is certainly growth occurring there. It depends on what portion of the market you serve and when it will come back to your sector. There are more jobs. People are looking for experience, though not in great numbers. But yes the stream is starting to flow a little better.”
What Gilbert and others have been seeing at ground level has been a great area of study for LSU Center for Energy Studies Director Gregory Upton. His vantage-point is global.
“We have seen a fundamental transfer of both the oil and energy market over the last decade,” Upton said. “What we had was since the 1970s are decreases in crude production. We offset that with imports that came into our refineries. With shale that has completely reversed. We had increasing imports when shale came along. Our refineries have had to adapt and it has changed the infrastructure. Now we are getting the crude traveling down to here. The infrastructure for that wasn’t here. We have been put in a unique position to become this trading center or hub for oil.”
The Gulf coast market has the potential, Upton said, to increase domestic handling of oil that comes from shale, rather than from the ocean.
The deepwater production he said, was never truly affected to a great degree by global oil prices, since such exploration is done over such a long period of time.
“Going back in time everyone was looking at the GOM, what were the biggest discoveries there,” he said. “The growth at the Gulf of Mexico has historically been stable. Deepwater offshore has a long time horizon on investment. With shale it is different. I can decide tomorrow I am going to build a well, thinking in months and not years.
With the price continuing to be low for a couple of years, now the companies are adjusting, he explained.
“Decreasing drilling operations in the Gulf and moving into production at shale areas will be detrimental for Louisiana’s work force,” Dr. Upton said. “It is a tale of two states. Upstream is having a hard time, Lafayette, Houma, Thiboaux hit really hard,” Upton said. So long as the oil companies continue to value the long-term potential of the Gulf of Mexico, he maintains, the picture will brighten locally.
“Those labor markets will stabilize and be fine,” Upton said, noting that there is another potential. “If the big players decide to leave the Gulf of Mexico entirely and we see a fundamental shift, we could see a long-term fundamental change and right now nobody knows.”
A fleet of boats sits tied up in the water in Lafourche Parish – a sign of how slow work is throughout Louisiana. Industry experts said it’s possible for a recovery, but several factors are in play.
Workers work on an oil platform in the Gulf of Mexico. At press-time, deepwater drilling remained down, though many are hopeful of a rebound in the very near future.