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Written By Claire Taylor

Low, stable natural gas prices, an improved business climate and manufacturers moving back to the United States give Louisiana’s economic development secretary Stephen Moret optimism about the state’s economic recovery over the next few years.

Moret, who released the Louisiana Economic Development department’s 2011 annual report Thursday, cautioned that the state’s economy could be slowed if the national economy worsens and if concerns linger over federal regulations such as environmental rules and Obamacare.

The national recession that hit the nation in 2008 affected Louisiana later, Moret said. Louisiana also was one of the first states to begin emerging from the recession, recovering jobs lost faster than most other states, he said.

Moret touted economic development successes of 2011, revisiting a long list of new industry and expansions announced in the past year. That list included several Lafayette Parish projects such as an expansion of the Schumacher Group’s headquarters in Lafayette, expected to create 600 new jobs in the next five years; a new Halliburton manufacturing facility in Lafayette, creating 150 new jobs; and Maritime International of Broussard, which is moving its harbor protection systems production home base from China to Louisiana, creating 90 new jobs.

Across the state, new industry and expansion in Louisiana are expected to create some 20,000 new jobs and generate $18 billion in new capital investment, Moret said. As these projects become reality, they’re expected to generate hundreds of millions of dollars in new sales for Louisiana small businesses and more than $55 million a year in new state sales taxes.

State officials have worked hard to improve Louisiana’s business climate and rankings by national organizations and magazines such as Forbes. In four years, the state has seen “tremendous improvement” in those rankings, which are important in building confidence that Louisiana is an attractive place to do business, he said.

Acadiana received its share of national attention in 2011. RelocateAmerica named Lafayette one of its Top 100 Places to Live in 2011 and Southern Business and Development named Lafayette a “true digital media hotspot” in the South.

Overall, the state still is not where economic development officials and Gov. Bobby Jindal want it to be in national rankings, trailing Texas and a few other southern states, but Louisiana is moving up and is a contender.

The low, stable price of natural gas is the one thing that “is going to have a profoundly important impact on the Louisiana economy,” Moret said.

As important as the Haynesville Shale natural gas discovery in North Louisiana is, its possible secondary effects are even bigger, he said, predicting a “very robust sustained construction boom in Southwest Louisiana” chemical and energy industries.

Because there’s so much inexpensive natural gas in Louisiana because of finds like the Haynesville Shale, Louisiana has gone from the 14th most expensive state for manufacturers to the 14th least expensive based on electricity rates, Moret said.

“Now it’s become a significant advantage,” he said.

There’s also a growing belief that some U.S. manufacturers who fled to China will be returning soon as productivity adjusted manufacturing costs become comparable.

“Hundreds of jobs could be created in the South,” Moret said.

Louisiana with its rivers, ports, labor costs, competitive industrial electricity rates and other factors is well positioned to attract some of those returning less labor-intensive manufacturers, he said.

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Companies working in the Haynesville Shale now have another alternative when it comes to providing fresh water for hydraulic fracturing.

Heckmann Water Resources announced Wednesday that water from the Red River is flowing through a PVC pipeline that will be 40 miles long when fully commissioned. It represents the largest fresh water line in the shale area.

The company anticipates having the pipeline fully operational next year. It will be capable of carrying up to 60,000 barrels of water a day. Delivery of about 16,000 barrels is projected for this month based on initial orders.

The company has located reservoirs along the pipeline route to hold water transported from its Red River water supply. Ultimately, plans are to draw from the Sabine River, too, the release states.

Heckmann officials discussed more than a year ago a desire to pull water from the Sabine River but have not followed up with formal talks, Sabine River Authority Executive Director Jim Pratt said Thursday.

“Our fresh water pipeline enhances the efficiency and reliability of our total water solutions for HWR customers in the Haynesville Shale area,” Richard J. Heckmann, chairman and chief executive officer of Heckmann Corp., said in a prepared statement. “Having secured fresh water sources and operating a fresh water pipeline in the Haynesville Shale area augments the full range of HWR water services and enables us to provide our customers with even more competitively priced fresh water solutions.”

Heckmann is not the only company installing a water pipeline. In August, Select Energy Services LLC announced the acquisition of a 12-mile industrial pipeline installed last year by EXCO Water Resources.

It delivers processed water from International Paper Co.’s Mansfield Mill to EXCO’s Holly Field northeast of Mansfield. Select plans to market the water to other operators working in the Haynesville Shale region.

Water sources for fracking have been a hot button issue this year in light of the area’s drought conditions. Oil and gas operators have been pushed to surface sources so as to not further affect aquifers that are stressed from a lack of significant rainfall over the past two years.

But this year, even the surface sources have dwindled. Private ponds are drying up, and the Toledo Bend Reservoir, which is fed by the Sabine River and any rainfall runoff, is at its lowest level ever.

On average, 6.3 million gallons of fresh water are needed for each natural gas well fracking operation in the Haynesville Shale area.

The water returns to the surface over time, with about 20 percent returning as flowback water within the first two to three weeks after the fracking has commenced, and the remaining water is generally returned to the surface as produced, or saltwater, over the life of the well, which can be up to 30 years, according to the Heckmann release.

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HOUSTON, Dec. 15, 2011 /PRNewswire via COMTEX/ — A majority of Americans think developing natural gas by tapping shale formations offers greater rewards than it does risks, including those associated with hydraulic fracturing, according to a survey conducted by the Deloitte Center for Energy Solutions. Moreover, 8 in 10 respondents link natural gas with job creation and economic revival.

Specifically, 83 percent of respondents agree that natural gas development can stimulate job growth in the United States, while 79 percent believe the development of natural gas resources can help revitalize the economies of the states and communities where shale gas is located.

Further, the survey indicates that the public associates jobs in the natural gas industry with good pay. More than half (56 percent) of respondents in areas where shale gas development is planned or underway believe that jobs producing gas from shale formations command a “much” or “somewhat” higher pay grade than the average in their communities. The number jumps to 62 percent when looking at relatively mature shale regions like Texas.

Peter Robertson, an independent senior adviser for oil and gas at Deloitte, points out that the role of natural gas in job creation and economic revival is only going to grow as production of shale gas ramps up. Citing a separate Deloitte research project, Robertson points out that “shale gas made up a small share of domestic natural gas production in 2005, but has surged since then – and in 2010 made up 20 percent of what is produced domestically. By 2030, the portion could be close to 50 percent.”

Shale benefits seen to outweigh risks

Only 2 in 10 respondents (19 percent) feel the risks of developing shale gas “somewhat” or “far” outweigh the benefits; 58 percent believe the benefits outweigh the risks; and almost 25 percent are unsure.

Moreover, a clear majority of respondents (58 percent) in areas where shale development is underway or planned would recommend that their family and friends lease their land to a shale gas developer. In fact, 7 in 10 survey respondents (71 percent) in established shale areas like Texas, Louisiana and Arkansas would advise family or friends to lease their land to a natural gas developer.

The survey consisted of 1,694 online interviews conducted in November 2011 with adults age 21 to 74 and examined three different audience segments: residents of areas where shale gas development is an established phenomenon, specifically Texas, Louisiana and Arkansas (537 respondents); residents of areas where shale is a newer phenomenon, specifically New York (89 respondents in New York City and 162 in western New York State) and Pennsylvania (243 respondents); and finally, the survey canvassed an additional 663 respondents in the United States nationally.

“The survey findings are especially interesting among the more mature shale areas where people are long-accustomed to oil and gas development,” said Gary Adams, vice chairman, Deloitte LLP, and leader of Deloitte’s oil and gas practice. “There, 8 in 10 respondents who currently do, or ever have, leased their land to a natural gas developer (83 percent) would do so again.”

As Adams points out, in contrast, these numbers are lower in newer shale regions – indicating a higher level of discomfort with the processes and technologies involved in shale gas development. “In Pennsylvania and New York, where people are not as used to oil and gas development, a more modest majority of respondents (52 percent) would advise family or friends to lease their land to a natural gas developer. Similarly, a slimmer majority of respondents who currently do, or ever have, leased their land to a natural gas developer (53 percent) would do so again,” Adams adds
Shale seen to improve energy independence and air quality

The survey also indicates that shale gas could play an increasingly important role in making America more energy independent: Respondents with at least some degree of familiarity with shale gas development view energy independence as the single most important benefit of shale – ahead of all other benefits, including: boosting the national economy, job creation, cleaner air, and boosting local economies. And a near majority (47 percent) of national respondents believes shale is “extremely” or “very” impactful on energy independence.

In addition, survey respondents believe shale gas development could improve air quality: 6 in 10 national respondents (62 percent) with at least some degree of familiarity with shale gas development associated the word “clean” with natural gas – making it the top association over other words such as: reliable (47 percent), domestic (41 percent), affordable (40 percent) and abundant (38 percent). Finally, 88 percent of all national respondents think it is at least “somewhat believable” to claim that “using natural gas resources to generate electricity can significantly reduce our carbon footprint.”

Strong need for better dialog, more information on shale

Still, the road to increased shale production is likely to be rocky. There is controversy about the environmental impact of shale development and heated rhetoric – all of which was reflected in Deloitte’s survey.

Most notably, respondents are not familiar with the processes involved in shale gas production: 37 percent of national respondents report being “not very” or “not at all” familiar with hydraulic fracturing – and 23 percent “never heard of hydraulic fracturing.”

Nonetheless, a large percentage of the public is aware of the dominant concerns about shale development. 58 percent of national respondents with at least some degree of familiarity with shale gas development are aware of potential water contamination issues and 49 percent know about the potential for surface-land impact issues.

Curiously, while the news media is seen as the primary source of information on shale (much higher than sources like word-of-mouth, non-profits, industry websites, academics and town hall meetings), it is not trusted: 73 percent of respondents nationally get information about shale development from the news media, yet only 17 percent see the media as “extremely” or “very” trustworthy when it comes to providing unbiased coverage of the natural gas industry.

At the same time, respondents in areas where shale gas development is planned or underway indicate that oil and gas production companies need to communicate better. While nearly half (45 percent) believe shale gas producers are “somewhat” transparent and open, just 35 percent believe shale gas companies communicate “extremely” or “very” effectively. Only 34 percent see shale gas companies as “extremely” or “very” trustworthy.

“There’s so much shale activity in so many parts of the country that it’s important to communicate and operate effectively,” said Robertson. “Everything shale gas producers do gets enormously magnified. That’s why they have to get it right every time, on every well drilled. Consistently operating with excellence and communicating effectively with all impacted stakeholders are critical attributes.”

Interestingly, the survey shows that there is faith that the shale development is currently being regulated appropriately: 54 percent of respondents nationally believe that regulation of shale development is “just right” or “evolving, but on the right track.” Approximately 20 percent think there is too much regulation and 16 percent think there is too little regulation. Ten percent are not sure.

About the Deloitte Center for Energy SolutionsThe Deloitte Center for Energy Solutions (Center) provides a forum for innovation, thought leadership, groundbreaking research, and industry collaboration to help companies solve the most complex energy challenges. Through the Center, Deloitte’s Energy & Resources group leads the debate on critical topics on the minds of executives – from the impact of legislative and regulatory policy, to operational efficiency, to sustainable and profitable growth. The Center provides comprehensive solutions through a global network of specialists and thought leaders. With locations in Houston and Washington, D.C., the Center offers interaction through seminars, roundtables and other forms of engagement, where established and growing companies can come together to learn, discuss and debate. www.deloitte.com/energysolutions .

As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

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The United States has nothing to lose from exporting liquefied natural gas, according to a new independent review commissioned by Deloitte.

Bill Lehane and news reports  15 December 2011 15:43 GMT

The report found that exporting LNG would not adversely impact domestic consumers as the upward effect on domestic prices would be “likely quite small”.

A string of rival LNG export projects have been proposed in the US over the past year as unconventional gas production has left the country with a century’s worth of cheap supply, evaporating import needs and thinning producers’ profit margins.

It is thought that together, the proposed export plants could export the equivalent of more than 10% of US gas needs by the end of the decade.

However, because the volume of exports is small relative to the total domestic market, it would be insufficient to raise US prices to those of higher-priced markets in Asia and Europe, according to the new study’s authors.

“Assuming six billion cubic feet per day – the approximate total volumes of the three LNG export applications at Sabine Pass, Freeport and Lake Charles – the weighted-average price impact is forecast at only $0.12 per million British thermal units on US prices from 2016 to 2035”, the report states.

Deloitte believes abundant shale gas resources would mitigate the price impact as well as any concerns about accelerated depletion of natural resources or increased competition for supplies.

The report concluded there were sufficient volumes of domestic natural gas for both domestic consumption and LNG exports, and rebuffed suggestions of economic damage to the US resulting from such exports.

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The annual average price for a barrel of oil in 2011 is likely the highest since 1860 when the modern oil industry began bubbling forth in Titusville, Penn., according to a study by IHS Cambridge Energy Research Associates.

“Quite simply, we are looking at the highest average price since the age of oil began,” said Daniel Yergin, IHS CERA chairman, in a news release.

Brent crude oil’s high average at the beginning of the year was $97 per barrel; IHS CERA said that by the end of 2011, the average for the year will be close to $111 per barrel.

The 2011 prices have been boosted by record oil demand of 89 million barrels per day while tensions are high in major oil producing regions of the Middle East and North Africa. The report also found that rising oil production costs and the shift to ultra deepwater have contributed to the record prices.

New capacity from Canadian oil sands, offshore Brazil and tight oil formation in the U.S., along with Iraq’s planned output expansion, could ease prices in the coming years, the report said.

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By Ben Geman – 12/15/11 12:13 PM ET

The new catch-all fiscal 2012 spending bill that House leaders unveiled early Thursday would get the Environmental Protection Agency out of the air pollution permitting business for offshore drilling projects in Arctic waters off Alaska’s northern coast.

The provision, which hands authority to the Interior Department, follows GOP and oil industry complaints that EPA has dragged its feet on permits for Shell Oil’s pending plans to look for oil in the Beaufort and Chukchi seas.

Shell has begun receiving EPA air permits for its planned projects, although it also needs various other federal approvals such as Interior Department drilling permits.

The bill does not invalidate any pending or existing air quality permits.

Sen. Lisa Murkowski (R-Alaska), the top Republican on the Appropriations Committee panel that crafts EPA and Interior spending bills, called the language a vital step to spur drilling in Arctic waters.

“Transferring air quality authority from the EPA to Interior will place Alaska’s Arctic leases on a level playing field with the Gulf of Mexico and provide a level of predictability, without compromising environmental protections, for those companies willing to invest in the production of America’s energy,” said Murkowski, who is also the top Republican on the Senate Energy and Natural Resources Committee.

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By Kenneth Rapoza

Investors continue to expect steep oil price volatility in the months ahead as political strife continues in the Arab world pushes prices higher and the recession bound economies of Europe are pushing prices lower.

Oil prices fell again on Thursday after declining by more than 5% in some oil futures contracts Wednesday due to markets eroding confidence in a European bailout deal.

ICE WTI crude prices fell Thursday by $1.08 to end the day at $93.87 per barrel in New York.  ICE Brent crude, which is used to price foreign oil like Russia’s oil, fell by as much as 65 cents to finish at $103.60 a barrel in London.

Investors don’t know whether to short or go long oil. In the derivatives markets, investors are buying options contracts for oil above $120 and below $60 per barrel in a long straddle strategy that suspects wide swings either way.

“Simply put, investors appear eager to purchase protection against fat tail risks like plummeting oil prices as a result of a global recession triggered by further deterioration in Europe and China, or skyrocketing oil prices caused by a conflict in the Middle East which materially disrupts supply to the markets,” said Richard Soultanian, an energy consultant at NUS Consulting in New Jersey.

“The current environment is highly unstable and investors seem to know it. As each day passes, the likelihood of one of these scenarios occurring seems to increase. The most recent meeting of EU leaders has once again failed to deliver a durable solution to the European debt crisis,” Soultanian said in a note to clients published on Dec. 13.

He said that sanctions against Iran (the world’s fourth largest producer and third largest exporter of oil) as well as Iran’s recent capture of a U.S. intelligence drone has increased tensions in the region. Finally, the threat of Iran blocking the Strait of Hormuz – the narrow sea passage from the Persian Gulf into international waters which transits approximately 15.6 million barrels per day, provides Iran an even larger impact on the markets than simply its own productive capacity. These factors (along with worrying political developments in Russia – the world’s 2nd largest oil producer and exporter) explain why the market is suffering from a form of bipolar personality disorder with no clear direction either way.

The iPath Crude Oil Total Return (OIL) exchange traded fund was down 1.65% with just under 40 minutes to go in Thursday’s trading session. The ProShares Ultra Oil & Gas (DIG), a two times leveraged ETF, was down just under 1%.

Oil and gas major Russia was outperforming both after falling all week due to political unrest there. Alleged election fraud has sent the Market Vectors Russia (RSX) ETF down more than 11% in the last five days. RSX was up by more than 3% late in the day on Thursday, however.

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Please take a moment to welcome LOGA’s newest members to our growing association.   If you currently do business with these companies, please thank them for joining and supporting Louisiana’s oil & gas industry.

ANKOR Energy – Frank Barber, W. Denton Copeland, Henry Welch, Warren P. Miguez, Bill Folsom, Steve Goff, Mike Anderson, Anthony LaRocca

Aggreko, LLC – Gordon Broussard, Keith Sanner, Pete Cochran, Rusty Sanner & Barry Gautreau

Event Restroom of Louisiana – Deborah Young & Dylan Langdon

Timco Services – Michael Maraist & Mark Guidry

Lafayette Steel Erector, Inc. – J.B. Prudhomme & Jacques Landry

IOS – Edgar Chaisson & Kevin McKay, Jr

Elliptical Production Management – Michael Hopkins

Gulfland Construction, LLC – Laurie Linehan

Environmental Standards, Inc. – Kevin Renninger & Shane Penn