By September 28, 2009 1 Comments Read More →

The Pendulum Has Swung

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For the years to come, 2009 will be a year none of us will easily forget; certainly not in the near future.  When you say the “pendulum has swung the other way”, it definitely has in the oil and natural gas industry.  As well, we cannot talk about the state of the oil and gas industry without talking politics.  The political pendulum has swung the other way and is playing a role in our industry’s direction.

In the past recent weeks, Lafayette was recognized as the eighth-best city in the country to find a job, according to employment services firm Manpower’s latest United States Employment Outlook Survey.  Also the Greater Lafayette Chamber and executive director Rob Guidry were awarded the No.1 Chamber and director of the year in Louisiana.  Recognitions of such is rewarding to our community and even more so because it is happening at a time when our country is in a sever recession and Louisiana’s oil and gas industry has experienced historical swings in exploration and development.

In 2008 the price of a barrel of oil broke all records hitting a high of $147 per barrel and natural gas prices soared to a record high of $13/mcf.  In 2009, the pendulum swung the other way at a breakneck speed.  In the matter of a few months oil prices crashed from a record high to $35 per barrel – a 76% decline.  Natural gas prices followed suit, falling to a low of $2.41/mcf – an 81% decline.

With the fall of oil and natural gas prices, the decline in exploration and drilling activity was soon to follow.  Oil and gas companies slashed exploration and development budgets, watching in dismay the free fall of oil and natural gas prices. For many in Louisiana and especially in oil and gas communities of Lafayette, Houma, Morgan City, and New Iberia, it was déjà vu of the mid eighties.

The US rig count peaked at 2031 active rigs in 2008 and crashed almost over night to a low of 899 rigs in January of 2009, a 56% decline. As a side note, the peak rig count in 1981 was 4,500 active rigs drilling in the US.  As you can see from the graph comparing Louisiana rig activity to other major producing states, Louisiana has faired well in comparing decline rates from 2008 to 2009.

The Texas rig count has declined by 60%, Oklahoma by 64% and Louisiana by 27%.  Only Pennsylvania has a growth of 96%, which is due to the growth in the Marcellus Shale.  However, in doing an analysis of Louisiana rig count throughout the state, the picture is bleaker than the overall decline of 27% which it depicts.

In reality, if it were not for the current record high of 99 rigs drilling in North Louisiana, Louisiana’s overall rig count would be near 50 rigs instead of 147.  We can count our blessing for the Haynesville Shale.

1992 was the worst year recorded for drilling activity in the state of Louisiana having been caused by the downturn in the Asian economy.  Unfortunately, the current rig crisis we find ourselves in today has surpassed the 1992 crash.  However, it appears the bottom has been reached and a slight growth is taking place.

In recent months the rig count in South Louisiana hit unprecedented record lows, shattering the 1992 lows.  Twenty-five rigs drilling in the Gulf of Mexico is difficult to believe.  Going back in recorded history, it was only in the 1940’s the rig count in the Gulf was in the twenties and that was because drilling in the Gulf was just getting started.  In 2001, the average rig count in the Gulf of Mexico was 148 rigs. The Inland Water rig count recently bottomed out at 5 rigs and the South Louisiana Land rig count bottomed at 11 rigs.

Today, nearly 70% of the rigs drilling in the US are drilling for natural gas. A few decades ago; the opposite would have been true.  There is a definite migration of the oil and gas industry moving from the conventional drilling prospect to the non-conventional natural gas resource plays.  Oil is not out, but gas is the trend.

In the mid eighties, there was an effort to push the consumption of natural gas.  However, due to the technology at the time, there was a mere nine years of supply.  That has all changed. Today there is a conservative 150-year supply of natural gas in the US.  Natural gas is the fuel of the future and the State of Louisiana has vast reserves and will be a leader in the development of those resources in Louisiana and the nation.

There are currently seven major natural gas plays being explored and developed totaling nearly 184 thousand square miles.  This is not limited to other potential resource plays being evaluated today in Arkansas, and Mississippi.  The potential is unlimited for the development of natural gas resource plays.

Louisiana is a vital ingredient in the makeup of our country’s energy security and future.  Not only do we have the blessing of vast oil and natural gas resources, we have the infrastructure, we have the people, the technology, and the know how to develop those resources.  The reason Lafayette received a top rating in the entire country for places to find a job is because we are a city of “innovators”.

Louisiana is a large consumer of natural gas.  It is because of our vast natural gas reserves that we have the petro chemical industry in Louisiana, which employees tens of thousands of Louisiana citizens.  Natural gas is a feedstock for the chemical industry and vital for it’s existence.

The use of natural gas to power the engines of our transportation system will be the answer to ending our ever-growing dependence on oil from countries that hate us.  It makes no sense for the US to continue on a path that undermines our entire economic structure.  It is not about being energy independent, it is about being energy secure.

The political pendulum has swung to the far left in regards to our President’s opinion of the oil and natural gas industry.  At no time in my life have I seen the resources being spent by our industry to convince Congress of the importance of the domestic oil and gas industry to our country’s energy security.  President Obama has made it very clear he does not support the industry or desires to understand it.

At the time of writing this column, the debate on a cap-and-trade system to regulate emissions, and stripping the incentives needed by the industry to explore for oil and gas was going on in Congress.  Hopefully, the pendulum is now on it’s swing back to reality, and our industry can do what we do best, and that is to develop the oil and natural gas resources of our country providing energy security for the US of A.

Posted in: Presidents Articles

About the Author:

The Louisiana Oil & Gas Association (known before 2006 as LIOGA) was organized in 1992 to represent the Independent and service sectors of the oil and gas industry in Louisiana; this representation includes exploration, production and oilfield services. Our primary goal is to provide our industry with a working environment that will enhance the industry. LOGA services its membership by creating incentives for Louisiana’s oil & gas industry, warding off tax increases, changing existing burdensome regulations, and educating the public and government of the importance of the oil and gas industry in the state of Louisiana.

1 Comment on "The Pendulum Has Swung"

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  1. Vishwanath says:

    , I would like to show you, Jesse, that Skull and Bone created Hurricane Katrina with state owned eitmtrocagneelc weaponry; as they do all weather now. I can show you with a date and time when I disclosed this publicly, causing them to stall the hurricane heading to Cuba; at which time was being reported to be slammed. When the stall ended and the hurricane weapon reactivated it continued its path towards Cuba, but only brushed it with little to no damage or destruction. Elated for Cuba, but unfortunately, I couldn’t find a person of conscience in the U.S. to stop it from slamming into New Orleans. It is my reporting, disclosing of Skull and Bones eitmtrocagneelc weather weaponry that has prevented them from further attacking and targeting Florida, incognito, with their so-called hurricanes. As well, I can show the same date and time evidence that caused them to stop erupting Mt. St. Helen public disclosure of their crimes, incognito, is what stops and prevents them from committing them. Members of Skull and Bone are, in a word, EVIL, without conscience and will stop at nothing to get what they want, even to their own demise; that is, after they take everyone else with them. Obama better shake the spider webs from his head and issue arrest warrants for them ASAP. They are radiating us, I have proof in my fingernails, and plastic that was made malleable both in my yard and house, they have put something in our tap water now, since the first extreme cold/freezing tempuratures, that causes my hands to become dry and chafed, literally splitting open the skin drawing blood, my hands look like an 80 year olds hands, I’m 53. Since I’ve determined this to be the problem, yesterday, I quit putting my hands in the water and it’s clearing up with the help of some hand repair aloe cream, and will have to use bottled water to brush my teeth and wash my face, but I need a shower, wash my hair and I’m afraid to do so, of the results. I will be contacting the water company today, but they’ve lied to me before, and they just put in all new pipes in this section to replace the old ones they said were not a problem causing rusty water. I’ve had these people poison my food coming from restaurants here, one that is owned by the family of a friend of one of my nephew’s who is a New York City cop, I’ve had them do things to food I buy at the grocery stores, I’m afraid to eat anymore. I was surprised to find out Obama’s connection to the CIA, I knew there was some connection, nothing in Washington happens by accident, but they are riding shotgun all over him, out of control, or else he wants to see me dead too. Life around her is like a daily shoot out at the OK Corral, kill or be killed, well, I’m still shooting, waiting for one of my bullets to hit them square between the eyes, stop them cold, DEAD! And as usual, the reinforcements are flying over head when I’m disclosing something they don’t want exposed, right on que. One more thing, now that I have their attention, I heard their loud, uproarious eitmtrocagneelc weaponry tonight at the Cobblestone Store Plaza between 9-10pm, the same loud, uproarious eitmtrocagneelc weaponry I heard from my house and forced the police to enforce the noise ordience to get rid of them a few years back now. Let’s talk Jesse, these EVIL Lunatics must be stopped and eliminated ASAP!

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