Nov. 16–LSU researchers are downsizing the employment growth projections for Louisiana’s oil and gas production sector for the coming years, but energy companies are expected to continue adding jobs and spending money as part of an ongoing Gulf Coast energy boom.
The industry-sponsored outlook for 2019 projects a “mixed bag” for the Gulf Coast energy industry, depending on the sector. Trade and other political uncertainties could delay capital investments, the report said, but growing global demand for energy and chemicals should continue to drive growth here.
While Gulf Coast energy sectors will continue to grow in 2019, the researchers said geopolitical tensions, price uncertainties and other issues will slow that growth somewhat.
“The GCEO sees regional employment continuing to grow over the next year in both the upstream (oil and gas production) and downstream (refining and petrochemicals) sectors for both Louisiana and Texas,” the authors wrote. “For the Louisiana upstream employment, while we still do anticipate employment growth over the next three years, we have tempered the rate of increase significantly.”
Last year’s report forecast more than 40,000 jobs in Louisiana’s upstream oil and gas production sector by 2021. The revised forecast is just over 35,000. Gregory Upton, Dek Terrell and David Dismukes are the authors of the study, on behalf of the E.J. Ourso College of Business Economics and Policy Research Group and the Center for Energy Studies.
Even though shale formations are where most of the growth in the oil and gas drilling business is, Upton said offshore production in the Gulf of Mexico will be “resilient.” That’s good news for the Louisiana labor market, he said.
However, companies operating offshore have made “productivity gains” that require fewer workers to operate rigs, part of the reason for the employment forecast downgrade.
And while some industry analysts have projected oil prices topping $90 a barrel, the report said prices in the range of $60 to $65 a barrel are more likely in the coming years. Oil prices recently entered a bear market and tumbled to their lowest point of the year below $60, an abrupt turnaround for the market.
“There are positive indications to say we’re seeing a slight increase in the Gulf,” Terrell said. “We’re just not seeing an increase that would justify that rapid of a recovery.”
Louisiana refining and chemical industries now employ more workers than the upstream oil and gas production sector, the researchers said, and that trend will continue in the coming years.
A slowdown in Asian demand, lackluster energy demand growth in Europe, increased dollar valuations, more U.S. supply hitting the market, sanction exemptions on Iranian oil producers and other geopolitical issues will likely prevent oil prices from rising significantly, the authors project. Natural gas prices are expected to drop over the next two years then stabilize at between $2.50 and $3 per thousand cubic feet, the result of growth in gas coming out of oil plays like the Permian basin in Texas.
For that reason, the petrochemical outlook is flat, Dismukes said. Cheap, abundant natural gas has helped fuel a significant boom in petrochemical projects in Louisiana in recent years. Natural gas is both a raw material and fuel source for making many chemical products.
Methanol is seeing a slowdown in demand, making it a competitive market, Dismukes said. Developing countries that need fertilizer have fueled a need for ammonia production facilities in the Gulf Coast, though there is “a bit of an excess supply” in that market as well. There is strong demand for ethylene, he said.
The refining sector will see “positive, yet limited” growth, the report said. Continued growth of U.S. crude oil supplies and continued activity in pipeline construction will aid the sector.
“The market for many of the commodity chemicals that are made here … it’s these markets in Asia in the developing world that are important,” Dismukes said.
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