The Louisiana oil industry is expected to rebound in the coming years and natural gas will continue driving billions in investment in the state, according to an LSU study released today.
But because the recent downturn in the oil industry was so severe and prices are not forecast to be as high as they have been in past years, the sector is only projected to recover half of the jobs recently lost by 2020. Oil prices are forecast from $51 to $59 per barrel in 2017 and $55 to $75 per barrel by 2018.
Overall, the Gulf Coast Energy Outlook, an LSU study sponsored by Regions Bank, paints a tentatively rosy picture for the oil and gas industries for the coming decade, assuming prices remain within the forecast range.
Cheap, abundant natural gas has been a boon for the Gulf Coast chemical industry, and that trend appears poised to continue, researchers say. Natural gas serves as a key component in chemical manufacturing, and companies have planned or completed billions in capital projects in recent years.
For Louisiana, 2017 is forecast as the peak year for capital spending by energy manufacturing companies, with more than $25 billion projects announced or completed for the year. Most of that spending—more than $15 billion—comes from LNG export projects.
All told, $96 billion in uncompleted capital projects are planned for Louisiana.
The LSU researchers forecast a steeper climb in employment for Louisiana’s upstream oil and gas industries compared to Texas, which has a much larger industry. The same is true for Louisiana’s refining and chemical manufacturing sector.
Gulf Coast energy production will soar in the coming decade, the researchers predict, as will production throughout the U.S. In recent years, surging U.S. production—fueled in large part by technological advances in shale drilling—has helped cause a downturn in oil prices. OPEC cut a deal late last year to cut output in an attempt to artificially inflate prices, and the U.S. benchmark oil price currently sits at around $43 per barrel.
Louisiana’s oil sector has taken a hit from the recent downturn, shedding thousands of jobs and helping drive a state recession. The price decrease—from more than $100 per barrel to around $30 per barrel—also hurt the state budget. Roughly speaking, a one dollar decrease in oil prices sustained over a year is a $12 million hit to state revenues.