Port Fourchon is adjusting to a nearly $2.9 million expected drop in its gross revenue because of a 20% discount it is providing on land leases to help struggling oil and gas companies.
“Every year, we budget very conservatively. Thus, changes can be made easily to meet reduction in revenue. We have looked at many of our budgeted line items and have made cuts already,” says Chett Chiasson, executive director of the main service hub for the Gulf of Mexico oilfield.
Chiasson tells The Courier the Greater Lafourche Port Commission last month approved the discount that began April 1 and will continue until March 31, 2016, or when the price of a barrel of crude reaches $70 for 60 consecutive days.
Chiasson said the commission cut rental rates by 30% in response to the federal government’s moratorium on deepwater drilling in the Gulf of Mexico following the Deepwater Horizon oil spill in 2010. Lease revenue makes up nearly half the port’s budget.
Economist Loren Scott says cuts across the oil and gas industry are flowing downstream to Port Fourchon.
“This is turning out to be about a 30% cut they’re asking their suppliers to absorb. Otherwise they’ll say ‘Let’s shut down drilling altogether,'” Scott says.
Don Briggs, president of the Louisiana Oil and Gas Association, says everything in the industry is slowing, and cutting rates makes sense for the port as the commission tries to keep its tenants.
“The operators that sell oil have lost half of their revenue stream. That ends up trickling down to our service industry,” Briggs says. “They’ve got companies saying, ‘Hey, we’ve got no business. We can’t pay.’ They’re doing the right thing by reducing their costs by as much they can.”
Briggs says cuts like these indicate a long-term “hunkering down” in terms of spending.
