IF IT IS, OUR LOCAL ECONOMY COULD GROW. NUMBERS SHOW LAND DRILLING PRODUCTION NUMBERS ARE SINKING.
Right now, there is more oil being sucked out of the earth in the United States than ever before.
So why is our local economy still slow?
Well, that’s became most of that oil is being drilled on land and not in the Gulf of Mexico — a shale revolution that has changed the landscape of the oil and gas industry in recent years.
But there are signs that shale may be more a fad than a long-term fix, which could send major oil and gas companies back home into the Gulf for their futures.
Shale production is leveling off — if not downright dropping — a trend that local oil and gas leaders are picking up on as more and more research becomes available.
As the land drilling becomes to slowly dwindle, that will likely get the Gulf of Mexico active again in the future, though timing is everything.
“It’s going to be interesting,” Port Fourchon Executive Director Chett Chiasson said. “What I have seen so far is that it’s a constant, steady decline for the land rigs and that’s expected to continue. That should bring some of that drilling back to the Gulf and to our area.”
Chiasson isn’t just taking a stab in the dark. Numbers do back his statement and several well-known oil and gas forecasters agree with his opinion.
The Energy Information Administration releases numbers every month to show how much oil is being drilled very month in the United States.
In April, United States energy reached its peak. Since then, there’s been a steady decline in production and many statistics say that the shale plays are beginning to produce less than forecast.
The Wall Street Journal picked up on it earlier this year, saying that forecasted production was down in “thousands” of locations.
In March 2019, CNBC reported that major shale drillers were beginning to cut spending, which again landed support to production forecasts being lower than expected.
Overall, energy production in the United States is up from 2018 and 2017 — in some cases by substantial amounts.
But the actual individual shale plays, themselves, are underperforming what was once expected.
“I think supply estimates for the U.S. will disappoint,” Ben Dell, a managing partner at Kimmeridge told CNBC.
So the question is — how long will it take for us to see a difference here? And right now, no one has a concrete answer.
Shale is attractive to oil and gas companies because it’s a cheap way to produce oil — far cheaper than deepwater oil and gas exploration.
But pockets of oil in the Gulf of Mexico are seemingly endless streams, while land plays are much more finicky.
If the production drop continues, the work, effort and expense to operate will soon overtake the profit.
At the point where those two lines meet, work should, in theory, come back to the Gulf, though, as we know from studying the industry every month in this column, there are other global and political factors at play.
“It’s a cheap way to drill and get that oil, but it’s a big burst and then production goes down,” Chiasson said. “As numbers go down on land, that’s when the offshore sector is going to be critical to keep production levels up. That’s where we should see a difference here.”
OIL PRICES — SLIGHTLY ON AN UPTICK
This column has mostly been dominated by stories about the ebbs and flows of the actual price of oil, itself.
But that’s been pretty steady — not much news to report.
Oil hovered in the mid-$50/barrel range most of the past month. Some days, it fluttered up a little bit, some days, it sunk. The rises and falls were mostly centered around the United States’ trade war with China and all of the latest happenings and Tweets involving that situation.
Around our press-date in mid-September, there was a small price hike in oil prices to near $60/barrel because of uncertainty in the market after Saudi Arabia unexpectedly ousted its Energy Minister. This led to concerns over a possible change in policy and a hike in price. But as of our press-date, no policies have yet been changed and the Saudis say nothing will change and the new Energy Minister will “continue his predecessor’s policy.”•