While many Americans are thrilled about the plunging oil prices,
there is some concern amongst locals about the oil patch economy.
Since this summer, the price of one barrel of oil has dropped
over 25 percent, sending the national average for a gallon of gas under three
dollars for the first time since 2010, and saving Americans roughly $250
million per day, according to AAA.
However, this price drop might adversely affect some
sectors of the Houma-Thibodaux area that are closely tied to the oil and gas
In November, Houston-based Hercules Offshore announced
layoffs of up to 400 workers, giving the first hint of concern about the price
drop effects. The cuts are distributed
across Texas and Louisiana, affecting employees at Port Fourchon, Grand Isle
Economic development officials for Terrebonne Parish stated
that this is the only substantial layoff that they’ve heard of since the recent
downturn. Local companies have said they
are approaching 2015 cautiously since the 2014 holiday season has been slower
than in previous years.
Said Eric Danos, Executive Vice President of Danos, based
in Larose, “We haven’t really seen any project cancellations or things get
postponed. We are starting to see some more sensitivity on cost from the
customers . . . We have a had tremendous growth over the past three to five
years, and what we are talking about internally is a slower pace of growth.”
Joseph Orgeron, Chief Technology Officer for Montco, Inc.
of Galliano, expressed, “The three H’s — hurricanes, hunting, and holidays —
those things always seem to get the purse strings of the oil and gas companies
clutched a little tighter.”
Orgeron also said that some customers are considering
postponing projects for early next year to “tighten the belt.”
Experts, however, relay that there is more to the slowing
of activity than the drop in oil prices. Cinnamon Odell, HIS-Petrodata Rigs Analyst, expressed that drillers
started to cut back well before the price of oil plunged, due to increasing
costs related to offshore activity. Odell also said that the drop in prices will cause more of an immediate
effect on onshore drilling.
According to Odell, “It started happening earlier this year
strictly due to cost ... Not just for the rig itself but other related things
like offshore service vessels. All those things have been on the rise.
Operators are saying ‘wow, what we projected a few years ago has sky rocketed.’
That means putting things on the backburner.”
LSU economist and Director of the Center for Energy Studies
at the university, David Dismukes, feels that “[i]t could go down further, but
I do not think that is likely.”
Dismukes went on to say that decreased economic activity – particularly
in and around Asia – has put downward pressure on oil prices, and that a strong
dollar increases that pressure.
Said Dismukes, “I can see us bouncing around $75 and $85
(per-barrel) for the next year... As long as we are not going below about $75
a barrel you will see some action at the margins but not people moving toward
the exit doors.”
In 2016, production in the Deepwater Gulf of Mexico is
projected to reach a new peak of 1.9 million barrels of oil per day, marking
the first time production will surpass the previous peak set in 2009. That increase is predicted to be driven by
big discoveries like the Hess Corp’s Tubular Bells field in Houma, which began
production this week.
Kirk Meche, Gulf Island CEO, stated that the prospects for
the Houma yard are good, though oil prices will have an effect on
Meche conveyed, “I think the market is still strong for the
Houma facilities for the next several quarters. ... We need to figure out what
is beyond that. I can’t tell you what the
market is going to be. I can tell you we recognize the challenges of the
marketplace and we are diversifying to meet the needs of not only oil and gas,
but different industries.”