Over the past two decades, the landscape for oil and gas development has experienced a fundamental shift due to technological advancements made in the U.S. Gulf Coast region.
As the combining of horizontal drilling and sequential hydraulic fracturing has become economical in “tight” shale formations, the long run trend of declining oil and gas production has reversed itself and created historical increases in production. This has fundamentally changed the trajectory of both the energy industry, and the economy more generally, both here in the U.S. and across the world.
But how has Louisiana fared during this time of the historic “shale boom”? The answer to this question lies in another question — which part of Louisiana?
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Anyone who lives in this state knows that it’s been a tough few years for the upstream exploration and production part of the oil and gas industry. In the months preceding OPEC’s meeting in September of 2014, oil had traded at over $90 per barrel. But by January of 2015, prices had plummeted below $50/bbl, reaching their lowest point around $30/bbl by early 2016. This price collapse hit Louisiana hard—the upstream oil and gas industry alone went from employing about 50,000 workers in January of 2015 to 33,000 in less than two years; this is a drop of more than 34 percent. Today, the upstream industry employs fewer workers than any time in recent history.
But the refining and petrochemical industry has had a different experience; the large increase in domestic oil and gas production has created historic opportunities. Oil and gas are the feedstock for these industries — and more feedstock at lower prices means significant investment opportunities. As a result, Louisiana has seen tens of billions of dollars in investments in export facilities for liquefied natural gas and petrochemical manufacturing facilities. In 2006, before the onset of the historic shale boom, these industries employed about 32,000 Louisiana workers. But since the advent of new domestic resources, the industry has experienced a decade of continued growth. Today it employs more than 37,000 workers—an increase of 15 percent. While this increase in absolute terms might seem small relative to upstream declines over the past few years, these are long term and high paying jobs tied to large infrastructural investments that will serve our state’s economy for decades. In addition these numbers do not include the thousands (and not easily counted) more temporary jobs created during the construction phase of these tens of billions of dollars in infrastructural investments.
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Different areas in Louisiana have been impacted asymmetrically by these two sides of the oil and gas industry. Employment has declined significantly in upstream areas, namely Houma, Lafayette, and Shreveport-Bossier. On the other hand, the Mississippi River corridor (centered around Baton Rouge), Lake Charles, and to a lesser extent New Orleans have benefited greatly from these billions of dollars of investment in the petrochemical industry. So while residents of Lafayette are feeling the brunt of the oil and gas downturn, just an hour drive either east to Baton Rouge or west to Lake Charles workers have found themselves in the middle of a historic boom induced by, ironically, the very upstream production that has flooded the market contributing to the recent price collapse.
The potentially positive news is that with prices and production stabilizing, the next few years are looking promising for both the upstream oil and gas extraction and downstream refining and petrochemicals sectors. There is no denying that this past decade of transition has been a rollercoaster for the industry, not only in this state but globally. But we have now entered a new era of the oil and gas industry—the Era of Shale. While it is impossible to accurately forecast prices, production and jobs in these industries, one thing can be taken as given: this new era is just beginning. All eyes will be on how a historic hub for oil and gas activity like Louisiana takes advantage of these changing times.
Greg Upton is assistant professor at the LSU Center for Energy Studies.