Energy

Louisiana energy exploration setting pace for the nation

Louisiana’s energy industry has been setting the pace for the nation as the overall domestic energy industry recovers from the economic challenges of the past 18 months– evidenced by energy companies investing their money and moving their drilling rigs into Louisiana at an ever-increasing rate.

Louisiana energy exploration, as measured by operating drilling rigs, has been up in early February over the same time last year by a double-digit percentage. Things are different for the majority of the nation’s other major energy producing states, where rig counts are mostly down or flat. The only exceptions are New Mexico, where the total count is up by two rigs, and Pennsylvania, where development of the Marcellus Shale natural gas formation has brought a ramping up of rigs, but the total count in both states is still less than half that of Louisiana.

The sharpest declines in other energy producing states from the current count to the same time last year range from a decrease of 10 percent or more in Texas, and Oklahoma and California, to 30 percent or more in Colorado and Wyoming.

"Louisiana has a long and distinguished history of fueling America, and the fact that we are outperforming every major energy producing state in the nation at this time through increasing drilling rig activity is a sign that the best may be yet to come,” said Louisiana Department of Natural Resources Secretary Scott Angelle. “This nation is looking to clean-burning natural gas to be a more critical part of our energy supply and 95 percent of our drilling in Louisiana right now is for natural gas.”

After a sharp decline in the last quarter of 2008, drilling rig counts nationally have been rising in recent months, but the latest numbers still show 5 percent fewer rigs operating in the U.S. than this time last year. Meanwhile Louisiana’s total rig count is up by 14 percent compared to this time last year – from 171 to 198. If the level of drilling activity in federal waters is excluded from the calculation, the rig count percentage is up 26 percent. As of the last count, the rigs running in Louisiana alone made up about 15 percent of the nation’s drilling activity.

David Dismukes, director of the LSU Center for Energy Studies, said, “Louisiana’s efforts in business tax reform, ethics reform, its progressive business environment and the discovery of enough potential natural gas to fuel the nation for a decade have strengthened Louisiana’s position as a leader in U.S. energy producing states – even as the energy industry has struggled elsewhere.”

The exploration of the Haynesville Shale natural gas formation in northwest Louisiana has been a mainstay for the state’s oil and natural gas industry – with north Louisiana boasting a 40-plus-year high for running rigs in the past two weeks at 133. In that area, the activity in six parishes – Bienville, Bossier, Caddo, DeSoto, Red River and Sabine -- makes up for 10 percent of the nation’s drilling activity. “Shale fever has definitely arrived in northwest Louisiana,” Angelle said.

While the north Louisiana province is setting records, “We seem to have two Louisianas when it comes to drilling activity, with south Louisiana and the federal waters off Louisiana’s coast being flat,” Angelle said. “As shale plays become more in vogue, the drilling investment dollars are flowing disproportionately to these unconventional resources. What was once uneconomical has become unconventional and is now becoming the new normal. The activity in Pennsylvania also confirms this.”

Angelle said that though a great deal of interest has been focused recently on natural gas and north Louisiana, the state is still bullish on oil and south Louisiana energy production.

Louisiana’s legislature has, in the last two years, cleared the way for sequestering carbon dioxide and for using it in what is known as enhanced oil recovery – a process that involves using CO2 to reinvigorate old wells to draw out oil unreachable by conventional means. Standard oil drilling methods can leave two-thirds or more of the oil in a well stranded underground.

Louisiana has an estimated 15.7 billion barrels of oil stranded in its oil fields. Of that, an estimated 6 billion barrels may be recoverable through CO2 injection techniques. That could mean a great deal of interest in older oil fields in south Louisiana in the future.

“The best place to find oil today is where we found it yesterday,” Angelle said.

Angelle said he believes the current low rig numbers in the Gulf of Mexico do not represent a long-term future pattern. The federal offshore numbers have been in decline since 2000. He noted that potentially rich new and newly developed fields, such as the Tiber and Thunder Horse, have been discovered in the Gulf, and that the U.S. Minerals Management Service sold approximately $5 billion in Gulf leases in 2008 and 2009 – investments that companies will want to get a return on.

He also noted that McMoRan Exploration has recently announced a potentially prolific ultra-deep find in shallow Gulf waters off the coast of Iberia and Vermilion parishes, possibly the beginning of a new frontier in exploration and offering the hope of new life for the offshore service industry.

Greg Albrecht, state Legislature’s chief economist, in a December 2009 report, informed the Revenue Estimating Conference – which certifies budget and revenue forecasts throughout the year – that “Mineral revenue has been the primary bright spot in Fiscal Year 2010.”

“A robust energy exploration industry means demand not only for jobs on drilling rigs and with exploration service companies, but for the people who help provide food, fuel, homes, clothing and services to those who work in the industry,” Angelle said. “We at DNR and in this state understand that oil and natural gas companies do have a choice about where they will do their business.  We want to make sure that we can create an environment that allows industry to do business responsibly, without sacrificing our stewardship responsibilities.”