Economists are predicting an uptick in oil and gas drilling activity in the Gulf of Mexico over the next two years, which will spur economic recovery and job growth in Louisiana, particularly in the Acadiana and Bayou region energy hubs.
Signs of this promising trend are already evident, as rig counts have begun to rise in recent months from a three-year average of 20 rigs up to 25 rigs as of August. This jump, coupled with significant increases in the number and value of bids received for 2019 Gulf lease sales, points to renewed investment in the Gulf that will benefit Louisiana businesses, workers and ultimately our state revenue.
In their recently released Louisiana Economic Outlook 2020-2021 report, LSU Professor Emeritus of Economics Dr. Loren Scott and Assistant Research Professor Dr. Greg Upton of the Center for Energy Studies project total rig counts will rise to 35 through 2021, ending the lull that the Gulf has experienced since global oil prices began their freefall in 2014.
The rig uptick will help boost job creation, with more than 7,000 new jobs expected in the Lafayette area and 4,500 in the Houma-Thibodaux area over the two-year period. Rural coastal parishes like St. Mary and Vermillion are also expected to experience job growth with this resurgence of exploration in the Gulf. These figures are part of over 50,000 jobs that the researchers expect will be created within the entire state in 2020 and 2021, allowing the state to surpass 2 million jobs on an annual basis for the first time in its history.
This is very hopeful news to major oil and gas producers, the hundreds of locally owned service companies that supply the Gulf's oil and gas industry with tools and equipment, and all of the other small businesses in Louisiana's energy corridor that rely on this economic activity. The report points out that the 6.2 percent of jobs in the Lafayette area and 7.2 percent of jobs in the Houma area are directly tied to the oil and gas industry, with countless other jobs impacted through the multiplier effect. Good news for the Gulf is good news for all of us.
What's driving this optimistic prediction? Scott and Upton reason that, while oil prices are expected to hover around $60 per barrel over the next two years, industry's successful efforts to improve process efficiencies in the exploration and production of oil and gas enable producers to increase their investments as oil prices stabilize. By standardizing offshore projects, companies have reduced the cost of drilling and production, accelerated project timelines, and embraced new technologies and methods for making drilling smarter and safer at greater depths than ever before.
For example, the average length of time from discovery to production of oil before the year 2010 was about six years, according to the researchers. That process has now been reduced to about three years, fueling America at the fastest rate yet. Additionally, advances in the science of oil and gas extraction have allowed companies to explore depths and conditions previously considered unreachable, ushering in a new era in Gulf deepwater production.
Port Fourchon in southern Lafourche Parish, which serves 90 percent of rigs in the Gulf, is preparing its facilities for the anticipated upswing in offshore oil and gas activity. Next year, the port will embark on a $28 million expansion project and expects to have a feasibility report approved by the Army Corps of Engineers for deepening the port. This will allow the port to welcome deeper draft vessels and structures for construction, repair and servicing. A $350 million project to complete the LA 1 Improvement between Golden Meadow and Leeville would also help support increased traffic to and from the port.
At LMOGA, we are pleased to hear economists reveal what our member companies have been sharing with us: The Gulf of Mexico continues to be a significant energy province for our nation and now the world. As investment steadily increases, all of us will benefit.
For more information about Louisiana's oil and gas industry and LMOGA's work to protect and grow the industry, visit www.lmoga.com.
