The oil and gas sector is looking up in south Louisiana, at least as far as one indicator: energy prices. Wednesday was a good day, as the price of both natural gas and oil rose sharply amid indications demand may be on the rise due to increases in factory output and a surge in auto production. Natural gas jumped to $3.76 per million BTU, a 44 cent increase, and benchmark crude for October delivery was up $1.58 to $72.51 per barrel on the New York Mercantile Exchange.
Unfortunately, the uptick is not sufficient to ward off impending fourth-quarter layoffs in the oil and gas service sector, maintains Don Briggs of the Louisiana Oil and Gas Association. "[The price increase] doesn't change that. I think, unfortunately, some companies will be laying people off. Everyone is trying to hang on to everyone they can. They don't want to lose those key people." The record low rig counts -- about 25 rigs are running in the Gulf of Mexico and 18 on south Louisiana land -- are ther real sore spot, Briggs says. "It's never been that bad." In 1999, which was Louisiana’s lowest average annual rig count of 141 rigs, SLA Land rigs averaged 21 for the year. Read Briggs' analysis of historical rig counts in the August issue of Acadiana Business.
"People have different opinions about why the prices are going up," says Briggs, noting the normal increases at this time due to anticipated demand during the winter months. "One thing is for sure: They were undervalued. Natural gas went too low, from $13 in July last year to $2.41 last week. Oil went from $147 [per barrel] to $35," he continues. "It's correcting."