Oil, gas in fine shape

NEW ORLEANS — “The future is very, very bright for the oil and gas industry in Louisiana,” former U.S. Rep. Chris John, president of the Louisiana Mid-Continent Oil and Gas Association, told 400 representatives from the energy sector Tuesday.

During a luncheon address hosted by the Louisiana Department of Natural Resources, John hop-scotched over an array of topics, including: the “re-emergence” of oil fields in the Gulf of Mexico, the effects of two recent hurricanes; exploration off the coast; presidential politics — and the football fortunes of LSU.

John said, for at least the next decade, there will be “an incredible opportunity for the re-emergence” of Louisiana’s offshore oil and gas industry — thanks to recent, record lease awards in the Gulf.

Since Oct. 7, the oil and gas industry has spent $7 billion “leasing water” (an industry term) for mineral rights in the Gulf’s Outer Continental Shelf, from 3-to-200 miles offshore.

“That’s just the leasing dollars,” John said. “The real dollars to state and the federal government are going to (come) in the production stage.”

Currently, the offshore oil industry provides Louisiana with $6.23 billion in direct benefits, a $1.5 billion payroll and 17,000 direct jobs, he said. Future benefits to the state from OCS leases will be — “off the charts.”

Eric Smith, a finance professor at Tulane University and director of the Tulane Energy Institute, is less sanguine.

“I don’t think it’s going to be an amazing renaissance but it’s going to be a healthy development,” Smith said.

Deepwater drilling programs should be productive in areas, 150 to 200 miles offshore of Louisiana, he said. However, the professor cautioned, “the oil is not good quality.”

Turning to weather woes, The Associated Press last week reported that hurricanes Gustav and Ike hammered small oil and gas producers in the Gulf, with insured losses for Ike alone expected to rise near $2 billion. During a two-week period, John said Tuesday, the back-to-back storms shuttered 28 refineries, from New Orleans to Corpus Christi, Texas.

“That means 45 percent of the refinery capacity of this country was shut down for two weeks,” he said.

Most of the energy industry on the Gulf Coast is “back on line,” John said, adding: “There have been no major spills in the OCS that we know of, as of yet. … I’m very proud of that.”

But environmentalist Darryl Malek-Wiley, a New Orleans-based organizer for the Louisiana chapter of the Sierra Club, says it’s too early for the oil and gas industry to celebrate.

“While we haven’t heard of any major spills, the fact that some oil rigs are still missing is of concern,” Malek-Wiley said, adding: “I always find it disingenuous of the oil industry to talk about oil spills when some scientists found that 60 percent of Louisiana coastal wetland loss can be attributed to oil and gas exploration and operations, which places Louisiana more at risk for storm surge.”

To reduce national dependence on foreign oil, John said that the nation needs to lift drilling bans in other areas, such as the coastal waters off the Florida coast — a proposal hotly resisted by environmentalists.

But John says Cuba has offered offshore oil leases to other foreign countries some 50 miles away from Key West, Fla. “Who has purchased (the leases)? We really don’t know yet.” John said. Officials of the island communist government are contemplating enlarging coastal areas for oil exploration, John said.

“That should make us — as Americans — very nervous in a lot of ways,” he said. “The Floridians don’t want us to drill off of their coast, but yet they are going to have drilling whether they like it or not because of this initiative by Cuba.”

Smith of Tulane says the Cubans are already drilling and the concessions are held by Canadian or Spanish companies. “We don’t know the quality of the Cuban crude because they haven’t found any yet.”