La. oil, gas industry fears fallback to ’80s

• By TED GRIGGS
• Advocate business writer
• Published: Jan 7, 2009 - Page: 4B - UPDATED: 12:05 a.m.

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Plummeting oil prices and the credit crunch have sparked fears that Louisiana — and the nation’s — oil and gas industry could see the kind of suffering that took place in the 1980s, according to some industry members.

“What’s going to have a huge impact is the deterioration of capital. There is no capital,” said Don Briggs, president of the Louisiana Oil and Gas Association.

One association member, whom Briggs recently declined to name, had secured a $100 million budget to develop a field … or so he thought, Briggs said. Then the oil man’s lender called to tell him the money was no longer available.

Briggs said stories like this have become commonplace.

He and other industry experts expect the U.S. rig count — which peaked at 2,031 in September — will drop by as many as 1,000 rigs in 2009.

The U.S. rig count hit its annual low for 2008 at 1,721 rigs in December. The oil price dropped from $101 at the U.S. rig peak to about $38 at year’s end.

In 2008, Louisiana saw its rig count rebound from a low of 139 rigs on March 21 — when oil sold for $102 a barrel — to a peak of 198 working rigs Oct. 17, when oil prices were slightly below $72 a barrel.

At the end of 2008, the Louisiana rig count landed between the high and low for the year at 173 rigs.

In the Gulf of Mexico, the 2008 rig count ranged from a low of 92 on Nov. 7 to a high of 106 on May 2.

Energy companies are slashing drilling budgets in oil shales in Wyoming and natural gas plays in Pennsylvania and elsewhere, Briggs said.

The good news for north Louisiana is that drilling activity in the Haynesville Shale will remain at current levels or even rise a little, Briggs said. That’s because the economics are so much better for the natural gas play than conventional drilling.

The bad news is that energy companies will slash their drilling budgets in south Louisiana, Briggs said.

“It’s scary stuff. I’m very, very concerned about it,” Briggs said.