The Future of Natural Gas In Louisiana

As home to one of the largest natural gas plays in the country, the Haynesville Shale, several potential crude oil plays and the boisterous Gulf of Mexico region, Louisiana has no shortage of natural resources.

However, the latest conversation is regarding the current price of natural gas and how Louisiana can remain relevant in the natural gas world. Several positive factors exists regarding Louisiana’s natural resource market: The Haynesville Shale, the Cheniere Energy natural gas exporting facility, the manufacturing renaissance due to the vast amount of natural gas in Louisiana, and a pipeline infrastructure second to none.

While the Haynesville Shale is experiencing a rig decline due to the price of natural gas dropping to 10-year lows, the party is far from over. The cause of this decline in natural gas prices is due to a massive national supply of natural gas that has far superseded the demand. These simple economics have brought the prices from 2010 levels of $8-12 dollars per MCF, down to the current mid $4 range. However, as the market begins to level out and the demand for natural gas increases, the Haynesville will once again thrive.

The Haynesville Shale has seen over 2,400 wells drilled for natural gas in just over four years. At the height of the activity, 139 rigs were standing in Northwest Louisiana. Analysts say that while this much activity has already taken place, we have only tapped into roughly 25% of the natural gas in the Haynesville Shale. The current rig count has increased from around 12 rigs in January of 2013, to now over 40 rigs running in May.

In addition to the Haynesville Shale, Cameron Parish, in southwest Louisiana, is privileged to be the home of the Sabine Pass natural gas export facility. Cheniere Energy, of Houston, Texas, is constructing an $11 billion export facility that will be capable of shipping natural gas around the world. Of the nearly dozen export facilities that are in the application process with the federal government, Cheniere’s facility has been approved and construction is in progress. The location is slated to open somewhere in 2015-2016 timeframe. This facility alone will increase the demand for natural gas by around 6%. While this does not sound like a large number, this will help the Haynesville Shale stay relevant, which in turn helps to keep Louisiana in the game.

In addition to the Haynesville Shale and the export opportunity in Cameron Parish, over $62.3 billion in capitol investments have been announced for manufacturing projects in Louisiana. These projects are a direct correlation to affordable and abundant natural gas right here in Louisiana.

As previously mentioned, Louisiana is also home to one of the largest pipeline infrastructures in the country. 30% of the nation’s crude oil and gas move from or through the state of Louisiana. This pipeline infrastructure already being in place will only make the export process through the Sabine Pass facility more feasible.

So while the media and the general public gives a message that Louisiana is becoming a lesser play in the natural gas world, the truth is exactly the opposite. Louisiana will remain a major contributor for our country’s natural resource market for many decades ahead.

Don Briggs is President of the Louisiana Oil and Gas Association