1. Gulf Coast Energy Outlook
Gregory B. Upton Jr., Ph.D.
Louisiana State University
Center for Energy Studies
American Council of Engineering Companies of Louisiana
Baton Rouge, LA.
November 16, 2017

2. Up-Stream Oil and Gas Outlook
Introduction
The Era of Shale
Up-Stream Oil and Gas Outlook
Industrial Outlook
Employment Outlook
Conclusions
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3. Introduction
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4. Overview
Gulf Coast Energy Outlook
The inaugural Gulf Coast Energy Outlook seeks to provide a broad overview of the current status of trends guiding energy markets with an emphasis on the Gulf Coast Region.
The research initiative is a collaborative effort of Louisiana State University’s Center for Energy Studies and E.J. Ourso College of Business and focuses on the energy sector of the gulf Coast Region’s economy.
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5. Introduction
Introduction
The advent of shale oil and gas has fundamentally shifted the energy outlook not only here in on the U.S. Gulf Coast, but also globally.
U.S. shale production has led to significant decreases in global prices, and all eyes are on the resilience of U.S. producers in determining long term price forecasts.
While Gulf Coast production has increased significantly with shale, the composition of this production has changed significantly, creating potential winners and losers.
Significant opportunities for industrial expansion have been created, and historic investments in mid-stream and down-stream sectors are on the horizon.
The advent of shale has also fundamentally changed electricity markets, shifting towards lower emissions natural gas and creating opportunities for significant growth in renewables.
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6. The Era of Shale
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7. Industrial Renaissance
Louisiana Natural Gas Production
New Natural Gas End Uses & Fuel Diversity Concerns
Source: EIA.
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8. Up-Stream Historical Trends
Up-Stream Oil and Gas
From 1980 until the early 2000s, both Texas and Louisiana experienced significant decreases in crude production—both in absolute terms as well as a share of total US production. This was offset, though, by the relative increased share of Federal Offshore production.
Due to the advent of shale oil production, Texas has seen a resurgence in crude production and now accounts for almost 60% of Gulf Coast Production.
While Federal Offshore production has remained relatively flat, its relative share had declined significantly. The future of investment in offshore production is uncertain.
Louisiana (state production) now accounts for less than three percent of our region’s production.
Gulf Coast relative share of U.S. production is now a larger share than at any point in the past four decades.
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9. Up-Stream Historical Trends
Natural Gas Prices and Rig Counts
New Natural Gas End Uses & Fuel Diversity Concerns
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10. Up-Stream Historical Trends
Gulf Coast Natural Gas Production
New Natural Gas End Uses & Fuel Diversity Concerns
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11. Up-Stream Historical Trends
Oil Prices and Rig Counts
New Natural Gas End Uses & Fuel Diversity Concerns
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12. Up-Stream Historical Trends
Gulf Coast Crude Production
New Natural Gas End Uses & Fuel Diversity Concerns
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13. Up-Stream Historical Trends
Texas’ Share of Gulf Coast Crude Production
New Natural Gas End Uses & Fuel Diversity Concerns
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14. Up-Stream Historical Trends
OCS’s Share of Gulf Coast Crude Production
New Natural Gas End Uses & Fuel Diversity Concerns
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15. Up-Stream Historical Trends
Louisiana’s Share of Gulf Coast Crude Production
New Natural Gas End Uses & Fuel Diversity Concerns
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16. Up-Stream Oil and Gas Outlook
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17. Current Natural Gas Prices and Near-Term Outlook Price Outlook
Natural gas prices are expected to stay below $3.55 per MMBtu in 2017 and under $3.75 in 2018.
2017
2018
EIA
$3.73
Wells
Fargo
$3.41
EIA
$3.55
Deloitte
$3.25
World
Bank
$3.50
Wells
Fargo
$3.26
Bloomberg
$3.17
World
Bank
$3.00
IMF
$3.10
Bloomberg
$3.14
IMF
$3.00
Percent
Source: Energy Information Administration, U.S. Department of Energy.
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18. Current Crude Oil Prices and Near-Term Outlook Price Outlook
Most crude oil price projections for 2017 are around $55 per barrel. Prices are expected to increase in 2018, but remain below $75 per barrel.
2017
2018
Raymond
James
$75.00
Bank of
America
$59.00
Street
Consensus
$59.00
Jeffries
$57.00
EIA
$52.50
Deloitte
$55.00
EIA
$55.20
Morgan
Stanley
$64.00
Percent
Goldman
Sachs, Q2:
$57.50
Goldman
Sachs, Q1:
$55.00
Goldman
Sachs
$55.00
Morgan
Stanley
$51.00
Source: Energy Information Administration, U.S. Department of Energy.
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19. Production Outlook Gulf Coast Natural Gas Production Forecast
New Natural Gas End Uses & Fuel Diversity Concerns
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20. Production Outlook Unconventional On-Shore Natural Gas Oil Forecast
New Natural Gas End Uses & Fuel Diversity Concerns
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21. Production Outlook Off-Shore Natural Gas Forecast
New Natural Gas End Uses & Fuel Diversity Concerns
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22. Production Outlook Conventional On-Shore Natural Gas Forecast
New Natural Gas End Uses & Fuel Diversity Concerns
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23. Production Outlook Gulf Coast Crude Oil Production Forecast
New Natural Gas End Uses & Fuel Diversity Concerns
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24. Production Outlook Unconventional On-Shore Crude Oil Forecast
New Natural Gas End Uses & Fuel Diversity Concerns
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25. Production Outlook Off-Shore Crude Oil Forecast
New Natural Gas End Uses & Fuel Diversity Concerns
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26. Production Outlook Conventional On-Shore Crude Oil Forecast
New Natural Gas End Uses & Fuel Diversity Concerns
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27. Industrial Outlook
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28. Industrial Outlook
Industrial Outlook
There is a symbiotic relationship between natural gas prices and Louisiana’s energy-intensive manufacturing base. Louisiana manufacturing relies heavily on natural gas for heat, steam, power generation and most importantly, feedstock purposes. Louisiana’s chemical industry is particularly reliant upon natural gas and natural gas liquids since both are used to produce a wide range of goods.1
Abundant and inexpensive natural gas along side the U.S. increase in oil production has led to significant industrial investments.
Significant investments in crude oil transport, including pipeline reversals, expansions, and additions, alongside the lifting of the crude oil export ban can create an environment that allows for the Gulf Coast to become the epicenter for hydrocarbon trading.2
David E. Dismukes (2013). Unconventional Resources and Louisiana’s Manufacturing Development Renaissance. Baton Rouge, LA: Louisiana State University, Center for Energy Studies and author’s updates.
Upton (2016). Crude Oil Exports and the Louisiana Economy. A discussion of the U.S. policy of restricting crude oil exports and its implications for Louisiana. Baton Rouge, LA: Louisiana State University, Center for Energy Studies.
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29. Industrial Renaissance
Louisiana Natural Gas Production
New Natural Gas End Uses & Fuel Diversity Concerns
Source: BEA.
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30. Industrial Renaissance
WTI and Brent Spot Prices
New Natural Gas End Uses & Fuel Diversity Concerns
Oil and gas
prices diverge!
Source: EIA.
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31. Industrial Renaissance
Natural Gas In Manufacturing
New Natural Gas End Uses & Fuel Diversity Concerns
Source: Dismukes, Unconventional Resources and Louisiana’s Manufacturing Development Renaissance.
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32. Industrial outlook Gulf of Mexico capital expenditures.
The continued low natural gas price outlook has facilitated considerable development of over $318 billion: $155 billion will be spent in Louisiana and $162 billion in Texas.
Billion $
Source: David E. Dismukes (2013). Unconventional Resources and Louisiana’s Manufacturing Development Renaissance. Baton Rouge, LA: Louisiana State University, Center for Energy Studies and author’s updates.
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33. Industrial outlook
Gulf of Mexico total capital expenditures by sector.
The continued low natural gas price outlook has facilitated considerable development of over $318 billion: $100 billion already completed, $218 billion remaining, but heavily concentrated in LNG export facilities.
Billion $
Source: David E. Dismukes (2013). Unconventional Resources and Louisiana’s Manufacturing Development Renaissance. Baton Rouge, LA: Louisiana State University, Center for Energy Studies and author’s updates.
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34. Price Differential Peaks
Industrial Renaissance
WTI and Brent Spot Prices
New Natural Gas End Uses & Fuel Diversity Concerns
Price Differential Peaks
at more than $20/bbl!
Source: EIA.
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35. Industrial Renaissance
Crack Spreads
New Natural Gas End Uses & Fuel Diversity Concerns
Source: Upton, G.B. Crude oil exports and the Louisiana economy: A discussion of U.S. policy of restricting crude oil exports and its implications for Louisiana. LSU CES Whitepaper.
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36. Workforce
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37. Key Industries Oil and Gas Refinery and Chemical Manufacturing
NAICS 211: Oil and Gas Extraction
NAICS 213: Support Activities for Mining
Refinery and Chemical Manufacturing
NAICS 324: Petroleum and Coal Products Manufacturing (refineries)
NAICS 325: Chemical Manufacturing
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38. Relative energy sector sizes as measured by employment
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39. Employment Louisiana oil and gas employment forecast Jobs
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40. Employment Texas oil and gas employment forecast Jobs
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41. Employment Louisiana refinery and chemical sector employment forecast
Jobs
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42. Employment Texas refinery and chemical sector employment forecast Jobs
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43. Industrial outlook
Louisiana employment (total vs. industrial construction)
In Louisiana, industrial construction employment has been outperforming overall employment.
Employment (Q = 100)
Source: Census.gov
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44. Industrial outlook
Texas employment (total vs. industrial construction)
In Texas, industrial construction employment has been lagging overall employment.
Employment (Q = 100)
Source: Census.gov
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45. Export Opportunities
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46. Global Natural Gas Demand: ~122 Tcf of 335 Bcf/d (2015)
Energy Export
Putting global LNG into perspective
Global Natural Gas Demand: ~122 Tcf of 335 Bcf/d (2015)
Lower 48 US Natural Gas Demand: ~27.1 Tcf or 74 Bcf/d (2016)
Global LNG Demand: ~11.7 Tcf or 32 Bcf/d (2015)
Since 2000, LNG demand has grown about 6.6 percent a year, compared to 2.8 percent for natural gas.
About 114 countries use natural gas as a fuel source, while only 37 nations import LNG.
Source: US LNG Exports. Presentation at 2016 U.S. Association for Energy Economics. Chris Pedersen, LNG Pricing Analyst – Americas. S&P Global Platts.
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47. Global LNG Liquefaction Capacity: 301.5 MTPA or 38.6 Bcf/d
Energy Export
Global LNG infrastructure
Liquefaction
Global LNG Liquefaction Capacity: MTPA or 38.6 Bcf/d
2016 LNG utilization rate: 81%
LNG Exporting Countries: 19
LNG Re-Exporting Countries: 10
Regasification
Global LNG Regasification Capacity: 757 MTPA or 96.9 Bcf/d
2015 utilization rate 32%
LNG importing countries: 37
Source: US LNG Exports. Presentation at 2016 U.S. Association for Energy Economics. Chris Pedersen, LNG Pricing Analyst – Americas. S&P Global Platts.
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48. Energy Export
Natural gas/LNG to play a larger role in the future
Natural Gas
40 percent of the growth in global energy demand from is projected to be met by natural gas.
LNG
IEA report forecasts liquefaction capacity to grow 45 percent between
China, India, Brazil, Mexico, South America, Nigeria, Egypt, Turkey, Saudi Arabia, Iran, Thailand & Indonesia will account for roughly 80 percent of the new growth in energy demand through
Source: US LNG Exports. Presentation at 2016 U.S. Association for Energy Economics. Chris Pedersen, LNG Pricing Analyst – Americas. S&P Global Platts.
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49. Energy Export LNG Exports by Region
Source: US LNG Exports. Presentation at 2016 U.S. Association for Energy Economics. Chris Pedersen, LNG Pricing Analyst – Americas. S&P Global Platts.
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50. Energy Export LNG Exports by Country
Source: US LNG Exports. Presentation at 2016 U.S. Association for Energy Economics. Chris Pedersen, LNG Pricing Analyst – Americas. S&P Global Platts.
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51. Energy Export LNG Imports by Country
Source: US LNG Exports. Presentation at 2016 U.S. Association for Energy Economics. Chris Pedersen, LNG Pricing Analyst – Americas. S&P Global Platts.
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52. Energy Export Timeline of US Liquefaction Capacity
Source: US LNG Exports. Presentation at 2016 U.S. Association for Energy Economics. Chris Pedersen, LNG Pricing Analyst – Americas. S&P Global Platts.
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53. Energy Export U.S. LNG Deliveries
Source: US LNG Exports. Presentation at 2016 U.S. Association for Energy Economics. Chris Pedersen, LNG Pricing Analyst – Americas. S&P Global Platts.
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54. Energy Export A I M E R O Q B C N K G J H L D F P GOM LNG capacity.
Regasification M E
Existing R
Under Construction O
Existing
Everett, MA: Bcfd
Cove Point, MD: 1.8 Bcfd
Elba Island, GA: 1.6 Bcfd (+0.5 Expansion)
Lake Charles, LA: 2.1 Bcfd
Northeast Gateway, Offshore MA: 0.8 Bcfd
Freeport, TX: 1.5 Bcfd (+2.5 Expansion)
Sabine, LA: 4.0 Bcfd
Hackberry, LA: 1.8 Bcfd (+0.85 Expansion)
Neptune, Offshore MA: 0.4 Bcfd
Sabine Pass, TX: 1.0 Bcfd (+ 1.0 Expansion)
Pascagoula, MS: 1.5 Bcfd
Under Construction
Corpus Christi, TX: Bcfd
Approved
Fall River, MA: 0.8 Bcfd
Port Arthur, TX: 3.0 Bcfd
Logan, NJ: 1.2 Bcfd
Port Lavaca, TX: 1.0 Bcfd
Port Baltimore, MD: 1.5 Bcfd
LI Sound, NY: 1.0 Bcfd
Approved Q
Liquefaction B
Existing
Under Construction
Approved C N K G J H L D F P
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55. GOM LNG capacity development outlook.
Energy Export
If all of the current DOE LNG export applications come online, GOM capacity would exceed 45 Bcf per day by Most of this capacity would come online in 2020.
Capacity (Bcf/d)
Source: U.S. Department of Energy.
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56. Surplus Capacity (MMBbl/d)
Energy Export
U.S. refining capacity and utilization.
Operable capacity at U.S. refineries has increased 20 percent since 1995 while utilization has remained stable at 90 percent.
Surplus Capacity (MMBbl/d)
Source: Energy Information Administration, U.S. Department of Energy.
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57. Energy Export
GOM refinery capacity outlook.
GOM refinery capacity has been increasing annually at an average rate of 1.5 percent per year.
Capacity (MMBbl per day)
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58. Petroleum Product Imports and Exports
Energy Export
U.S. petroleum product imports and exports.
In 2011, the U.S. became a net exporter of petroleum products. Net exports have increased 360 percent since then.
Net exports
Exports
Petroleum Product Imports and Exports
(MMBbl per day)
Imports
Distillate
Motor gasoline
Other petroleum products
Source: Energy Information Administration, U.S. Department of Energy.
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59. Energy Export U.S. crude oil exports.
In December 2015, restrictions on exporting U.S. produced crude oil were lifted. In 2016, the U.S. exported an average of 520,000 barrels per day reaching 1.1 million barrels per day in Opportunities for the U.S. to participate further in global crude oil exports are considerable, and the Gulf Coast will be the beneficiaries of these opportunities.
Export Destinations
Thousand barrels per day
Thousand barrels per day
Source: U.S. Energy Information Administration.
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60. CONFIDENTIAL Energy Export Louisiana Offshore Oil Port (“LOOP”).
The Louisiana Offshore Oil Port (“LOOP”) is a deepwater port designed for unloading crude oil cargos from deep-draft tankers. It is the only U.S. port capable of handling Ultra Large Crude Carriers, the largest ocean-going oil tankers and handles about 10 percent of all U.S crude oil imports.
Located in the Gulf of Mexico, 18 miles offshore from Louisiana, LOOP receives crude from three sources:
tankers carrying foreign and domestic crude oil;
domestic crude oil produced in the Gulf of Mexico; and
the Zydeco pipeline carrying domestic crude oil.
The port is connected by a 48-inch pipeline to the Clovelly Hub, located 25 miles inland. Three pipelines connect the Clovelly Hub to refineries in Louisiana and along the Gulf Coast.
LOOP also operates a 53-mile, 48-inch pipeline that connects to the LOCAP Terminal in St. James, Louisiana. The LOCAP Terminal is connected to Plains Terminal, NuStar Terminal, Sugarland and Capline. Capline is a 40-inch pipeline that transports crude oil to several Midwest refineries.
CONFIDENTIAL
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61. CONFIDENTIAL Energy Export
LOOP crude oil imports.
Imports of crude oil through LOOP have fallen 50 percent in the last ten years, and 38 percent since 2012, or an average annual rate of 6.7 percent - due to increased production of competitive U.S. crude oil from unconventional plays.
Million Barrels
CONFIDENTIAL
Source: Louisiana Department of Natural Resources.
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62. CONFIDENTIAL Energy Export
A two-way LOOP: facilitating an Louisiana energy export economy.
In July 2017 LOOP announced it was pursuing contracts to start exporting crude oil.
The “two-way LOOP” would provide connecting logistics from the Clovely Hub to the deepwater port.
The facility would require minor modifications to pump oil in both directions and service could be available in early 2018.
Most U.S. crude exports are shipped from Houston or Corpus Christi. However, these Texas facilities cannot accommodate the largest tankers carrying full loads. Smaller vessels are being used to transfer cargoes to large tankers elsewhere.
Exporting from LOOP would lower freight costs. And, LOOP’s multi-tank storage hub would allow for customer-specific blending of different crude grades.
CONFIDENTIAL
Note: is 6-month average, January through June.
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63. Conclusions
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64. Conclusions
Conclusions
Over the past decade, worldwide energy markets have been fundamentally changed due to the advent of U.S. shale oil and gas development.
These changes have not only impacted where hydrocarbons are produced, but has also created significant change to the transportation, processing, and final use.
The gulf coast has seen large increases in oil and gas production, with these increases mainly concentrated in Texas. Louisiana and Federal Offshore production have decreased in their relative importance.
Significant investments in the refining, petrochemicals, and transport of hydrocarbons have been made, and will continue to be made over the next decade. The Gulf Coast is well positioned, and could potentially become the world-cited crude benchmark.
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65. www.enrg.lsu.edu gupton3@lsu.edu
Questions, Comments and Discussion