An oil lease sale scheduled Wednesday will offer a glimpse at whether the Houma-Thibodaux area will see relief from a four-year oil bust anytime soon.
The Trump administration says it will again conduct the largest oil and gas lease sale in U.S. history in New Orleans, opening about 78 million acres in the Gulf of Mexico to drilling. It remains uncertain whether the lease sale will attract any more interest than the previous two, which saw bids on 1 percent or less of the tracts offered.
The sale comes as Houma-Thibodaux’s offshore oil-based economy struggles amid a bust that has entered its fourth year. The area has lost more than 16,000 jobs -- one of every six -- amid a global crude glut that caused oil prices to plummet to less than half their mid-2014 high of about $115 a barrel.
The U.S. industry has rebounded, but job growth has been limited mostly to inland shale fields, where drillers have been able to break even at about half the $60-a-barrel prices most deepwater operations required.
A few things have changed since the last lease sale in March.
Oil has traded above $60 a barrel since the start of the year, with the exception of a couple of days in February. Economists have said months at those prices or above will be necessary to attract much interest from drillers.
Companies, including Shell and BP, are pushing forward with two or three projects in the deepwater Gulf they say can break even with oil prices as low as $30 to $40 a barrel. But Louisiana economist Loren Scott has said companies have managed to do that by finding efficiencies that have reduced the number of workers they employ and by demanding lower prices from suppliers who make up much of Houma-Thibodaux’s economy.
The Gulf rig count stood at 18 last week, up six, or 50 percent, since March. It remains down, however, from 56 rigs in August 2014, when the bust began.
Federal officials in April rejected a proposal to cut the amount the government charges oil companies to drill in the Gulf of Mexico by a third. Industry officials and analysts had expressed hope that the royalty cut could reinvigorate an offshore oilfield. But analysts told the Reuters news agency Friday that some companies that may have held off on bidding for Gulf tracts amid the uncertainty may be interested this time. “The uncertainty is gone; it is off the table,” said Imran Khan, senior manager at consultants Wood Mackenzie, told Reuters.
Several environmental groups are suing the Trump administration over the oil lease sale, saying opening such vast areas to bids amounts to an expansion without adequate consideration of the risks to people, wildlife and the environment.
The lawsuit, filed last month by Earthjustice on behalf of the Gulf Restoration Network, the Sierra Club and the Center for Biological Diversity, awaits a hearing in U.S. District Court in Washington, D.C.
“With these massive lease sales in the Gulf, the Trump administration is holding up President Obama’s policies with one hand to claim the environment and worker safety won’t be compromised, while slashing those same policies with the other hand and aggressively attempting to expand drilling," Chris Eaton, Earthjustice attorney, said in a prepared statement. "Trump can’t have it both ways.”
-- Executive Editor Keith Magill can be reached at 857-2201 or firstname.lastname@example.org. Follow him on Twitter @CourierEditor.