Last year, the Federal Energy Regulatory Commission (FERC) approved the expansion of the Kinder Morgan Louisiana pipeline. This is just one of several pipeline expansion initiatives in the state, and many experts in the oil and natural gas industry believe Louisiana will be home to the next wave of pipeline expansions. Yet what makes this state unique from other high producing states like Texas? What has changed in the industry to revive Louisiana as a hub of growth?
An Existing Hub to the Nation
According to the Louisiana Department of Natural Resources, the state already is home to almost 50,000 miles of pipelines. The greatest amount of pipeline is located within the 19 parishes that border the Gulf of Mexico, the location of oil and gas productions. Within Louisiana, the pipeline system intersects with every major transportation passageway. The system also connects with interstate pipelines, providing energy to the rest of the nation.
Pipeline mileage aside, Louisiana’s oil and gas production levels are among the highest in the nation. The amount of natural gas produced in the state only falls behind that of Texas, STI Group explains. 59 million barrels of crude oil were produced in 2013, making it the seventh-highest producing state.
Based on these numbers, it might seem that Louisiana is has already reached a top-level of energy production. Yet changes in the industry and advancements in technology have renewed interest in expanding the state’s already robust system.
Hydraulic fracturing (“fracking”) allows companies to tap gas and oil sites that were previously inaccessible. This process pumps liquids into a wellbore to create cracks within rock formations. This allows for the flow of the untapped gas and oil.
Advances in drilling haven’t been limited to onshore techniques. New offshore technology has allowed companies to tap areas deeper and more remote underneath the ocean. STI Group believes this will help build Louisiana’s share of offshore drilling production.
The Prime Location of the Pelican State
While Louisiana currently has an expansive pipeline system that connects with interstate pipelines, the majority of these connections were made to areas with high production. CNBC explains new methods (including fracking) have opened up-and-coming hubs such as North Dakota. New infrastructure needs to be built to connect these areas to existing hubs in Texas and Louisiana.
Transportation via pipelines is also cheaper than other methods such as rail. Indeed, CNBC explained that the 2012 pipeline transportation cost per barrel was between one and two dollars, compared to a minimum railway transportation cost of 10 dollars per barrel.
Natural gas resources are coming exclusively from the Midwest. According to the American Oil & Gas Reporter, the United States as a whole will experience a surplus in energy. In particular, the Northeast will need to send its surplus elsewhere while regional demand catches up. With energy absorption needs already peaking in the Midwest and South, the surplus will head to Louisiana. The state serves as an exporter to Mexico and overseas through liquid natural gas (LNGs), and its central location in the United States makes it an ideal outlet for surplus fuel.
New pipelines are being constructed in the Northeast to reshuffle and send out the excess resources in the region. As of 2014, 60 percent of these pipeline expansion projects are targeted to the Gulf Coast.
Time to Shine for Louisiana
American Oil & Gas pointed out the irony in Louisiana’s transformation from a gas and oil supplier to the rest of the nation to the recipient of excess fuel products. The industry has recognized this switch, and is investing resources into expanding the current pipeline infrastructure. While the oil and gas industry will always change, at least for now Louisiana can enjoy the spotlight.