The Gulf Coast's energy industry was slowed by COVID-19, with reductions to levels of both employment and capital investment.
However, the recently released 2022 Gulf Coast Energy Outlook (GCEO), published by the LSU Center for Energy Studies, found some surprising good news in its analysis of recent years and forecasts.
As some of the most efficient and profitable refineries in the U.S. and globally, capital investment and employment in the Gulf Coast's energy sector have remained strong in spite of the pandemic, with the 2022 GCEO noting that a "relative recovery was underway" by July 2020. However, PADD 3 refineries were dealt a succession of additional blows in the form of adverse weather events Hurricane Laura, Winter Storm Uri and Hurricane Ida.
Now, "a new recovery in the refinery sector is underway, and it seems likely that utilization will hover around levels comparable to those experienced before the pandemic," the 2022 GCEO reported.
The 2021 GCEO predicted $21.7 billion in capital investments due to the uncertainty about the pandemic - about $16.5 billion below the publicly announced amount of $38.2 billion. The realized amount of energy manufacturing investments, however, was more resilient than anticipated, reaching $35.2 billion. While lower than the prediction for 2021, that outcome demonstrated the resilience of the Gulf Coast energy industry and portends continued recovery to prepandemic levels into the near future.
A backlog of capital investments came on line in 2021, reversing the relative lull in activity that occurred from 2018 to 2020. The 2022 GCEO foresaw as much as $190 billion in capital development to take place through year-end 2029, but it also predicted investment to ebb away from chemical activities and toward LNG export facilities as the result of the increasing global need for LNG imports, particularly in Asia. The 2022 GCEO reported, "Total LNG related investments are anticipated to surge to $120 billion, whereas non-LNG investments (mostly chemical-related) are anticipated to grow by $70 billion across the entire [Gulf Coast] region."
Because of the shift toward increased LNG exports, the 2022 GCEO predicted that Louisiana would lead the region in total energy manufacturing capital investment potential with as much as $125.6 billion by 2029. LNG export facilities are expected to represent the majority of energy investment in Louisiana, totaling $86.1 billion. A smaller yet significant level of investment of $39.4 billion is expected in the chemical sector.
Texas investments are expected to be more equally allocated than Louisiana's. The report stated that of Texas' $57 billion in new energy manufacturing investments announced, LNG-export related investments were appraised at $26.3 billion and new chemical/refining related investments at $30.7 billion. The U.S.'s reentry to the Paris Agreement and the implementation of new ESG policies also offer new opportunities for growth and investment through new decarbonization technologies like carbon capture and sequestration, bio-petrochemicals, blue ammonia, blue hydrogen and other biofuels.
The result of the coming investment is expected to be reflected by employment numbers in both states. "Both Texas and Louisiana are anticipated to reach new highs in refining and chemical manufacturing employment over the forecast time horizon," the 2022 GCEO stated. Louisiana's employment is expected to increase about 3.7 percent, or 1,350 jobs by the end of 2022. Employment growth is then expected to slow, gaining approximately 600 jobs in 2023 and 1,000 jobs in 2024.
Texas refining and chemical manufacturing employment exhibits a similar pattern, forecast to increase by 3.8 percent by the end of 2022, reaching 3,900 jobs. In 2023 and 2024, GCEO anticipated Texas refining and chemicals sectors to gain approximately 1,500 jobs and 900 jobs, respectively.
