Friday, July 19, 2013
Deepwater production in the Gulf of Mexico is poised for sustainable growth, as the news I consistently hear from clients and other industry pundits is very positive, and if you read any business news, it seems that significant announcements are released weekly: Exxon/Mobil, BP, Shell, ConocoPhillips, Chevron, Freeport-McMoRan Oil and Gas (formerly Plains Exploration & Production or PXP) and others have new significant deepwater activity.
Deepwater drilling is very expensive, involves more risk and takes much longer than drilling on "the shelf." The Macondo disaster is a lingering reminder of the risk, but as unfortunate as the incident was, some very positive developments have resulted. New tools and technologies are being developed that make exploration and production much safer, and much of that technology is developed and supported here in Acadiana. I believe that we will see substantial job growth in the service sectors and in the technology companies that service and support the energy industry. With that job growth, we will see continued expansion in all commercial real estate sectors, particularly industrial/warehouse.
The energy industry has a solid track record of innovation and entrepreneurialism, and a significant amount of that innovation has occurred in South Louisiana. There are many exciting new technology-based trends that are having substantial impacts on the Gulf - and in turn our economy.
Ever heard of a FPSO? It stands for floating production, storage and off-loading vessel, and it appears to be the wave of the future for deepwater drilling. These vessels offer flexibility and safety features that traditional fixed platforms do not. During severe wind and rains, the vessel can be rafted into wind and waves to reduce stress on stem connections and even disconnected from sub sea wellheads during more severe weather.
How about SureTec? It is a new leak and pressure monitoring solution that is revolutionizing deepwater downhole monitoring and troubleshooting by providing more accurate data much faster. Had this technology existed when Macondo was in production, the disaster might have been averted. Another new technology called the SHARC, developed by Chet Morrison Contractors, is an acronym for Subsea Hydraulic Abrasive Rotating Cutter. This device reduces diver time underwater, eliminates hand jetting and reduces job time by more than 50 percent. Technological developments like these are important to safe production in the Gulf and sustained growth in our market.
I believe that all sectors of the commercial real estate market will grow, but industrial will likely see more dramatic expansion than office and retail. Consider the following string of projects. Freeport-McMoRan Oil and Gas has partially moved into its new deepwater service facility in Broussard. GE Oil and Gas has a major expansion under way on Hwy. 90 across from Le Triomphe and just across the street, Baker has new space under construction on its campus.
In the SMEDA business/industrial park on the western edge of St. Martin Parish, Forum Energy is building a new facility on 20 acres and has additional expansion land for future growth. In Iberia Parish, Halliburton is under construction on Phase 1 of its new 105-acre site.
IPT Global, the Houston-based company that owns the aforementioned SureTec technology, just purchased 15 acres in Broussard with plans to build a new field support facility. Expro, Weatherford and Schlumberger all have facility expansion plans as well. This list represents only a few of the significant projects being constructed or in the pipeline.
Also significant is the level of speculative land development that is beginning to occur. Believe it or not, our market does not have many shovel-ready sites, so industrial parks with infrastructure in place are needed. Pride's Crossing on Verot School Road is under construction and will open this year. Garber Industrial Park off Hwy. 90 has sold out Phase 1, and the second phase should start this year. Schaefer Industrial Park jump-started with the Forum Energy project. There will be one or more new parks coming to Broussard as well.
While the site development is significant, it is important to note that there still is not a lot being built on a speculative basis.
I believe that we will see local companies continue to thrive and create jobs. While I am bullish on the industrial sector of the market, what's most promising is that local real estate as a whole stands to benefit from the energy industry.
Monty Warren is vice president and partner of Beau Box Commercial Real Estate, which has offices in Baton Rouge, Lafayette and New Orleans. Warren, based in the Lafayette office, has two decades of commercial real estate experience.