This has been a record-breaking year for oil and gas in New Mexico.
Just one example: the New Mexico State Land Office collected more than $30 million from monthly oil and gas lease sales in July, an all-time high, according to the office’s records.
That’s important not only to oil and gas operators, but to other businesses, because the industry accounts for nearly one-third of all state funding, according to the New Mexico Oil & Gas Association. In January, Gov. Susana Martinez cited a steep drop in oil and gas revenues as a factor in the $69 million budget deficit the Legislature was facing.
An uptick in oil and gas revenue will help the state rebuild its reserves to more than 8 percent by the end of the fiscal year, the Albuquerque Journal reported in November.
Daniel Fine, associate director of New Mexico Institute of Mining and Technology’s Center for Energy Policy, also told Business First in November that legislators can thank the unusually prolific nature of the Delaware Basin, which straddles the New Mexico-Texas border on the south side of New Mexico and is part of the Permian Basin.
“We’re leading the world now in production, close behind is Russia and Saudi Arabia,” Fine said.
A recent market study of the region showed the Permian Basin’s recoverable resources would be enough to supply every refinery in the U.S. for 12 years and have a market value of about $3.3 trillion, according to Bloomberg.
The term “Permania” is now a common hashtag among energy watchers on social media. Some experts like Fine say the turnaround surprised them.
Fine said when he told a Business First audience at an energy panel two years ago to expect “bad news” that included a decrease in production and prices, he did not anticipate the boom in the New Mexico and Texas Permian Basin that is happening today.
He described that boom as a technological revolution for drilling in the Southwest, where companies use horizontal drilling and hydraulic fracturing to access more of a geologic formation.
“Individuals today in the business that went to grad school for petroleum engineering are putting their textbooks up for sale in garage sales. What they learned is not essentially relevant today,” Fine said.
Ken McQueen, secretary of the New Mexico Energy, Minerals and Natural Resources Department, told Business First last year he wanted to update New Mexico’s rules to keep up with technology that allows companies to drill “two-mile laterals.”
Fine said early 2018 also looks good for oil and gas in the state.
He said he even expects the Delaware Basin to outperform the Wolfcamp shale in the Midland Basin portion of Texas’ Permian Basin. Last year the U.S. Geological Survey found that formation contains an estimated mean 20 billion barrels of oil, the largest estimate of continuous oil that USGS has ever assessed in the United States.
“I’m confident the official federal evaluation of the Delaware will take us up to around 28 billion barrels of oil,” Fine said.
Fine said New Mexico has been able to gain a top position in the world oil market thanks to the Organization of the Petroleum Exporting Countries agreeing around this time last year to reduce world oil production.
That decision was made to help end a global glut that caused New Mexico’s and other oil markets to plummet in recent years.
He said though he doesn’t see oil prices in New Mexico reaching previous highs of $100 per barrel, he does expect prices to increase from $50 per barrel as New Mexico’s production soars, and investment continues in the region.
“If the price of oil gets to $70, $75, OPEC will have no reason to restrain production. OPEC will want some of that,” he said.
By: Rachel Sapin (ABQ Business First)
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