The cabinet secretary of the New Mexico Energy, Minerals and Natural Resources Department has told local oil and gas officials that things are continuing to look up for the industry — particularly in oil prices and production — in the aftermath of a regional recession.
EMNRD Secretary Ken McQueen spoke to the Four Corners Geological Society, the Four Corners Association of Professional Landmen and New Mexico Society of Professional Engineers during a joint meeting at San Juan Country Club on Friday.
McQueen said that while natural gas production in the state has been holding steady over the course of the past few years, statewide oil production has seen an enormous increase, making New Mexico the third-largest crude oil producer in the nation.
There were 89 active rigs throughout the state on Friday, McQueen said — a jump from a March 2016 low of 13 rigs and almost catching up to a December 2015 high of 103 rigs. McQueen credited advances is horizontal drilling technology and oil price increases for the rebound.
Oil prices have more than doubled in recent years, rising from about $26 per barrel in February 2016 to more than $55 per barrel in December, McQueen said.
Natural gas production, on the other hand, has remained relatively flat in the past few years, despite a “continuous decline” in San Juan Basin production, he said. Though the Permian Basin has been very productive, McQueen said the industry has been limited by shrinking markets as California — one of the largest consumers of New Mexico natural gas — moves away from natural gas use and by a lack of infrastructure to efficiently move gas to other markets.
McQueen said the statewide industry is on track to provide stability from oil revenue for the state’s fiscal year 2018 budget. The budget requires an average of 458,000 barrels of oil per day to fully fund the FY18 budget, but producers have done well in the first quarter, bringing the average daily production requirement down to 404,000 barrels per day for the rest of the year.
“The good news about this is, even if we suffer a downturn in price … we should be in good shape in the volume perspective on the state budget,” McQueen said, adding that the EMNRD used “conservative” pricing predictions to forecast potential oil revenue.