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Thoughts from ConocoPhillips count for New Mexico. That’s because CP accounts for around 40 percent of the gas produced in the San Juan Basin and has at least two locations in Farmington with three nice looking offices and sundry outbuildings.
A CP senior economist, Helen Currie, brought her Ph.D. to Farmington July 9 to outline the outlook for oil and gas markets. Her audience was 25 or so legislators attending a joint meeting of the Legislative Finance Committee and the Revenue Stabilization and Tax Policy committee.
A national overlay is an oil boom in New Mexico. Our oil production is way up — Currie expects maybe another 30 percent growth by 2020 — Currie just didn’t call it a boom.
In the state briefs section July 10, USA Today said, “Federal statistics show that (New Mexico) is in the midst of an oil boom. The U.S. Energy Information Administration said New Mexico, North Dakota and Wyoming were the largest crude oil producers on federal and tribal land during the 2013 fiscal year.”
The Permian Basin in Texas and southeast New Mexico, Lea County in particular, “is the nation’s most prolific oil producing area,” the EIA says. However the Permian has little federal land. Another indication of oil production growth expectation is Currie’s estimate that the Permian will have something approaching 55 percent of “upstream capital spending growth through 2020.”
While a good many of us have heard of the San Juan Basin, the location, seems generally described as “northeast New Mexico,” with no specifics. To clarify, the San Juan is roughly square with the Arizona-New Mexico border on the west, a line just above Cortez and Durango, Colo., on the north, the eastern border just east of Cuba and with I-40 the southern border.
Currie’s presentation was everything one would expect from a senior corporate economist: full of information, polished and professional, but with little humor. Offered an opportunity, though, she chose droll.
Sen. John Arthur Smith, Deming Democrat and Senate Finance Committee chair, asked about the Keystone oil pipeline, long the subject of maddening games from the Obama administration. The Keystone, Currie deadpanned, “is another example of something that should be allowed if you believe in free trade.” Keystone’s effect on New Mexico would be indirect through broadening the market for production from the state.
Free trade also means exporting crude oil, Currie said. Benefits include lower gasoline prices for consumers, $135 billion of economic activity and one million jobs, a lower oil import bill, more money to the government and geopolitical strength.
The very big picture, Currie said, is that “the renaissance of North American gas and oil production is the critical supply-side trend affecting global energy markets over the long term. North American supply growth is redefining global energy markets.” One happy result is a half million more manufacturing jobs nationally since 2010. The state’s manufacturing sector marches to a different drummer. Manufacturing jobs here, 27,200 in May, down 1,700, or 6 percent, from May 2013, were 34,800 in February 2005 and 43,300 in April 1999.
Over time, the San Juan-Permian production split has been oil in the Permian, gas in the San Juan. For the future, not so much. “Henry Hub” prices are expected to be just above $4 per mmbtu (million metric British thermal units), a level leaving producers little profit. Clearly the choice is to spend development money elsewhere, as on oil wells.
Currie’s production curves tend to be almost straight up. U.S. crude oil production grew by half from 2008 to 2013 and now is more than eight million barrels per day for the first time since 1988. Texas production has almost tripled. Good for New Mexico.