BY KEVIN ROBINSON-AVILA / JOURNAL STAFF WRITER
Wednesday, December 11th, 2019 at 9:16pm The complete article is here→ The complete article
“Last in a five-part series: Behind the Boom
Copyright © 2019 Albuquerque Journal
The shale-oil tsunami that has flooded New Mexico with a wave of petro dollars in recent years may be receding somewhat as U.S. production faces its first significant decline since the gushers began nearly eight years ago.
Signs of trouble are showing up in major basins around the country, with a significant drop in drilling rig activity and sluggish growth this year compared with the spectacular bursts of production in recent years that has transformed the U.S. into the world’s No. 1 oil producer.
A new report released in November by global research and consulting firm IHS Markit says the U.S. is headed for a “major slowdown,” reflecting today’s moderate oil prices, investor reluctance to continue pumping huge sums into companies that have shown only modest returns on capital, and significant productivity declines in shale-oil fields.
That poses substantial challenges going forward.
But a prolonged bust is unlikely, and New Mexico may be less affected than other places. That’s because the Permian Basin in West Texas and southeastern New Mexico remains at the forefront of the shale revolution, thanks to its rich resources, low production costs and the huge gushers that flow from wells drilled there.
As a result, New Mexico is well-positioned to navigate through the current headwinds, said Raoul LeBlanc, IHS Markit’s vice president for North American unconventionals.
“The Permian has an inventory of highly productive wells yet to be drilled that will last many years,” LeBlanc told the Journal. “New Mexico is in a really good spot. It’s proven extremely productive compared with anywhere else.”
Many companies are cutting back on investments in less lucrative zones to refocus on their most productive assets. That bodes well for New Mexico’s side of the Permian, where operators can still tap into rich, productive pools of hydrocarbons at lower cost than in other places.
In fact, those advantages have attracted some of the biggest players in the oil industry to New Mexico, such as ExxonMobil and Chevron. And that, in turn, means investment and production will continue to grow here in the short, medium and long term, because those deep-pocketed companies have the resources to sustain and expand activities even as smaller, cash-strapped firms pull back, LeBlanc said.
“New Mexico is one of the few places that will continue to have net investment,” LeBlanc said. “It’s still pulling in a lot of cash because of companies like Exxon and Occidental Petroleum that have big balance sheets and that continue to grow their activities. New Mexico should be a relative winner in the overall pullback.”