While New Mexico’s natural gas-rich San Juan Basin turned up another declining year of natural gas production in 2012, at least one exploration and production (E&P) company is “encouraged” by results so far this year.
Northwest New Mexico produced 780 Bcf last year, down 4.2% from the 815 Bcf produced in 2011 and the sixth consecutive year of declines. New Mexico’s Oil and Gas Conservation Commission (OGCC) is predicting that the production decline will continue this year and could hit the lowest level of the past two decades, 733 Bcf, which was recorded in 1992.
“While it is true that natural gas production is down in the San Juan Basin because of another warm winter leading to depressed prices, there is little doubt that natural gas will be one of the leading energy sources in the future,” said John Bemis, secretary of the state’s Energy, Minerals and Natural Resources. “New Mexico is committed to doing everything possible to further the consumption of this resource that is abundantly available in the state.”
Separately, Canadian-based Encana Corp. is keeping a close eye on New Mexico, according Denver-based officials. Encana apparently is quietly leading an uptick of interest, particularly in horizontal drilling for oil and liquids.
An Encana spokesperson told NGI that the San Juan is an area where the producer needs to develop more information, but it intends to continue to explore. To date, Encana has drilled 13 gross wells in the play, 11 of which have been completed.
“Successful operation execution continues to drive well costs down,” Encana officials stated. “The company is encouraged by the initial results… This year we intend to run a two-rig program in the area.”
Meanwhile, on the demand side, Bemis said the Gov. Susana Martinez administration is pushing a number of initiatives, including joining a consortium working with major vehicle manufacturers to encourage more natural gas vehicles. New Mexico also has reached a settlement with federal and energy sector organizations that will result in building more gas-fired power generation units in the state to replace older, coal-fired units.
“These are the kinds of efforts that will boost demand for natural gas in the future,” Bemis said.
Tom Dugan, who runs Dugan Production in Farmington, NM, told reporters that current gas prices make “it hard to drill a well and make a profit” in the San Juan Basin. He is not “looking for good times” in the San Juan Basin anytime soon.
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