'The increased production is taking away some of the sting' - New Mexico Oil and Gas Association official
BY DENNIS DOMRZALSKI
Despite the plunge in oil prices, New Mexico oil producers are pumping more oil than ever, and 2015 was the best year ever for oil production in the state.
Through November, producers pumped 134.7 million barrels of oil, shattering the previous record of 128.1 million barrels for all of 1970, according to numbers posted Wednesday by the New Mexico Oil Conservation Division.
December’s production numbers have yet to be added into the tally, but if they come in at the nearly 12 million barrels produced in November, the total output for 2015 would be around 146.7 million barrels, or more than more than double the 71.2 million barrels that were produced in 2011.
Wally Drangmeister, vice president of the New Mexico Oil and Gas Association, said the record pace of production is taking away some of the sting of the near-record-low oil prices and their effect on the state’s budget. “Production is basically double what it was in 2014, and that is a very huge mitigator against the low prices,” Drangmeister said. “The increased production is taking away some of the sting.”
West Texas Intermediate was selling for $27.27 a barrel Wednesday morning, a price that hasn’t been seen since 2003. About a third of New Mexico’s $6.2 billion general fund budget comes from oil and gas revenues.
It’s likely that production will fall off sometime this year, Drangmeister said, because exploration activity has fallen dramatically in the state. As of Jan. 16, there were 32 drilling rigs operating in the state, most of them in the Permian Basin in southeastern New Mexico. That compares to 92 rigs in January 2015, according to Baker Hughes, a Houston-based oilfield-services company.
“Even though the rig count is down, those rigs are going into very high production areas,” Drangmeister said. “If low prices continue and we continue to see the rig count go down, there will be a time when production goes down and levels off. But right now, production is extremely strong.”
The oil price plunge is causing great concern among lawmakers in Santa Fe, who are trying to put together a budget for the coming fiscal year and finding out that there won’t be a lot of new money they can spend. It’s now estimated that there will be around $100 million or less of new money, down from the $293 million that was predicted last August, and from the $232 million that was predicted in December.