FARMINGTON — Officials on Wednesday said the San Juan Basin likely won't experience a boom in natural gas production in the near future, and natural gas prices are not expected to rise significantly, according to a series of reports to the New Mexico Revenue Stabilization and Tax Policy Committee.
Helen Curie, senior economist for ConocoPhillips, said she expects national natural gas prices to stay the same through 2030.
"As you can see here, the range doesn't even touch $6," she said during a PowerPoint presentation to the committee, which has members from the state Legislature and the Legislative Finance Committee.
The graph Currie referenced had a black line indicating the forecast for ConocoPhillips' natural gas prices. The line stayed below $5 per mmbtu, or million metric British thermal units, through 2030.
San Juan County experienced a boom in natural gas production starting in the late 1990s and continuing to 2009. During that time, natural gas prices reached as high as $13 per mmbtu. But in 2009, prices dropped drastically to about $3 per mmbtu. Last week, natural gas prices were at $4.39, according to a report from the U.S. Energy Information Administration.
In a separate hearing on Wednesday, Jason Sandel, vice president of Aztec Well, said his company lost about half of its workforce when gas prices dropped.
The demand for natural gas is expected to grow over the next 10 to 15 years, mainly as power utilities move away from coal and embrace natural gas, Currie said.
Currie noted the U.S. is the largest producer of natural gas in the world, but she doesn't expect prices to increase above $6 per mmbtu through 2030, according to her presentation.
She said the national price for natural gas could rise if more of it was exported to other countries, but she said that increase wouldn't be very much.
With forecasts indicating little profitability in natural gas exploration or production, some companies have shifted their focus to exploring and producing oil from the Mancos Shale, a rock formation that is about 5,000 feet underground.
Tim Smith, reservoir engineer for Encana Corp., said his company expects the San Juan Basin will have up to 15 oil rigs running by the end of the year.
T. Greg Merrion, president of Merrion Oil and Gas Corp., reported 11 rigs are currently operating in San Juan County.
Smith said Encana has invested more about $200 million into oil exploration and production in the Mancos Shale in southern San Juan County this year. Early this year, the company announced plans to invest $300 to $350 million in the area for oil exploration and production.
Oil prices are also expected to remain stable, barring any global catastrophes, Currie said.
In a April report, the Energy Information Administration forecast oil will cost about $109 per barrel in 2025 — up about $7 from its current cost — and then start to trend upward to about $141 per barrel by 2040.
Currie added U.S. oil and natural gas production would benefit from free trade policies, which include the building of the Keystone Pipeline, a pipeline that would transport oil from Canada to the Gulf Coast.
Currie said U.S. oil companies have already made investments to produce the type of oil that would come through the pipeline.
"Keystone is a project that should be allowed if you believe in free trade," she said.
Legislatures asked her how advocating for the Keystone Pipeline could benefit New Mexico oil production.
"I would say the benefits are going to be more indirect," she said, "Allowing the U.S. to export that oil lessens the competition your barrels are going to face."Erny Zah is The Daily Times business editor. He can be reached at 505-564-4638.and firstname.lastname@example.org. Follow him @ernyzah on Twitter.