New Mexico gas production falls to lowest level in 20 years

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Latest Oil and Gas News: 
March 14, 2013

(Farmington, N.M., Daily Times; March 10) - Far from shale gas fields in Pennsylvania and Texas, natural gas production in northwest New Mexico dropped 4.2 percent in 2012 to its lowest level in 20 years. It was the sixth consecutive year of declining production in the region, according to state Oil Conservation Division data.  Drillers in the San Juan Basin have reacted by moving some operations to other states, leaving positions vacant and retooling their drilling program to focus on more valuable oil.

To a significant extent, the drop in drilling is a result of low prices. Natural gas was trading at $3.63 per million Btu on the New York Mercantile Exchange last week, a rebound from a year ago when gas was trading near $2 but still below the boom in 2005-2006, when natural gas was at times worth around $7.

Production is unlikely to recover before prices do, said Tom Dugan, president of Dugan Production in Farmington. "With the price of gas being like it is, it's hard to drill a well and make a profit," he said. Northwest New Mexico produced 780 billion cubic feet of natural gas in 2012, down from about 815 billion a year earlier. It was the lowest since 1992, when the region produced 733 billion cubic feet of natural gas.

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