No oil bust in sight for booming Permian Basin
At least for the foreseeable future, the series of oilfield boom/bust cycles is over, according to an industry expert speaking in Hobbs to the New Mexico Association of Counties board of directors last week.
Ryan Flynn, executive director of the New Mexico Oil and Gas Association, said oil and gas industry leaders and analysts are focused on the Permian Basin.
“The Permian Basin is the epicenter of the energy world right now,” Flynn said. “That’s not just my word — that’s the Wall Street Journal, Bloomberg, you name it. The Permian Basin is the hottest oilfield in the world right now.”
New Mexico last year became the third largest oil producer in the United States. With the first quarter of this year showing more oil production than the first quarter of last year, 2018 is set to become another record-breaking year, he said.
“This is projected to be a sustained period of growth in terms of business. Every analyst predicts that over the next 10 years, you’ll see production in the Permian remain stable and continue to increase,” Flynn said. “In the past, we’ve seen production has followed market prices where we’ve had booms and busts, the current cycle in the Permian is projected to continue to grow.”
He expanded the prediction, however, beyond national borders.
“The projection is in the next four years, the Permian Basin will be the third largest oil producer in the world,” Flynn said. “You’ll have Saudi Arabia, Russia and, then, the Permian Basin will be the third largest oil producer in the world.”
Even though the price of oil is expected to fluctuate, moving up and down, the Permian Basin likely will fare well, he said.
“There’s less exposure here compared to other basins around the United States,” he said. “What that means is if you see prices dip again, production would slow down in other regions long before production starts to pull down in the New Mexico and West Texas part of the Permian because we have a better break-even point here than in other parts of the United States.”
Although insisting NMOGA works with regulators and understands the need for some environmental and safety regulations, he said, “The biggest threat to the industry is regulatory uncertainty.”
Acknowledging changes possibly on the horizon with new administrations, he warned against efforts to ban hydraulic fracking.
“If you ban hydraulic fracturing, you decimate the industry,” he said. “I don’t think people understand that we’ve been fracking wells for over 50 years. Hydraulic fracturing hasn’t been the game-changer for the industry. The real game changer has been directional drilling, horizontal drilling. That’s been the key, the innovation that’s changed how the industry has evolved and unlocked the Permian Basin.”
Before concluding his talk with the state’s county commissioners, Flynn presented each a report on how the oil and gas industry has contributed to the state’s budget and affected each county’s educational funding. The report is on the organization’s website.