Home Business ExxonMobil to invest $55B in Lea, Eddy

ExxonMobil to invest $55B in Lea, Eddy

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IRVING, Texas — ExxonMobil officials said that a new study commissioned by the multinational oil and gas corporation estimates its development of Permian Basin resources in New Mexico will generate $64 billion in net economic benefits for the state and local communities over the next 40 years, creating thousands of new jobs and providing increased funding for education, health and human services and infrastructure improvements.

“The Permian Basin is the engine of America’s energy renaissance and New Mexico residents will see direct economic benefits and opportunities from our planned investments,” said Darren W. Woods, chairman and chief executive officer of Exxon Mobil Corp. “We will be a significant, long-term economic contributor to the state of New Mexico and will work hard to be a trusted member of the community.”

State government, about a third of which is funded by oil and natural gas proceeds, will receive an estimated $62 billion in net fiscal benefits, $44 billion of which will come from new leases and royalties, according to the research.

About $8.5 billion will come from state oil and gas severance taxes, said the study which was conducted for ExxonMobil by Impact Data Source. The research findings assume an oil price of $40 per barrel.

From an employment perspective, ExxonMobil’s activities will generate an average of 4,100 direct job opportunities for New Mexicans per year for the next 40 years, the study estimates. Over the next 40 years, the company’s operations are expected to generate a total of about $29 billion in new wages, salaries and benefits.

Robert McIntyre, spokesman for the New Mexico Oil and Gas Association, said other major oil producers are likely to expand operations in the Permian Basin given new data.

New data from the U.S. Geological Survey estimates 46.3 billion barrels of oil assessed in the Wolfcamp Shale and overlying Bone Spring Formation in the Delaware Basin portion of Texas and New Mexico’s Permian Basin. The USGS also reported there were 281 trillion cubic feet of natural gas, and 20 billion barrels of natural gas liquids in the basin.

“Right now, there are a number of operators who are investing in New Mexico, there are a number of folks that have recently acquired positions acreage leases and I think you’re going to see a similar story across the basin, not just with one company,” Robert McIntyre, spokesman for the New Mexico Oil and Gas Association, told the News-Sun Friday. “But for any company who has production in the Permian, they’re going to be able to grow rapidly, quickly and at a very large scale over the next several years.”

Currently, New Mexico is the third largest oil-producing state in the nation, while Lea County is the second highest oil-producing county in the country.

Even Democratic Gov. Michelle Lujan Grisham, who often speaks of green energy but rarely speaks of fossil fuels, was quoted in Friday’s ExxonMobil news release, saying the oil and natural gas industry is crucial for New Mexico.

“The benefit to this state’s bottom line, as represented by investments from companies like ExxonMobil, has been enormous,” Lujan Grisham said. “My administration has been and will continue to be responsive to changes in the energy sector and the need for meaningful regulation and diversification as a means of ensuring a sustainable future — for our children, their education, the infrastructure that will support our collective future and more.”

As part of ExxonMobil’s Permian Basin growth, the company said it plans to expand its operations to produce more than 1 million oil-equivalent barrels per day as early as 2024. The company said significant growth will require about $55 billion in capital expenditures in Lea and Eddy counties.

“A lot of (money) is going to go directly into the local economy, supporting local businesses, creating jobs,” McIntyre said. “Some of that money is going to come back to the state, rather city and county government in the form of local tax. A lot of it is going to come back to the state in the form of production tax. So that ultimately means that southeast New Mexico is going to be having some tremendous economic growth, we’re going to have a number of jobs available in that region and ultimately New Mexico is going to be supported by this industry in a big way for a long time.”

Southeastern New Mexico communities where ExxonMobil operates will receive an estimated $1.8 billion in net tax revenue, said the Impact Data Source study.

More than 65 percent of those estimated tax revenues will flow to the state’s general fund.

At current funding levels, those contributions would translate into:

• $6 billion for higher education, which is enough to pay college tuition for more than 827,000 New Mexico students.

• $10 billion for health and human services, which is equal to the salaries of more than 146,000 nurses.

• $18 billion for New Mexico’s public schools, which is equal to the salary of more than 309,000 elementary school teachers.

• $6 billion for other state government services, which is almost equal to the entire 2018 New Mexico state budget.

State Sen. Gregg Fulfer said the Exxon-Mobil announcement is great news for the region.

“The first question that I get from anybody is ‘How long is this oil thing going to last?” Fulfer, R-Jal, told the newspaper. “And I always tell them that when major companies start moving in, they always look for long-term growth and with this we’re talking about a 40-year life, $55 billion over 40 years. This is a really positive thing I think for Lea and Eddy county we’re seeing.”

Fulfer, who is also an oilfield company owner, said ExxonMobil’s 40-year expansion plan will spark further investment.

“This will allow people, actually the investors, to come in and spend money on housing and things like that long-term,” he said. “If you get a job here, it’s not just a get-your-RV-for-a-job for one week. This is a job for 40 years, and so hopefully this will help take off — the investors investing into real estate and bringing people buying into our communities and being a part of the communities. I think that’s the kinds of things we need to grow our community, growing the school, growing the families — the whole families, not just workers coming in RVs. So I think this is great news.”

State Rep. Larry Scott, also owner of an oilfield company, said ExxonMobil’s investment is wise.

“With the technology that is being developed today, with respect to horizontal drilling and fracture stimulation, virtually every square foot of southeast New Mexico will eventually be considered a reservoir of circumstance,” said Scott, R-Hobbs. “That level of capital investment is well-justified. I think they’re making a smart business decision.”

Hobbs Mayor Sam Cobb said ExxonMobil is a good partner with the city.

“It creates a lot of economic opportunities for our local businesses, a lot of job opportunities for our local citizens,” Cobb said. “I think its exciting news, they’re good corporate partners with us, and we want to continue to expand that partnership with them — have them think about Hobbs and Lea County as part of their capital projects for sure.”

Cobb said the shale oil play in the Permian Basin is the most attractive oil patch in the world.

“It’s the best business opportunity for the oil and gas production and exploration people,” the mayor continued. “I think that we really have a strong business network with a lot of knowledgeable people in the service industry. All the communities in Lea and Eddy county are working hard to try to be sure to address the infrastructure issues and housing issues, and all those kinds of things. The Permian Strategic Partnership — we are going to continue to work on with them, and do what we can do to address some of the needs and make sure that we move forward with them — acquiring a plan that will make them glad that they are part of our area, for sure.”

In November, a group of major oil and gas companies with plays in the Permian Basin, a portion of which is the Delaware Basin that straddles the New Mexico-Texas border including the southern half of Lea County, announced the formation of an energy alliance, collectively committing more than $100 million over the next several years to spur additional private-sector investment in the region.

The 18 major oil companies that comprise the Permian Strategic Partnership said the Permian Basin is an oil-producing superpower, becoming one of the most strategically important oil-producing regions in the world, and leading the way to American energy independence.

The coalition says total oil production in the region is expected to more than double in the coming years due to advances in technology and improved operating efficiencies. The energy companies said while the oil and gas industry is inherently cyclical, they are convinced the Permian Basin is different from the boom-and-bust cycles of the past.

“I’m glad to be mayor of the community right now because it is a very fortunate time for our community,” Cobb said. “I’m glad to be part of it.”

New-Sun Managing Editor Jeff Tucker contributed to this story.

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