Home Local News $174 billion in oil projects? Study says it is possible

$174 billion in oil projects? Study says it is possible

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SANTA FE — New Mexico’s growing oil and natural gas industry is poised to attract as much as $174 billion in new infrastructure investments through 2030, according to a new study prepared by the global consulting firm ICF.

The report was commissioned by the New Mexico Oil and Gas Association and the American Petroleum Institute and announced Tuesday by NMOGA.

“We have enormous potential to grow and transform the future of our state over the next several years, and increased investment in New Mexico’s vital energy infrastructure is critical to the short- and long-term success of our great state,” said Ryan Flynn, executive director of NMOGA.

Alongside policies to support and promote growth in oil and natural gas production, investments could grow the combined value of oil and natural gas production 323% by 2030, or more than quadruple the 2017 value.

“Billions of dollars in economic impact, tens of thousands of jobs, and reliable, affordable energy are all on the line,” Flynn continued in a release Tuesday. “Most importantly, we have the chance to put New Mexico on a path toward remarkable prosperity and grow in a transformative way that lifts the trajectory of all New Mexicans. We should take advantage of these opportunities and put the policies in place to make the potential possible.”

The study predicts that proper investment could increase production by 358% for crude oil, 106% for natural gas, and 136% for natural gas liquids. That would result in a 323% percent increase in the value of oil and natural gas outputs, from $17.1 billion in 2017 to potentially $72.6 billion in 2030. The oil and natural gas industry contributed $13.5 billion to New Mexico’s Gross Domestic Product in 2017, representing 14% of the state’s GDP, and could grow as high as $60 billion by 2030, or 45% of GDP.

New Mexico’s general fund and local governments stand to gain substantially from increased production of oil and natural gas. In 2017, state and local governments benefitted from $2.4 billion the industry paid in, and revenues – including one-third of the total state budget – for that fiscal year.

Industry contribution to state and local governments could be as high as $80 billion annually by 2030, under the base case scenario modeled in the study. Money from the general fund supports a variety of public sectors, including education, health care, public safety, transportation, agriculture, and economic incentives.

An alternate case in the study explores the scenario if the necessary investments are impeded by policy decisions or other factors, including increased regulations or additional red tape. Specifically, the study highlights negative impacts of less leasing of new lands for drilling; new laws and regulations affecting drilling, completion, and production; and delayed drilling permits.

If the policies were to come to fruition, the results would be stark. Constraints would potentially reduce billions of dollars in contributions to state and local tax revenues and the value added by the oil and natural gas industry.

“New Mexico is well-positioned to be a magnet for investment and a national leader in economic growth.

It’s important that we prioritize policies that reflect New Mexico’s energy leadership and potential,” Flynn said.

“New infrastructure also helps us meet our environmental objectives and continue the trends we’ve seen in decreasing methane emissions,” Flynn added. “Additional investments in new technology will allow us to increase production while reducing the footprint of operations and protecting our lands, water, and air.”

Emissions of methane, the primary component of natural gas, are down 51% in New Mexico since 2011, even as combined production of oil and natural gas has increased 31%. Oil and natural gas producers have invested in new technology and equipment to capture and reduce methane emissions. Added infrastructure and pipeline capacity will allow oil and natural gas producers to capture more methane for delivery to consumers, the NMOGA release said.

Flynn said he doesn’t see it as an infrastructure challenge but rather natural growth in investment that will come from “hitting a new normal of continually high production. We’ve been seeing it for the last couple of years. That history of boom and bust, that cycle, is something we’re flipping on its head right now. The new normal for the Permian Basin is going to be solid growth for the next decade or so.”

Development in the basin, which straddles parts of New Mexico and West Texas, has been surging. Energy companies already have invested billions of dollars in the region in recent years while government scientists estimate that reserves within the basin could be enough to potentially double the nation’s onshore oil and gas resources.

The study, entitled “The Economic Importance of New Mexico’s Oil and Natural Gas Infrastructure,” is scheduled to be presented to state lawmakers today in Roswell at the New Mexico Legislature’s Transportation Infrastructure Revenue Subcommittee.

New Mexico is the third-largest oil producer in the United States having produced a record 250 million barrels of oil in 2018, a 46% increase over the prior record set in 2017. New Mexico natural gas production is also on the upswing, coming in at a 10-year high of 1,488,471 Million Cubic Feet for 2018.

According to the Albuquerque Journal, New Mexico is on track to collect record revenue for the upcoming budget year, including $907 million in “new” revenue, primarily driven by growth in oil and natural gas production in southeast New Mexico’s Permian Basin.

If investment in infrastructure doesn’t keep up, the authors of the study warn that growth would be constrained and the state’s coffers would feel the effects.

Flynn said the report underscores the industry’s influence on New Mexico’s economy.

“The revenue alone doesn’t solve some of those really difficult problems that the state is facing — whether it be public education or child well-being — but certainly having revenue and a roaring economic really gives you a lot more tools that you can deploy to tackle those kinds of problems,” he said.

EDITOR’S NOTE: The Associated Press contributed to this story.

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