It has been 70 years since a President of the United States has considered domestic oil and gas as a “power” in world affairs. With Secretary of the Interior Ryan Zinke charting a new course, the Trump Administration is considering a transfer of Federal Land management with natural resources to the Western States.
Coupled with Zinke’s proclamation of American energy world domination, a revolution on how to think about oil and gas in the San Juan Basin is taking place.
The Four Corners BLM management could move across Farmington to the New Mexico state office. The Bureau of Land Management’s Washington control might move to Denver.
It is more than speeding up Applications for Petroleum Drilling (APD): it is who decides and implements Trump-Zinke. How is San Juan natural gas to advance American oil and gas first in a redesign of domestic resources on a world stage?
Farmington and Carlsbad would control, as New Mexico State offices of oil and gas, new rules with national and global meaning. The San Juan Basin future would have natural gas reserves managed for strategic and economic purposes in the Baltic and Black Seas. Management would be drawn from New Mexico.
What is the cost for this historic transfer of power from Washington or a non-oil and gas Potomac?
The State of New Mexico must legislate expansion budgets to overcome the limitations of Santa Fe staff in numbers and expertise. Under State Oil and Gas Law, inspectors are needed to inspect wells (62,000).
Inspection of Federal oil and gas wells (transfer from Washington BLM) requires a budgetary alignment with the strategy and vision of Secretary Zinke.
There is a return to the economic development history of America. San Juan Basin natural gas does not depend on localized manufacturing alternatives into natural gas in the Four Corners. Pipelines take care of markets. The expansion to ultimate economic recovery is in the new policy of this Administration.
I was the lunch keynote speaker at the Jicarilla Apache Energy Conference in Dulce. Indian nation natural gas must not be outside American oil and gas first. Investment and production is now a different opportunity. Deals with conventional oil and gas companies were part of the excitement.
Readers of this column in the Energy Magazine have followed a forecast made 11 months ago, in which I have seen warning signs of oversupply of world oil in 2019.
The Initial Public Offering (IPO) shares in Saudi Aramco is doubtful. China or BP could buy non-controlling blocks of shares as an alternative. If this IPO fails, Saudi Aramco will have little reason to throttle OPEC production downward.
This would open the way for a trend-line similar to 2014. Saudi Arabia is in the first phase of instability. What happens to Mohammed bin Salmon, the Crown Prince, lies in Qatar, and with the Kurds.
It is important to recognize that the IPO process called for the right of women to obtain driving permits. Underwriters were on notice that such discrimination would distract buyers of Saudi Aramco shares.
Hilcorp’s female staff at Dulce added that they (women in Saudi Arabia) must be 30 years of age and will not be able to drive at night.
“With the Saudi Arabian-American strategy of removing ISIS and terror roots in Middle East societies and governments, the global oil and gas service companies have new projects to expand oil capacity of Saudi Arabia. This moves Saudi Aramco into overcapacity production range and a Second Downturn in early 2019 as forecast in this column six months ago.
Saudi oil production capacity should increase to 13 million barrels per day with Haliburton and others working on projects to increase reserves. This is prepared to flow into export markets to deprive Occidental of its short- term export of domestic oil which the production cut-back under the 1,800,000 barrels per day OPEC and Russian “deal” provided as a temporary marketing opportunity. The price of de-terrorism in the Middle East is more Saudi Arabian oil and lower world prices. Saudi Arabian demand forecasts are no more than 1 percent per annum growth: its new capacity addition could reach 4 percent per annum in the next five years following the service company projects signed weeks ago.
OPEC production and imports to the U.S are up as this column is prepared for publication. The Commodity Market, which determines the price of world oil, would have a trading range breakout if Iranian gunboats break the isolation of Qatar and engage the U.S. Persian Gulf naval capability. However, such incidents would move traders for hours only.
Natural gas prices should continue to move upward as risk hedging begins to focus on buying gas and selling crude. This is a contract which oil price risk is hedged
A laying of the risk of crude oil price declines with a simultaneous buying of natural gas.
Natural gas storage favors San Juan natural gas producers in the winter months ahead. This stimulates a regional Texas offset with new Eagle Ford dry gas promotion.
Lithium prices have sharply declined mainly because of South Korean mining production and investments. This explains the stock market and Tesla Motors. Tesla may not need its mining investment in Nevada to lower the cost of the battery pack.
This shift to downstream concentration which will re-start statewide competition for expanded facilities to relieve its Fremont, California plant. New Mexico economic development competed with three states to capture the giga-factory in Nevada. A second chance for Santa Fe to win in a second round? “
That’s the verdict from Daniel Fine, one of Gov. Susana Martinez’s senior advisers on energy policy. The U.S. oil and gas industry — and the San Juan Basin — is in a “bust” period, Fine said Tuesday at an inter-tribal energy conference at San Juan College’s School of Energy.
“This is what a bust is. You lose the workforce,” said Fine, who is associate director at New Mexico Center for Energy Policy at New Mexico Tech. “Loss to the country and to the Southwest will be the workforce. It will be decimated at levels of less than $30 a barrel (of crude oil).”
And 2015 was a year of layoffs and cutbacks.
Since the collapse of oil prices on the commodities market in fall of 2014, the number of workers laid off from local oil and gas companies — from the large corporations to the smaller independents — has been in the thousands.
“We’re in a ‘bust.’ So be ahead of the curve, and think ahead in this business by at least six months,” Fine told the Native American and non-tribal energy leaders and business people in the Merrion conference room at the new $15.8 million school.
He said looming federal regulations such as the the U.S. Bureau of Land Management’s proposed Onshore Oil and Gas Orders Nos. 3, 4 and 5 along with proposed updates to its rule aimed at reducing “fugitive” atmospheric methane from oil and gas operations were doubling the pain already caused by low crude oil prices. He said that a third of all U.S. oil and gas producers — especially those burdened with debt — will inevitably go bankrupt.
But Fine’s sobering analysis wasn’t without one ray of hope for the industry.”
Energy expert Dr. Daniel Fine, left, in March predicted the current low gasoline prices. Pictured with Fine during a meeting in Roswell in March are local oil men Rory McMinn of Reed & Stevens, center, and Bob Armstrong of Armstrong Energy Corp. (Jeff Tucker Photo)
An energy expert’s prediction in March that gasoline prices in New Mexico would dip to $1.65 a gallon has been proven true.
Dr. Daniel Fine, associate director of the New Mexico Center for Energy Policy at New Mexico Institute of Mining and Technology, said at a landmen’s association’s meeting in Roswell in March that gasoline prices in New Mexico would drop to as low as $1.60 a gallon this year as the United States and the Organization of Petroleum Exporting Countries engage in a crude oil price war.
Gasoline prices in Bernalillo County dipped to $1.64 a gallon this week at some stations, according to GasBuddy.com. Gasoline prices in Chaves County were as low as $1.80 a gallon this week at Sam’s Club in Roswell.
In March, Fine predicted gasoline prices in the Albuquerque market in 2015 would rise slightly to $2.35 a gallon before leveling off somewhere between $2.35 and $1.65 per gallon. He said in March that gasoline prices in Albuquerque could ultimately drop to as low as $1.60 a gallon.
“We made it to $1.60 and I have an outline of where we’ll be in 2016,” Fine told the Daily Record this week. “I’m getting calls to return to Roswell to do the next year.”
Fine said fuel prices in the United States are at their lowest levels since 1998, unadjusted for inflation. Fine attributed the low gasoline prices to soft market demand and excess supplies of crude oil.
The United States has more crude oil reserves than it has had since 1933, Fine said.
Fine said he’s not so sure crude oil prices will rise any time soon. He said there is a lot of anticipation about a Dec. 4 meeting of OPEC in Vienna, Austria.
“There’s a little excitement in the market about what the Saudi Arabian position might be on the 4th,” Fine said. “What’s reported out is some language about stability. So the speculators are buying oil today. But I am very skeptical that this will last.”
Fine, who has been critical of OPEC, said the oil cartel is creating an imbalance in the marketplace by over-producing while crude prices continue to drop.
Fine said many economists assumed Saudi Arabia’s state-owned oil producers would cut back production as crude oil prices plummeted, but he said that did no occur.
“From Thanksgiving (2014) on, we’re in this oil price war crisis,” Fine said.
Panelists at Business First’s second annual New Mexico Energy Outlook Summit yesterday offered but one common ground: Something needs to be done to turn the industry around.
Emceed by ABF publisher Candace Beeke, the event brought together Dr. Daniel Fine, associate director of the New Mexico Center for Energy Policy at New Mexico Tech and a senior policy analyst in the New Mexico State Department of Energy Minerals and Natural Resources; Ron Darnell, senior vice president of public policy for PNM Resources (NYSE: PNM); Bob Gallagher, president of RMG Consulting; and Regina Wheeler, chief executive officer of Positive Energy Solar.
Ron Darnell, senior vice president of public policy at PNM Resources, speaks during Thursday’s New Mexico Energy Outlook Summit while Regina Wheeler (left), CEO of Positive Energy Solar, looks on.
Over the course of 90 minutes, which included a keynote speech delivered by Fine and a panel discussion, the group addressed questions about the state of the energy industry in New Mexico and the United States, what 2016 might look like for the oil and gas industry and possible solutions to the current industry slump. While driven, in part, by audience-submitted questions, everyone offered a much differing perspective.
In his keynote speech, Fine said he was “coming with realism and bad news” and believed that while no one can forecast the price of oil, “we should prepare for 2003 prices.” He estimated that the price of oil could drop to the $22 to $28 range by June 2016.
Fine also said that the state could see a 10 percent reduction in shale production by that time, as well. He cited increased foreign production of oil over the last couple of years, China’s stabilization at a lower growth rate, decreased commodity demand and the Organization of Petroleum Exporting Countries’ (OPEC) price war with the U.S. shale industry.
It’s time to talk seriously about the energy industry in New Mexico. And you have some work to do.
Whether your business is directly involved in this industry, it’s very much tied to its outcomes — and right now, there’s much concern about that in the state. After all, some 30 percent of New Mexico’s tax base comes from oil and gas. And you’ve read the headlines we’ve been reporting on how that sector is faring. If you haven’t, let me recap — it’s a fracking mess. The price of oil dropping more than a year ago has resulted in rapid cost cutting from many of the energy majors, including ConocoPhillips (NYSE: COP) and Halliburton Co. (NYSE: HAL), both of which have major operations and workforce in New Mexico — although smaller now.
Some 30 percent of New Mexico’s tax base comes from oil and gas.
But that’s just one sector of energy. At Albuquerque Business First’s Energy Outlook event Nov. 12, we will hear from the CEO of one of the fastest-growing companies in New Mexico — Positive Energy Solar. And Positive wasn’t the only energy player on ABF’s List of gazelle companies this year. Affordable Solar Group ranked high and made Inc.’s list of fastest-growing companies, as well.
In addition to solar, we will hear from New Mexico energy giant PNM Resources (NYSE: PNM), which has its hands stretched into multiple sectors of energy. We’ve also added oil and gas expert Bob Gallagher, whom many of our readers will remember from his decade of leading the state’s oil and gas association, NMOGA, as well as his time as advisor to the U.S. Secretary of Energy. Gallagher tells me it’s not all doom and gloom in New Mexico oil and gas. In fact, he knows of pockets in the state that are growing rapidly and seeing strong new investment.
But New Mexico doesn’t operate in an energy vacuum. It’s critical for our companies — whether involved directly in energy or on the periphery of it, as most of us are — to understand the global and national challenges facing this industry. Dr. Daniel Fine from the Center of Energy Policy at New Mexico Tech will give us that broad overview and tell us what’s coming in the future.
The Mexican government has recently completed some of the most sweeping energy reforms in the world. Hear from experts on the deregulation of the energy markets in Mexico, and how to find opportunities for your business in both the energy sector and elsewhere in the Mexican economy.