New Mexico Oil And Gas Hit Record Highs In March
The Permian Basin may be predominately in West Texas, but the prolific Delaware sub-basin extends well across the New Mexico state line. And thanks to development activity in the Delaware, and to a lesser extent in the Central Basin Platform, New Mexico set new records for both crude oil and natural gas production in March, according to a report issued in mid-June by the U.S Energy Information Administration.
The new highs in production output, combined with strengthening prices for both oil and natural gas, also led to record royalty revenues to the state in April, reports the New Mexico State Land Office.
In March, both crude oil and natural gas production volumes surged to their largest monthly increases in history in the Land of Enchantment. EIA says crude oil production averaged 1.16 million barrels a day while natural gas production averaged 6.19 billion cubic feet a day.
“The increased production occurred after a month when production fell in response to the extreme winter weather in the U.S. South Central region,” the report notes. “New Mexico'’ increased production in March was a result of both new wells coming online for the first time and existing wells coming back online after being shut in during the cold snap.”
On total, crude oil production increased by 172,000 bbl/d in March, a 17% increase from February’s 983,000 bbl/d. Natural gas production increased by 0.65 Bcf/d, representing a 12% hike over February’s 5.54 Bcf/d.
EIA says New Mexico’s rise in crude oil and natural gas production in 2021 follows record production for both in 2020, despite markedly reduced industry activity. Last year, New Mexico crude oil production increased by 133,000 bbl/d, or 15%, from 2019 to a record annual production of 1.04 million bbl/d. Natural gas production also increased to a new record of 5.60 Bcf/d in 2020, the reports points out, adding that natural gas output in Permian resource plays in southeastern New Mexico accounted for most of that growth.
The sudden and dramatic drop in oil and gas prices last spring after the emergence of COVID-19 impacted crude oil and natural gas production in New Mexico, EIA relates “The declining market led operators to shut in wells and limit the number of new wells brought online during the first half of 2020. However, operators in New Mexico in the second half of 2020 resumed new well completion despite the low prices,” the report summarizes. “In March 2021, New Mexico surpassed its previous record for monthly production of crude oil (previously set in November 2020) and for natural gas (previously set in October 2020).”
In fact, EIA says production of both oil and natural gas increased in the United States as a whole during March to 11.18 million bbl/d and 112.68 Bcf/d, respectively. Other states and regions with production increases in March were Texas, the Federal offshore Gulf of Mexico, and Oklahoma, all of which had reported production decreases in the prior month related to February’s extreme cold weather, according to the agency.
Record State Revenues
The State Land Office announced historic monthly royalty earnings of $109.8 million from oil and gas activity on New Mexico public lands in April. The revenues from oil and gas royalty payments are deposited into the Land Grant Permanent Fund to benefit New Mexico public schools, hospitals, and universities, while also continuing to draw additional revenue for the state in the form of investment returns.
“The money earned by the State Land Office in April was more than any month since statehood, brought in through royalty payments on our oil and gas leases. When the State Land Office has huge revenue months like this, New Mexicans benefit directly from that success,” commented Commissioner of Public Lands Stephanie Garcia Richard.
On average, oil and gas royalties collected by the state on public lands save the typical New Mexico taxpaying household an estimated $1,500/year in taxes that would otherwise be needed to fund programs, she emphasized, adding, “This is a huge monetary relief for hard working New Mexico families, particularly during the coronavirus pandemic.”
The two previous record months for New Mexico royalty earnings had been $108.9 million in February 2020 and $106.3 million in April 2020.
However, despite all-time high monthly royalty revenues on state-owned lands, the Biden administration issued an executive order earlier this year to suspend new drilling on federal lands in New Mexico, among other states. In addition, New Mexico introduced a proposed state rule in May that would impose strict new standards on oil and gas production facilities to reduce methane emissions, volatile organic compounds, and nitrogen oxides. The proposed rule is scheduled to take effect in 2022.
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