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Report: Oil boom to continue, more infrastructure needed

September 3, 2019
FILE - In this April 24, 2015, file photo, pumpjacks work in a field near Lovington, N.M. State economists on Friday, Aug. 23, 2019, revised upward forecasts for state government income amid surging oil and natural gas production in New Mexico, giving lawmakers greater leeway as they begin crafting a general fund spending plan for the coming fiscal year. Most of the windfall is linked to steadily growing oil and natural gas production focused in the Permian Basin that straddles the state line between New Mexico and Texas. (AP Photo/Charlie Riedel, File)
FILE - In this April 24, 2015, file photo, pumpjacks work in a field near Lovington, N.M. State economists on Friday, Aug. 23, 2019, revised upward forecasts for state government income amid surging oil and natural gas production in New Mexico, giving lawmakers greater leeway as they begin crafting a general fund spending plan for the coming fiscal year. Most of the windfall is linked to steadily growing oil and natural gas production focused in the Permian Basin that straddles the state line between New Mexico and Texas. (AP Photo/Charlie Riedel, File)

ALBUQUERQUE, N.M. (AP) — New Mexico’s oil and gas industry is expected to keep growing at a record pace, resulting in more revenue for the state and billions of dollars in new infrastructure investments to get the commodities to market, according to a study commissioned by industry trade groups.

The predictions were outlined in a report presented to state lawmakers during a meeting Tuesday in Roswell. The report, compiled by a national consulting group, was commissioned by the New Mexico Oil and Gas Association and the American Petroleum Institute.

Analysts estimate it will take $174 billion of new infrastructure to keep pace with expected growth through 2030. That would include investments by the industry in new pipelines, access roads, well pad construction, processing plants and refineries.

Ryan Flynn, executive director with the New Mexico Oil and Gas Association, 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,” Flynn said. “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 have invested billions of dollars in the region in recent years and government scientists have estimated that reserves within the basin could be enough to potentially double the nation’s onshore oil and gas resources.

In its latest forecast, the U.S. Energy Information Administration said it expects the United States to pump about 12.3 million barrels of crude oil a day in 2019 and 13.3 million barrels a day in 2020, both of which would be record levels.

Much of the increase is expected to come from the Permian Basin as operators use hydraulic fracturing and other techniques to squeeze more oil and gas from shale formations.

With continued growth, the report estimates that production value in New Mexico would increase from $17 billion in 2017 to more than $72.6 billion in 2030, tripling the industry’s contribution to the state’s gross domestic product. Local and state revenues from the industry also would more than double.

If investment in infrastructure doesn’t keep up, the authors 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.

Economists from three state agencies and the Legislature announced last week that general fund income for the coming fiscal year is expected to surpass current annual spending obligations by more than $900 million. Most of the windfall is linked to steadily growing oil and gas production.

Lawmakers have been studying ways to shield state finances from boom-and-bust cycles in the oil sector.

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