Small oil producers struggling to keep running aging wells
Apr. 16, 2018
ALBUQUERQUE, N.M. (AP) — Small- and medium-sized oil and gas producers in New Mexico are struggling to keep running aging wells based on outdated technology.
The Albuquerque Journal reports that independent producers might soon be swallowed up by an unprecedented oil and gas boom in southeastern New Mexico as ExxonMobil and other industry titans pump billions of dollars into previously untapped sections of the state's oil patch.
Those smaller companies, which have flourished for decades in New Mexico's side of the Permian Basin, don't have the resources to invest in the modern drilling technology needed to dig into the oil-rich, hard shale-rock formations where the majors are now concentrated.
With oil prices well below the $100 per barrel level that kept low-volume "stripper wells" profitable in years past, many independent operators are now choosing to invest in only their most-productive ones and abandon others, said Gregg Fulfer of the Fulfer Oil and Cattle Co. in Jal, which operates about 150 marginal wells.
"I think the little guys will be history pretty soon," Fulfer said. "The low-volume wells run by stripper operators like me supplied about 20 percent of the market until recently, but it's fading away now. We'll see a lot of stripper operators disappear as they plug up the small, marginal wells."
Local government officials and economic development professionals say the flood of investment pouring in from the major players will easily make up for economic losses from the decline in traditional, or legacy operations that fueled past booms.
Many independent operators are shifting focus to provide services to the modern titans now operating in the Delaware Basin, a formation within the Permian that protrudes from southwestern Texas northward into Lea and Eddy counties.
Unemployment from the last four years of industry downturn is rapidly declining as workers find jobs in the Delaware. In addition, a new industry layer of "mid-stream" services to gather and process oil and gas after its pumped to the surface is cropping up for the first time on New Mexico's side of the Permian after remaining glued to the Texas side for decades.
Companies are laying thousands of miles of new pipeline for oil, natural gas and water transport in the Delaware Basin near Jal.
Information from: Albuquerque Journal, http://www.abqjournal.com