Opinions regarding the future of oil prices stretch across the spectrum from messages of doom to those believing prices are on their way back up, but it seems that—as of right now—we have reached a point of stability with respect to production, exploration, and pricing. Numerous variables currently at play could change the current position dramatically including: world political stability/volatility, the Keystone Pipeline’s opening, major bank credit redeterminations, and Federal legislation regarding crude oil exports.
In the short term, all of these events seem very unlikely to occur. What we do know is that exploration rigs have stabilized at about 50 rigs in NM, the price of oil is sitting at $45/bbl (not adjusted for pipeline costs). In addition, the Permian Basin remains the strongest production basin in the nation, just slightly off the $2M bbl/day average for the past six months. That is the good news. However, the lower oil prices are having/will have a direct impact on Roswell and Chaves County. We have already seen a reduction in service company jobs locally with Halliburton, Schlumberger, and others. Among the many geologists, landmen, engineers, and other professionals who live and work in Roswell we may expect to see some interesting new partnerships involving the consolidation of firms between specialties. The biggest opportunity the EDC has for economic benefit is to showcase the numerous available local industrial buildings—presenting them as a cost saving method for relocation from the oilfield.
There are many wellhead supply needs that can be manufactured, repaired, and stored that do not require onsite presence such as motors, hydraulic gear, and casing. The 2-3 hour logistics expense of trucking between Roswell and the oilfield would be hugely offset by the savings in real estate costs As mentioned earlier, banks will begin a debt redetermination soon, and although I do not believe it will change the industry, it may affect those smaller companies who need to reevaluate their operating expenses and seek out unique choices in how they conduct business in the future. Another impact for Roswell-Chaves County is the opportunity to import natural gas, which is in plentiful supply with the price statically sitting at only $2.70/mmbtu. These natural gas stocks, perhaps even harvested from flare gas, would supply a LNG/CNG plant that would both produce and sell to many potential local users including Fortune Transportation, Ruan, and Navajo Refining. The remainder, likely the majority, of the production could be trucked to filling stations throughout Southeastern NM west TX.
So, the primary message of this post is that while understanding the dramatic price drop in oil since December; the industry continues to be a huge part of our economy, and we must seek the benefits we can. Right now, the market appears stable; the rig count is stable. It is time for our community to think creatively about how we can maximize our own economic benefit, whether through job relocations based on real estate cost, developing LNG/CNG production, or any number of creative ideas.