Oil bust could spur natural gas turnaround in San Juan Basin

Santa Fe New Mexican ^ | 6/7/20 | Jens Gould

[brownwill6767]

To say times are tough for energy companies in the San Juan Basin would be an understatement.

The market for natural gas is so bad right now that T. Greg Merrion has shut in nearly half of his family-owned company’s wells, most located in northwestern New Mexico.

But that could soon change.

If Merrion and key industry analysts are correct, there might be a silver lining in the oil crash caused by the coronavirus pandemic — it could end up helping northwestern New Mexico natural gas producers and even give a lift to state revenue in a time of crisis.

[brownwill6767]

“There is a lot less associated gas coming on the market, and we anticipate that it will have a positive impact on natural gas prices going forward,” said Merrion, president of independent producer Merrion Oil and Gas Corp., based in Farmington. “That absolutely would impact us in a positive way.”

It might seem a strange time to signal potential good news for any part of the energy industry right now, given the recent unprecedented declines in oil prices caused by the novel coronavirus pandemic.

As the COVID-19 outbreak dried up demand for oil and helped send crude prices tumbling, producers in the Permian Basin have shut in thousands of wells and laid down dozens of drilling rigs. Many of those wells produce natural gas along with oil, so output of this “associated gas” has taken a dive as well.

The potential upside: The drop in natural gas production is bound to reduce the global supply of gas and it could lead to shortages, which would drive up prices and allow companies in the San Juan Basin to increase their production, said Daniel Fine, a longtime energy analyst and oil and gas researcher with New Mexico Tech.

[diatomite]

The WSJ said today that as oil approaches $40 a barrel, shale companies are bringing oil wells back online, even as the market continues to recover from the demand drop caused by the coronavirus.

[Ruy Dias de Bivar]

In my youth of 1954-1956 I lived in the gas camps East of Farmington.
When I returned in 1973-1977 there was still lots of drilling going on and I worked at making glycol reboilers at several companies in town.

Over the years, as I returned, I noticed oil well pumps replacing the dryers at well sites.

https://naturalgasindustryhub.com/wp-content/uploads/2016/02/Cover-Page.png