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Has OPEC been out-gased?

How does New Mexico rank among natural gas producers? According to a ranking form The American Petroleum institute, the state not only dominates the U.S. natural gas market, but also outranks six OPEC nations.

The ranking accounts for data from 2012, the most recent year offering consistent international data. For purposes of data comparison, the report ranks U.S. states against foreign nations.

Churning out a daily average of 3.09 billion cubic feet of natural gas, New Mexico ranks as the eighth highest-producing state in the U.S., topped only by other fuel-rich states like Texas, Pennsylvania and Colorado.

On an international level, the state is still a major contender; New Mexico ranks as the 27th largest oil and gas producer in the world, outranking Oman and Venezuela.

“Thanks to innovations in hydraulic fracturing and horizontal drilling, New Mexico now outpaces six of 12 OPEC nations in natural gas production,” said Kyle Isakower, API vice president for regulatory and economic policy. “Rising domestic production has helped to reshape global markets and revitalize job creation here in the United States.”

‘We just need a better price’

New Mexico’s natural gas abundance may have landed the state high rankings both nationally and globally, but it hasn’t necessarily translated to a healthy fuel market for the state.

As natural gas stockpiles in the San Juan Basin, prices flounder around $2.80 per 1,000 cubic feet. Residents will benefit from the low utility costs, but the state ultimately suffers from dwindling taxes and royalties, which make up 30 percent of the state’s general fund, according to the Santa Fe New Mexican.

Low prices are also likely hinder growth and discourage new well production. Without new wells, existing supplies will eventually deplete and uproot total production.

“If the price goes back to $6, that will be an incentive to drill again,” Steve Henke, executive director of the New Mexico Oil and Gas Association told the New Mexican. “We just need a better price.”

Isakower believes that changes in policy will help rectify meager natural gas prices and make the most of available resources.

“New Mexico isn’t just a national leader—it’s a global leader,” he said. “Shale production has changed the way other countries view competition from America. To harness the world-class opportunity in front of us, it’s critical that policymakers open the doors for free trade and lift regulatory barriers on the construction of vital energy infrastructure, including pipeline and export terminals.”

Even markedly environmentally-conscious New Mexicans seem to share Isakower’s enthusiasm towards exports. In 2013, Sen. Tom Udall—a Democrat—urged the Department of Energy to hasten their approval of natural gas exports, according to NM Political Report.

“It’s a big opportunity for us to be able to export natural gas,” Udall told The Daily Times in Farmington. “There are a lot of applications that are pending, and we urged (U.S. Energy Secretary Ernest Moniz) to look at them and move those along.”

Despite concern over New Mexico’s accumulation of excess natural gas, financial analysts offered an optimistic forecast for the state’s economy.

“Oil and gas revenues have stayed steady, but the real strength is the income taxes,” Legislative Finance Committee economist Abraham Sanogo told the Associated Press.

Revenue was expected to see a $136 million boost to $6.25 billion, though hard numbers won’t be available for another couple of months. In April, New Mexican Governer Susana Martinez approved a   budget of $6.2 billion for the next fiscal year, $83 million of which is new money.

The $83 million is significantly scaled down from August forecasts of about $285 million. Forecasts again fell short in February, when projected energy revenues for 2015 dropped from $1.17 billion to $970 million. A report shared with the Legislative Finance Committee, however, still indicated reason for optimism:

“The increased strength in broad-based taxes has offset the weakness in energy-related revenues… Since energy prices continue to be below the level of the February estimate, these revenue sources will continue to weaken in the remaining months of FY15. The strength in broad-based taxes is expected of continue to offset the weakness in energy-related revenues.”

 

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