FARMINGTON – The San Juan Basin could be headed toward a renaissance in natural-gas and oil drilling if rosy expectations touted by industry officials at Monday’s San Juan Basin Energy Conference hold true.
“In the southern part of the basin, the Mancos play has the potential to revitalize declining San Juan Basin oil production and also has a tremendous amount of future gas production in the northern part of the basin,” said Ron Broadhead, a principal petroleum geologist with the New Mexico Bureau of Geology and Mineral Resources.
The conference, which drew about 500 attendees from across the nation to San Juan College, was the first to have a dedicated focus on the Mancos Shale, which stretches across the northwestern part of New Mexico and into southwestern Colorado.
After years of declining production in the San Juan Basin, companies are eyeing the shale play for both natural-gas and oil potential because of advances in hydraulic fracturing and horizontal drilling technologies that have helped operators unlock shale gas and oil across the nation.
“It’s reasonable that the Mancos Shale could be a really, really good shale play in the San Juan Basin,” said Darryl Williams, the vice president of subsurface for BP North America Gas Exploration and Production Co.
Other presenters were more direct.
“I’m bullish on the Mancos, we’ve already seen a number of wells drilled that are economic,” said T. Greg Merrion, president of Merrion Oil and Gas. “I’m looking forward to this next boom.”
With natural-gas prices hanging around $4 per thousand cubic feet, many conference speakers focused on the oil-producing window of the shale play located in the southern San Juan Basin.
The play has been estimated to contain up to 60 billion barrels of oil, about 10 percent of which is expected to be recoverable, according to estimates by Encana and Daniel Fine, a senior energy analyst with the New Mexico Center for Energy Policy.
The possibility of a resurgence had some speakers proclaiming the beginning of a new era of economic prosperity for northwest New Mexico.
“These are happy times again,” former U.S. Senator Pete Domenici said.
If drilling does rev up in the area, La Plata County likely would see some spillover benefits.
Some New Mexico energy companies lodge prospective employees in Durango to show off the city as a regional amenity and a growing number of New Mexicans fly out of Durango-La Plata County Airport – both activities would likely increase with more natural-gas and oil activity, said Roger Zalneraitis, director of the La Plata Economic Development Alliance. A decade-long increase in commuters between Durango and Farmington also shows more people work in one place and live in the other.
“Our economies are more closely tied than people think,” Zalneraitis said.
Despite rosy predictions for Mancos Shale, production thus far from initial wells has been variable.
Of the 10 Encana wells drilled in 2012, “there’s some good stuff, some modest stuff and an area we haven’t really figured out yet,” said Jeff Balmer, the asset manager of the San Juan Basin for Encana Corporation.
Other industry executives stressed that they are still in the initial exploration stages.
“It’s still the early days for this play,” BP’s Williams said.
The newness of the shale play poses difficulties for regulators, said William Hoppe a district geologist with New Mexico’s Oil Conservation Division.
Because the basin varies so much geologically, it’s hard to create a single rule for it, Hoppe said.
With an eye toward the potential explosion of drilling, the Bureau of Land Management is undertaking new environmental-analysis projects and management plans related to future development, groundwater monitoring and air quality, BLM District Manager Dave Evans said.
Many gave a sense that the industry is breaking new ground with shale drilling in the area,
“What we call unconventional now is rapidly becoming conventional,” Broadhead said. “This is a new day for the industry.”