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Hope blooms for gas, oil wells

FARMINGTON – The gas and oil industry is getting excited about a potential boom in northwestern New Mexico.

Preliminary results from some of the 22 exploratory wells drilled in the Mancos shale formation in the San Juan Basin show commercial potential for production, said industry executives who visited Farmington this week.

Ken McQueen of Oklahoma-based WPX Energy Inc. told the Albuquerque Journal that two wells the company drilled in 2010 in a dry natural gas section of the Mancos have produced 2 billion cubic feet of gas so far. He described the area as an “attractive target” to pursue.

“These two wells are in the top 10 best wells drilled by WPX to date,” he said. “They’re quite extraordinary for us.”

Energy development companies were hopeful about the prospects for liquid natural gas and oil in other sections of the Mancos formation.

Mancos shale is sandwiched between soft sandstone layers in the San Juan Basin that producers have been exploiting for decades. Modern drilling techniques allow resources trapped inside the rock-hard shale to be tapped. Three dimensional imaging helps pinpoint gas and oil deposits, while hydraulic fracturing and horizontal drilling can access the deposits.

“I’m bullish on the Mancos,” said T. Greg Merrion, president of Merrion Oil and Gas Corp. in Farmington. His company is partnering with Denver-based Bill Barrett Corp. to drill exploratory oil wells in the area.

“We’ve already seen a number of wells drilled that are economic,” Merrion said.

Eight companies have received permits to drill 45 wells. Almost half of the wells are producing or ready to produce. Among those are a dozen wells being developed by Canada’s Encana Corp. The company has invested $100 million in the Mancos play.

More exploration must be done on the geology of the Mancos and the best drilling methods for the area compared to other shale formations before more companies move aggressively into the play, said BP America Vice President Darryl Willis.

“There’s a uniqueness (to each shale formation) that we need to understand. Tens or even hundreds of wells are needed before we can develop an unconventional (shale) play,” Willis said.

State regulators also have to develop rules for horizontal drilling in New Mexico’s portion of the San Juan Basin. The federal Bureau of Land Management was working on a new environmental analysis and management plans for groundwater, air quality and surface disturbance for when production escalates.

“This is still really in the early stage for a shale play. But I think the future is very bright,” Merrion said.