A highly productive natural-gas well tested in the San Juan Basin could encourage more new drilling in the San Juan Basin’s Mancos Shale.
The well test started in June about seven miles south of the Colorado state line and had the highest production rate seen in the San Juan Basin in the past 14 years, a BP news release said.
The well achieved an average 30-day initial production rate of 12.9 million cubic feet per day.
“This result supports our strategic view that significant resource potential exists in the San Juan Basin, and gives us confidence to pursue additional development of the Mancos Shale, which we believe could become one of the leading shale plays in the U.S.,” said Dave Lawler, CEO of BP’s U.S. Lower 48 onshore business in a statement.
In recent years, experts touted the Mancos Shale formation in the San Juan Basin as a major source of natural gas.
“It has the potential to revitalize the San Juan Basin, on both sides of the state line,” said Christie Zeller, executive director of the La Plata County Energy Council.
In La Plata County, the mining industry, including oil and gas drilling, employed about 751 people in 2015, making on average about $101,231 annually, according to data compiled by Region 9 Economic Development District of Southwest Colorado.
The drop-off in gas prices in recent years led to job losses across the region, especially in Farmington, where the population declined 11.5 percent over seven years, according the U.S. Census Bureau.
The job losses hurt spending at retailers, lodgers and restaurants in the area, said Roger Zalneraitis, economic director of the La Plata County Economic Development Alliance.
It also hurt the county’s ability to provide services.
La Plata County property taxes from the oil and gas industry declined from $17.6 million in 2010 to $4.6 million in 2017, according to the county budget.
When asked whether the promising test could lead to new jobs, BP spokesman Brett Clanton said in an email it would depend on the level of investment BP and other companies are able to economically justify.
Robert McEntyre, a spokesman with the New Mexico Oil and Gas Association, said the discovery could attract other companies to the basin and greater development, he said.
“We’re very encouraged by this because it could mean we see future investment in the San Juan.
“We see jobs coming back,” he sad.
The price of natural gas recovered slightly in 2017. During the first seven months of the year in the San Juan Basin, the average natural gas price was $2.78 per thousand cubic feet. In 2016, the average price was $2.60, and in 2015, it was $1.90, according to data provided by the La Plata County Energy Council.
But the exploration of the Mancos Shale is likely being driven by better technology rather than pricing, Zeller said.
The improved technology is making it possible to access the gas and oil reservoirs in the formation, which is 80 million to 95 million years old, she said.
The San Juan Basin is shaped like a bowl, with about one third of it on the Colorado side of the border and rest in New Mexico.
The natural gas could be accessed in Colorado and New Mexico, but the oil is likely in the southern part of the basin, she said.
Test wells haven’t been drilled in La Plata County to determine if there is crude oil in the Colorado Mancos Shale, Zeller said.
Wells into the Mancos Shale must be much deeper than the traditional coalbed methane wells, she said.
The test well extended 10,000 feet horizontally and utilized advanced completion techniques, Clanton said in an email.
He declined to elaborate on the techniques used.
The 10,000-foot lateral is about three times the length of a coalbed methane well, Zeller said.
Despite the promising test, BP still plans to close its office in Farmington by the end of the year and lay off 40 people.
The company is planning to open a satellite office near Aztec and other employees will be relocated to Durango, Clanton said.
Employees at the new office and an office near Navajo Dam will serve the southern San Juan Basin.
BP is also evaluating whether to drill into the Mancos Shale on the Colorado side of the border, Clanton said.
The successful well test took place on assets BP bought from Devon Energy in late 2015.
BP bought 580 wells on 33,000 acres in San Juan and Rio Arriba counties in New Mexico from Devon Energy.
Jobs in oil and gas, like construction and manufacturing, help providing good paying jobs to those without advanced degrees and help provide equity to a community, Zalneraitis said.
To bring greater stability to the community, the county needs to continue focusing on its budding tech sector, engineering services, health care and other industries.
“We can’t keep relying on just extraction and tourism for our economy, we just can’t,” Zalneraitis said.