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New Mexico received US$2.2 billion in revenues from oil production last year, data from the state’s Tax Research Institute showed. This was a 26-percent increase on the year, or US$465 million. The total amount represented 32.3 percent of the New Mexico State General Fund recurring revenue.
According to a report of the news in the Albuquerque Journal, a substantial increase in investments and production in the state contributed to the revenue increase, as did higher oil prices, despite the fluctuations throughout the year.
New Mexico, together with Texas, is home to the Permian, the shale oil and gas play that has seen the strongest increase in interest, investment, and production over the last few years thanks to many low-cost production spots. That’s despite warnings from industry experts that the low-cost sweet spots are already taken and production costs will only rise.
Still, oil and gas companies, and private equity firms are flocking to the Permian and drillers are pumping, which most recently caused pipeline bottlenecks that pressured the prices of Permian crude. The bottlenecks are being addressed, however, and soon the play will have more oil-moving capacity.
The Permian is an outperformer: between 2017 and 2018, crude oil production shot up by as much as 860,000 bpd to 2.76 million bpd, energy investment expert Nawar Alsaadi noted in a recent analysis for Oilprice, but this may lead many to assume that this performance is the norm across shale plays.
This is not the case, however, Alsaadi warns. Exploitation of the oil and gas reserves of the Permian only began in 2013, a year before the oil price crash, unlike legacy shale plays such as the Eagle for and Bakken. In fact, he says, the Permian is what helped the United States win the price war with OPEC. The play has been the biggest contributor to the inexorable rise in U.S. oil production and this will it will keep this role, with the national total seen rising to 12.4 million bpd this year, according to the latest Short-Term Energy Outlook by the Energy Information Administration.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.