ExxonMobil investments in New Mexico could kick up a $64 billion tidal wave of benefits for the state over the next 40 years, according to a new study released Friday by the oil giant.
The study calls the company’s existing and planned activities in the Permian Basin in southeastern New Mexico and West Texas a “world-class mega project” that for New Mexico alone will generate about $62 billion in net fiscal benefits over four decades from leases, royalties and taxes. Local communities could also benefit from about $1.8 billion in economic growth.
“The Permian Basin is the engine of America’s energy renaissance and New Mexico residents will see direct economic benefits and opportunities from our planned investments,” ExxonMobil Chairman and CEO Darren Woods said in a statement. “We will be a significant, long-term economic contributor to the state of New Mexico and will work hard to be a trusted member of the community.”
Gov. Michelle Lujan Grisham expressed optimism about ExxonMobil’s projections.
ExxonMobil’s public and government affairs division commissioned the Texas-based economic consulting firm Impact DataSource for the study, given the company’s massive investment plans in southeastern New Mexico.
ExxonMobil subsidiary XTO Energy plans to drill about 6,500 wells on more than 400,000 net acres in Eddy and Lea counties over the next four decades, representing $55 billion in capital expenditures for drilling, facilities construction and oil and gas extraction operations.
The company said in March that XTO’s Permian Basin activities in both New Mexico and Texas will climb to 1 million barrels per day of oil equivalent by 2024. That’s up from a previous forecast in early 2018 of 600,000 barrels by 2025, which ExxonMobil predicted after investing $5.6 billion in 2017 to acquire 275,000 acres of leases in the Permian.
That purchase nearly doubled the company’s total holdings there to about 6 billion barrels of oil equivalent hydrocarbons, more than half of it on the New Mexico side of the Delaware Basin, an oval-shaped rock formation within the Permian that protrudes from southwest Texas northward into Lea and Eddy counties.
That area has become one of the country’s most-prolific oil and gas zones, producing some of the highest returns for oil firms operating in the U.S. today and converting New Mexico into the nation’s third largest oil-producing state.
Most of the $62 billion in projected government revenue would come from direct payments to the state, including $44 billion from lease and royalty charges and $8.5 billion from severance taxes.
It could be a conservative estimate, because the projections are based on $40-per-barrel prices. At $56 per barrel, the study estimates $83 billion in net fiscal benefits.
The price for U.S. benchmark West Texas Intermediate was at $62.87 per barrel on Thursday.
The study estimates 4,100 direct jobs per year for the next 40 years from ExxonMobil activities, plus thousands more indirect and “induced” jobs from businesses that either support or benefit from company operations. That could generate about $29 billion in new wages and benefits.
“Those are impressive numbers,” state Senate Finance Committee Chair John Arthur Smith, D-Deming told the Journal. “It shows we have huge oil and gas reserves in New Mexico that are attracting big investments from major players like ExxonMobil.”
And that’s just one company, said New Mexico Oil and Gas Association Executive Director Ryan Flynn. Other global players like Chevron and Occidental Petroleum have acquired immense assets in New Mexico’s oil patch in recent years, with a total of $13 billion invested in 2017 alone.
“It shows the Permian Basin remains critical to the state’s economic fortunes moving forward,” Flynn said. “ExxonMobil and other world-class companies continue to expand and invest heavily there.”
The oil patch boom drove New Mexico production to an all-time record high of 246 million barrels of crude in 2018, up 42 percent from 2017 and nearly three times the 86 million barrels produced in 2012. Modern technologies of hydraulic fracturing and horizontal drilling have unleashed a yearslong gusher there from previously untapped shale oil reserves, and there’s still a sea of potentially recoverable hydrocarbons to drill into.
Last December, the U.S. Geological Survey reported that two underground layers in the Delaware Basin, known as the Wolfcamp Shale and Bone Spring Formation, together contain 46.3 billion barrels of oil, 281 trillion cubic feet of dry natural gas, and 20 billion barrels of gas liquids. That’s the largest pool of oil and gas reserves ever announced by the USGS anywhere in the U.S.
The boom in production generated an unprecedented $1.2 billion surplus in state revenue for the new fiscal year that begins in July. And the state expects another record level of crude this year as well.
“We’re forecasting another significant increase,” Smith said. “Before Christmas, the feds said the motherload of oil and gas reserves are on the New Mexico side of the Permian. That’s very encouraging from a longevity standpoint.”