Oil And Gas Prices: How Low Will They Go? -- 10-17-2014
Oil And Gas Prices: How Low Will They Go?

San Juan Basin Energy Conference

Industry leaders from across the nation are expected to share their insights, visions and goals for the future of energy at the 2015 San Juan Basin Energy Conference in Farmington, New Mexico. Updates on presenters will be available soon on this web site!

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About

The San Juan Basin has one of the largest accumulations of natural resources in the United States, and possibly the world.  The San Juan Basin Energy Conference is sponsored by the San Juan College School of Energy, Four Corners Innovations Inc., and New Mexico Center for Energy Policy (a division of New Mexico Tech).

The conference objective is to explore energy production, natural gas, and energy alternatives.  Speakers will address the Mancos Shale as an emerging play and the recent decline of the price of oil.

According to an article posted on the oil-price.net website, the falling oil price is good for the U.S. consumer and good for the nation’s economy. If, however, oil prices fall too far, the nation’s fracking boom will end. There are forces that would like to end America’s projected energy independence and return the country to its dependence on the Middle East for its fuel demands. Saudi Arabia, the U.S.’s long term key supplier, doesn’t want to lose its best customer.

The return by Algeria and Libya to production has put pressure on OPEC’s oil quotas. Algeria and Libya are OPEC members, so their sudden return to the market means OPEC’s self-imposed limit of 30 million barrels per day has now been exceeded.

OPEC has no power to impose quotes, the article continued, which means of an OPEC member doesn’t want to abide by the self-imposed limits, there is little than can be done about it. Saudi Arabia is by far the largest producer in OPEC and it has always been it the country’s best interest to keep the price of oil high. Saudi Arabia is now selling at a price lower than the level it needs to maintain the country and is dipping into reserves, so it can undercut its competitors.

Hydraulic fracturing, or “fracking,” has created great growth in U.S. oil production. By 2010, fracking had removed the need for the U.S. to import gas and American companies skilled in the technique looked across the world for earning opportunities. Large shale oil basins were discovered, and U.S. businesses anticipated reaping the rewards by dominating oil production. However, the expanding fracking production in the U.S. has contributed to an oversupply, and is only viable at a certain oil price level, and has contributed to the problem. Investments were made in low-margin extraction and loans were obtained to finance them, based on the belief that price levels would be maintained by OPEC.

If the market was not plagued by politics, cartels or special interests, the article states, the price of a product is the only mediator between its demand and its supply. If supply exceeds demand, the price falls and if the price falls far enough and stay long enough, extractors will be forced to stop operations, excess production will no longer be on the market and prices will again rise.

Some shale oil regions, such as the Eagle Ford Shale and Permian Basin in Texas, can still make a profit by selling at $53 per barrel. The problems faced when assessing any new shale oil project include distance to the distribution points, local availability of accommodation, the capacity of the transport network and availability and price of expertise and staff. Those factors can make crude oil cheaper to deliver from Texas or North Dakota to refineries on the East Coast, or it can make Saudi Arabian oil cheaper, which is arriving by tanker, cheaper than domestically produced oil.

Supported by technology and aggressive cost cutting, the United States shale extraction oil producers can continue to expand their share of the market. Pipeline projects to distribute domestic oil to U.S. refiners would lower delivery costs and further reduce the price disadvantages of shale oil. However, the Saudi Arabia Oil Policies and Strategic Expectations Center recently said that the Kingdom is prepared to go as low as $50 a barrel.

The San Juan Basin Energy Conference was founded to provide a forum for exchange of ideas regarding the development of the abundant energy resources found in the region. The focus of this year’s conference will be the Mancos Shale. The knowledge of the immense hydrocarbon resources in this formation along with the recent improvements in technology required to produce it are now coming together. The early results of Mancos shale development have captured the attention of the petroleum industry, and it is anticipated that the San Juan Basin will continue to supply vital resources that this country requires.

The Mancos Shale is the one of the largest single shale deposits in the Western United States. The Mancos shale is known by other names such as the Niobrara, Baxter, and Hilliard. It was laid down 100 million years ago when the Cretaceous seaway inundated the area now roughly known as the Rocky Mountains when they were below sea level.

Make plans to join industry leaders and professionals as we discuss the changing, challenging times of our natural resources. These discussions are certain to be educational, informative and lively!