ConocoPhillips, the biggest gas producer in northwestern New Mexico's San Juan Basin, will temporarily suspend new gas drilling there until further notice, a spokesman said Thursday.
"We're beginning, effective immediately, a temporary suspension of development drilling," Jim Lowry said. He said the company broke the news of the drilling halt to its employees in the basin on Tuesday.
The drilling shutdown will idle the three rigs ConocoPhillips had been operating in the basin. Even with no new drilling, the company expects to remain the largest San Juan gas producer, with average output of about 1 Bcf/d, Lowry said.
"The drilling suspension is of a temporary nature and will have a minimal effect on production totals," he said. "We still have 10,000 wells in the San Juan Basin and they're all producing, so that production will continue."
Lowry said low gas prices were behind the drilling suspension.
"We'll watch the price of natural gas and when it rises to what we consider to be economic, we'll resume a drilling program as soon as possible," he said, although he declined to give a target gas price that would cause the company to resume drilling.
Gas prices in the basin, which had been hovering around $3-$3.99/MMBtu since the beginning of the year, recently rose to the high end of that range, but have yet to break the $4 mark. NO LAYOFFS EXPECTED
Lowry said that although the company does not anticipate layoffs due to the drilling halt, there would be some job changes among the approximately 600 ConocoPhillips employees in the basin.
"We expect approximately 20 employees will be assigned to new position in our San Juan offices and approximately 20 more will be offered new positions in other ConocoPhillips locations," he said.
Other big gas producers in the basin had previously announced cutbacks to their drilling operations, often opting to pursue more lucrative opportunities in other oilier and more liquids-rich plays.
"I'm told we were the last one to have an exploration program here, but I don't have personal knowledge of that," Lowry said.
ConocoPhillips will continue to have a major presence in the San Juan Basin, with two offices in the Farmington area. "All of our maintenance and operations will continue on the existing base that we have here," Lowry added.
In addition, the company has extensive operations in the southeastern corner of the state. "It's more oil and liquids than gas there," Lowry said.
Still, some worry over the economic impact of the move.
Jason Sandel, executive vice president of Aztec Well Servicing, which had provided the rigs for ConocoPhillips' San Juan drilling program, said the halt will have a devastating effect on the region's already battered economy.
"Without finding new customers for those drilling rigs, there's an immediate impact of anywhere from 75 to 100 jobs just inside of my company.
"But for our community, we're looking at hundreds of jobs and a ripple effect that will be tremendous," he said.
The employment impacts will reach "all the way from dirt contractors to waitresses at local restaurants. This is going to be a significant impact for our community," Sandel said.
