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T.BoonePickensnotsuprisedbylowercrudepricesTopStoriesMyWestTexas.com

T.BoonePickensnotsuprisedbylower
crudeprices
1image

EricKayne

T.BoonePickensspeaksatthe2014LNGConferenceJan.22,2014,inHouston.(EricKayne/Forthe
Chronicle)

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ByJimMalewitz|TexasTribune|Updated1weekago

Crudeoilpricesareplunging,butT.BoonePickensisntsurprised.Thebillionaireoilmanhas
seenplentyofspikesanddipsduringmorethan60yearsintheindustry,includingsomehe
predicted.
Texasisproducingmoreoilthanithasin30years,andpumpingtwiceasmuchasitdidjust
threeyearsago.ItnowaccountsformorethanonethirdofallU.S.production.Thesurge,
however,comesasastagnantglobaleconomyslowsdemand.
WestTexasIntermediateoil,theU.S.benchmark,hastradedrecentlyinthelow$80perbarrel
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range,thelowestpricesince2012andamorethan20percentdropsincelastJune.
Forcompaniesandcountrieshighlydependentonoilmoney,theprospectofidledrigsand
chokedbackproductionhasstirredfearsaboutplummetingprofits.
SowhatsnextforTexasoilandgasindustry?TheTribuneaskedPickens,chairmanofthe
hedgefundBPCapitalManagementandformerCEOofMesaPetroleum.
Afterpolitelydecliningacupofcoffeeadrinkhehasnevertasted,athisgrandmothers
instructionthe86yearolddiscussedoilpricesandotherissues:naturalgaspowered
vehicles,naturalgasexportsandeffortstobanhydraulicfracturinginDenton.
Thefollowingisaneditedandcondensedtranscriptoftheinterview.
TT:TheseslidingoilpriceshavestirredplentyofconcernswithintheU.S.oilindustry.Willthey
fallmuchfurther?
Pickens:Ithinkitcangodownfurther.Idontthinkitsgoingtogoto$60,butwouldntbeatall
surprisedifitwentdowninthe$70s.
TT:WhatdoesthatmeanforTexasanditsboomtowns?
Pickens:Therewasanoldbumperstickerbackin86,itsaidDearGod,justgiveusonemore
boom,andwepromisenottopissitaway."
TT:IndrillingtownslikeMidlandandKarnesCity,officialssaytheyarenttooconcernedright
now,becausetheyvebudgetedconservatively,andenergycompanieshavebuiltuptoomuch
infrastructuretowalkaway.Butshouldtheybeworried?
Pickens:Yourenotgoingtohaveabust.ButIthinkyouwillseecapitalexpenditurescutin
2015andseesomerigsgodown.Youoversuppliedgas,andnowyouveoversuppliedoil.
Nobodywantstostopdrilling.Wevescrewedourselves.Thatswhatwedid.
TT:WillU.S.drillerseverchangethatmindset?
Pickens:Whowouldbetheleader?In1991,whenthepriceofgaswentdowntoadollar,I
announcedthatIwasshuttingdownaplatformintheGulfofMexico.Hell,Inevergotonecall
saying,"Bullyforyougoodidea,welldothesame."
TT:Justthenatureofcapitalism?Nobodywantstostoppumpingfirst?
Pickens:Probablyso.
TT:Youvebeenpushingforustofindmorewaystousethelargesupplyofnaturalgasweve
beenproducing.Texasnowhasatleast104naturalgasfuelingstationsnearlya50percent
increaseoverthepastyear,with67moreplannedtoopenin2015.Isthatsignificantprogress?
Pickens:Ithinkyouregoingtogotowardsmorenaturalgasfortransportationfuel.Imnotbig
onitforthepassengercar.Forthetrucks,yes.

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TT:Socommercialfleetsaretheanswerbecauseitseasiertogetthoseuptoscale,interms
oflongtermsavingsonfuel?Whynotthepersonalvehicles?
Pickens:Thestationsareinforthetrucks.Thosevehiclesareburning20,000to30,000gallons
ayear,andthecompaniessaving$1.50to$2agallon.Personalvehiclesdontuseenoughfuel
togetpeopletobuyamoreexpensivevehicle.Andwhencompaniesbuynaturalgasfleets,
theycanbuildtheirownfuelingstations.
TT:AlotofpeoplearelookingatDentonaheadofitsvoteonbanninghydraulicfracturingwithin
citylimits.Manyindustryrepresentativesclaimsuchamovewouldcreateadominoeffect,
emboldeningothercommunitiestodothesame.Doyousubscribetothattheory?
Pickens:Nobodystoldmeyetwhat(fracturing)damages.Allitdoesisincreasetheresources
availabletoyou.Itcreatesjobsandprofitsandtaxes.Nowtellmewhywouldyouwanttoshutit
down?
TT:Opponentscitefumes,trucktrafficnoisesomeofwhichcanbeattributedtotheindustrys
presenceingeneral,notspecifically(fracturing).Texasisseeingmoredisputesbetween
surfaceandmineralproperty,particularlyasdrillingmovesintourbanareas.
Pickens:Mostofit,Ithink,isgeneratedbylawyers.For$500anhour,theycancomeupwith
somereasonsfornotdoingordoingthings.
TT:Soyoudontthinkpeoplelivingrightnexttodrillingsiteshaveanylegitimateconcerns?
SomepeopleinDentonhavewells300feetfromtheirhomes.
Pickens:Imnotgoingtoworryaboutthosepeople,becauseyouretalkingaboutahandfulof
people.
TT:Doyouthinka(fracturing)baninDentonwouldaffectothertowns?
Pickens:IftheyshutdownDenton,Texas,itwouldmeanalottothoselandownersthere,butnot
toanybodyelse.Canyouthink,now,howlongwevetalkedaboutthis?Weveprobablyspent
morethanhalfofourtimehere,talkingaboutDenton,Texas,orsomethinglikethat.
TT:Itsoneofthebiggeststoriesonmybeat.
Pickens:IthinkourtimeisbestspentonthestateofTexas.Whatdowehavetoofferthat
hardlyanystateintheUnitedStatesdoes?Itsunbelievable,andwetalkabouttryingtostopit?
Justdevelopitsafelyandproceed.AndIthinkwedothatinthisstate.
TT:SomeindustryofficialshavesuggestedthatanydistrustofdrillinginDentonorelsewhere
maybethefaultofaminorityofcarelessoperators.Shouldtheindustrydomoretoclamp
downonanybadactorsoraddresstheperceptionthattheyexist?
Pickens:Ifyouwanttocriticizetheoilandgasindustry,sayitcreatedtoomanyjobs.
Companieshavepaidtaxes,mademoneyandemployedonehellofalotofpeople.Moveonto
somethingelse.Imtiredoftalkingaboutthis.
TT:Yourenotconvincedthatweshouldfocusonrampingupnaturalgasexports.Why?
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Pickens:LeadershipintheUnitedStates,withalittleencouragementandmaybealittle
incentives,coulddirectcheapnaturalgastobeusedhereinsteadofshippingitout.Whenyou
startshippinggasoutofLakeCharles(aplannedexportterminalinLouisiana),bythetimeyou
getittoalocationitcosts$10or$12(perMcf,aunitequaltothevolumeof1,000cubicfeetof
naturalgas).AndatLakeCharles,itcosts$3.50today.
TT:Plentyofpoliticianshere(includingGov.RickPerry)havecalledonthefederalgovernment
tofacilitatenaturalgasexports,sayingitwouldbolsterourglobalinfluence.
Pickens:Youcantexportabillioncubicfeetuntil2016.Abillioncubicfeetitsnothing.You
havesillycongressmenupheresaying,weregoingtosendgastotheUkrainetotakecareof
theRussians,whocutoffUkrainessupply.Youwanttosay,Hey,howarewegoingtogetit
there?Honestly,itsembarrassinghowlittleisunderstoodaboutenergyinWashington.
TT:YoudontbuytheideathatwecanusenaturalgasasaweaponagainstRussia?
Pickens:Itssilly.(Shut)no.
Disclosure:T.BoonePickenshasbeenamajordonortoTheTexasTribune.Acompletelistof
Tribunedonorsandsponsorscanbeviewedhere.

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