Peak Oil News: Despite belief in peak oil, Pickens still believes in oil and gas

Thursday, April 05, 2007

Despite belief in peak oil, Pickens still believes in oil and gas

By Mella McEwen

T. Boone Pickens answers questions from Hoxie Smith, director of the College's Petroleum Professional Development Center,Wednesday evening at Chap Center.

After 56 years in the oil and gas business, T. Boone Pickens still believes in the business.

"All I can see is the future of the oil and gas industry as we know it is good," he said. "The biggest problem we have is finding oil and gas. I see a great future for energy and oil and gas will be there. We're all going to live in the hydrocarbon era."

But the native Oklahoman sees numerous changes in store for the industry, where he began his career with Phillips Petroleum in 1951.

In town to speak at Midland College's Chaparral Center Wednesday, Pickens told the audience he is convinced the world has reached its peak oil production.

"Yes, I believe in peak oil," he told moderator Hoxie Smith, director of the college's Petroleum Professional Development Center. "(Longtime peak oil predictor) Matt Simmons and I talked today and we're on the same team. If, as (oil analyst and author) Daniel Yergin believes, there's so much more oil left, why doesn't oil production move up instead of staying flat? Global demand is 85 million barrels, or 31 billion barrels a year. The world hasn't replaced the oil it's been producing since 1985. So if there's so much oil left, I don't understand why production hasn't gone up. All the big fields are declining and all the current drilling does no more than hold off the decline. So the next step is decline. We can't hold on to 85 million barrel a day production."

In fact, he predicts that by the fourth quarter of this year, oil demand will rise to 86 or 87 million barrels a day while production will stay flat, sending prices up to the record high near $80 a barrel seen last July. He declined to predict what oil prices would be in 2008 because he doesn't know what price level will begin to destroy demand -- and he pointed out that price is the only way to reduce demand.

That's not to say, he said, oil and gas won't have a future.

"We're going to need all the oil and gas we have available, and we're going to need more," he said. "With world demand at 85 million barrels a day, what are you going to do? The Saudis say they have another million barrels, but that's good for asphalt."

Consumers are becoming more supportive of alternative energy sources because they're becoming more sensitive about what's happening with the atmosphere. He pointed out that he addressed an alternative energy conference in Anaheim, Calif., this past Monday and told that audience "whatever energy you have a chance to get in, get in -- solar, wind, everything works at these prices. The price of oil goes up, alternative energy gets a chance. Our mix of energy will be different five years from now."

Another issue, he said, is that 75 percent of the world's oil reserve are owned by state-owned oil companies, with the two largest Saudi Arabia and Russia. Likewise, the two largest natural gas producers are Russia and Iran.

Just as he is a believer in peak oil, he believes the world is in the early stages of global warming, "and for a geologist, that's hard to swallow. But we've put so much emissions in the atmosphere; I'm intrigued by how much can be measured in Antarctica."

The nation's turn to ethanol as a clean alternative source of fuel isn't the answer, he said, pointing out that a significant chunk of the nation's Midwest would have to become a massive corn field to supply enough corn for the ethanol needed to replace gasoline. He added that ethanol isn't as economic as gasoline without government subsidies. So, he said, it won't be a major part of the nation's transportation picture.

Since the late 1980s, he said, he has been touting natural gas as a fuel source and predicted the nation will turn away from natural gas to fuel power generation and instead fuel automobiles.

"Will it happen Monday morning? Of course not. But it will move out of power generation." And, he said, the 20 percent gap in power generation left by natural gas will be filled by coal and nuclear power.

Texas has the second highest power costs in the nation, behind New York, he said, because so much of the state's electricity is gas-fired.

His first preference is nuclear power, he said, telling the audience he recently attended a meeting on a next-generation nuclear plant that disposed of its own waste internally and required no water. The public will be more supportive of new nuclear plants, he said, but permitting them will be a problem, as will be the fuel to run them. "No one's looked for uranium in 30 years. Now it's in short supply and the price has gone up 10 times."

Clean coal technology and gasification, as planned for the proposed FutureGen site that Permian Basin officials are trying to land, will work, he said, "but my question is the cost."


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