T. Boone Pickens Not Suprised by Lower Crude Prices - Top Stories - MyWestTexas

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18/11/2014 T. Boone Pickens not suprised by lower crude prices - Top Stories - MyWestTexas.com

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T. Boone Pickens not suprised by lower

crude prices

By Jim Malewitz | Texas Tribune | Updated 1 week ago

Crude oil prices are plunging, but T. Boone Pickens isnt surprised. The billionaire oilman hasseen plenty of spikes and dips during more than 60 years in the industry, including some hepredicted.

Texas is producing more oil than it has in 30 years, and pumping twice as much as it did justthree years ago. It now accounts for more than one-third of all U.S. production. The surge,however, comes as a stagnant global economy slows demand.

West Texas Intermediate oil, the U.S. benchmark, has traded recently in the low-$80-per-barrel

T. Boone Pickens speaks at the 2014 LNG Conference Jan. 22, 2014, in Houston. (Eric Kayne/For the

Chronicle)
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range, the lowest price since 2012 and a more than 20 percent drop since last June.

For companies and countries highly dependent on oil money, the prospect of idled rigs andchoked-back production has stirred fears about plummeting profits.

So whats next for Texas oil and gas industry? The Tribune asked Pickens, chairman of thehedge fund BP Capital Management and former CEO of Mesa Petroleum.

After politely declining a cup of coffee a drink he has never tasted, at his grandmothersinstruction the 86-year-old discussed oil prices and other issues: natural gas-poweredvehicles, natural gas exports and efforts to ban hydraulic fracturing in Denton.

The following is an edited and condensed transcript of the interview.

TT: These sliding oil prices have stirred plenty of concerns within the U.S. oil industry. Will theyfall much further?

Pickens: I think it can go down further. I dont think its going to go to $60, but wouldnt be at allsurprised if it went down in the $70s.

TT: What does that mean for Texas and its boomtowns?

Pickens: There was an old bumper sticker back in 86, it said Dear God, just give us one moreboom, and we promise not to piss it away."

TT: In drilling towns like Midland and Karnes City, officials say they arent too concerned rightnow, because theyve budgeted conservatively, and energy companies have built up too muchinfrastructure to walk away. But should they be worried?

Pickens: Youre not going to have a bust. But I think you will see capital expenditures cut in2015 and see some rigs go down. You oversupplied gas, and now youve oversupplied oil.Nobody wants to stop drilling. Weve screwed ourselves. Thats what we did.

TT: Will U.S. drillers ever change that mindset?

Pickens: Who would be the leader? In 1991, when the price of gas went down to a dollar, Iannounced that I was shutting down a platform in the Gulf of Mexico. Hell, I never got one callsaying, "Bully for you good idea, well do the same."

TT: Just the nature of capitalism? Nobody wants to stop pumping first?

Pickens: Probably so.

TT: Youve been pushing for us to find more ways to use the large supply of natural gas wevebeen producing. Texas now has at least 104 natural gas fueling stations nearly a 50 percentincrease over the past year, with 67 more planned to open in 2015. Is that significant progress?

Pickens: I think youre going to go towards more natural gas for transportation fuel. Im not bigon it for the passenger car. For the trucks, yes.


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TT: So commercial fleets are the answer because its easier to get those up to scale, in termsof long-term savings on fuel? Why not the personal vehicles?

Pickens: The stations are in for the trucks. Those vehicles are burning 20,000 to 30,000 gallonsa year, and the companies saving $1.50 to $2 a gallon. Personal vehicles dont use enough fuelto get people to buy a more expensive vehicle. And when companies buy natural gas fleets,they can build their own fueling stations.

TT: A lot of people are looking at Denton ahead of its vote on banning hydraulic fracturing withincity limits. Many industry representatives claim such a move would create a domino effect,emboldening other communities to do the same. Do you subscribe to that theory?

Pickens: Nobodys told me yet what (fracturing) damages. All it does is increase the resourcesavailable to you. It creates jobs and profits and taxes. Now tell me why would you want to shut itdown?

TT: Opponents cite fumes, truck traffic noise some of which can be attributed to the industryspresence in general, not specifically (fracturing). Texas is seeing more disputes between

surface and mineral property, particularly as drilling moves into urban areas.

Pickens: Most of it, I think, is generated by lawyers. For $500 an hour, they can come up withsome reasons for not doing or doing things.

TT: So you dont think people living right next to drilling sites have any legitimate concerns?Some people in Denton have wells 300 feet from their homes.

Pickens: Im not going to worry about those people, because youre talking about a handful ofpeople.

TT: Do you think a (fracturing) ban in Denton would affect other towns?

Pickens: If they shut down Denton, Texas, it would mean a lot to those landowners there, but notto anybody else. Can you think, now, how long weve talked about this? Weve probably spentmore than half of our time here, talking about Denton, Texas, or something like that.

TT: Its one of the biggest stories on my beat.

Pickens: I think our time is best spent on the state of Texas. What do we have to offer thathardly any state in the United States does? Its unbelievable, and we talk about trying to stop it?Just develop it safely and proceed. And I think we do that in this state.

TT: Some industry officials have suggested that any distrust of drilling in Denton or elsewhere may be the fault of a minority of careless operators. Should the industry do more to clampdown on any bad actors or address the perception that they exist?

Pickens: If you want to criticize the oil and gas industry, say it created too many jobs.Companies have paid taxes, made money and employed one hell of a lot of people. Move ontosomething else. Im tired of talking about this.

TT: Youre not convinced that we should focus on ramping up natural gas exports. Why?


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Pickens: Leadership in the United States, with a little encouragement and maybe a littleincentives, could direct cheap natural gas to be used here instead of shipping it out. When youstart shipping gas out of Lake Charles (a planned export terminal in Louisiana), by the time youget it to a location it costs $10 or $12 (per Mcf, a unit equal to the volume of 1,000 cubic feet ofnatural gas). And at Lake Charles, it costs $3.50 today.

TT: Plenty of politicians here (including Gov. Rick Perry) have called on the federal governmentto facilitate natural gas exports, saying it would bolster our global influence.

Pickens: You cant export a billion cubic feet until 2016. A billion cubic feet its nothing. Youhave silly congressmen up here saying, were going to send gas to the Ukraine to take care ofthe Russians, who cut off Ukraines supply. You want to say, Hey, how are we going to get itthere? Honestly, its embarrassing how little is understood about energy in Washington.

TT: You dont buy the idea that we can use natural gas as a weapon against Russia?

Pickens: Its silly. (Shut) no.

Disclosure: T. Boone Pickens has been a major donor to The Texas Tribune. A complete list ofTribune donors and sponsors can be viewed here.

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T. Boone Pickens Not Suprised by Lower Crude Prices - Top Stories - MyWestTexas

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