T. Boone Pickens Has a Plan for Natural Gas

T. Boone Pickens is an oil and gas man, an extremely successful entrepreneur who founded Mesa Petroleum - one of the world's largest independent oil and gas companies - over 50 years ago. Until 1996, he ran the company as CEO. Under his watch the company produced some 150 million barrels of oil and three trillion cubic feet of gas. While Pickens diversified into other areas including cattle and cattle feed - and most recently water and renewable wind energy - his background is decidedly hydrocarbon-based. Among other companies, he founded Pickens Fuel Corp. in 1997, which became Clean Energy in 2001. He serves as a member of this company's board of directors. Pickens' views on energy in general - and natural gas as a transportation fuel in particular - are strong, as noted in the following interview that's published verbatim from Green Car Journal's Fall 2005 issue.

ORIGINALLY PUBLISHED FALL 2005

GREEN CAR JOURNAL: You've said there's been a fundamental shift in oil and gas, and production has either peaked or is about to. Could you elaborate?

T. BOONE PICKENS: “The fundamental change, I believe, is that all production globally is at the peaking point. Now, does that mean today? No. Does it mean last month? Probably not. Or next month. But we're there...maybe this year. Oil is becoming very, very tight around the world. I think global production is probably 84 million barrels a day, and that's about what your refining capacity is around the world, too. So, refining and supply are in balance, and if you don't have enough product out there, the supply guys are going to say to the refinery that you've got a refinery bottleneck. And the refineries will probably say they don't have enough supply. So, I don't know...but we're seeing prices just continuing to trend upward and I think that's what we're faced with.”

GREEN CAR JOURNAL: Does that mean the days of cheap oil and gas are behind us?

PICKENS: “Yes, that's exactly what it means.”

GREEN CAR JOURNAL: There's been a lot of talk about how tapping into the Arctic National Wildlife Refuge will provide vast amounts of oil. Is that the answer?

PICKENS: “Well, you've got to look at your delivery mechanisms. There's a two million barrel-a-day pipeline that goes from Prudhoe Bay down to Valdez. That really is your only outlet for the oil. And that pipeline, I think, probably has five or six hundred thousand barrels a day in it now. The Prudhoe Bay field has declined to the point where it can only deliver, along with other satellite production, somewhere around five or six hundred-thousand barrels a day. So all you could add, regardless of size, would be a million and a half barrels-a-day. A million and a half barrels-a-day is really somewhat insignificant to our overall requirements because the United States is importing over 10 million barrels a day. It would be a nice incremental addition, but it's not going to solve the United States' needs for oil production.”

GREEN CAR JOURNAL: You've been outspoken against the fuel-neutral energy policy. Could you explain?

PICKENS: “I don't think you can compare prices, clean diesel to natural gas, and come out with just one answer. Natural gas is cleaner than diesel. Pick the fuel that does the best job, and that's what you pay for. That somehow doesn't mean neutral to me.”

GREEN CAR JOURNAL: What role do you see alternative fuels playing in our future?

PICKENS: “I think anything that is identified as a fuel is going to be considered because I think you're going to need it. Let's look at the first real hurdle that we have to experience now. That is probably the fourth quarter of this year. If we're writing that supply is no more than 84 million barrels, and if demand is 86 million barrels, then that is a huge problem and it's coming up on us real fast. We speak of alternative fuels. If we do have a serious supply problem, and prices jump up near the fourth quarter, well everything then is on the table. You talk about wind, solar, shale, or nuclear, everything will be looked at. It probably is already being looked at, but it will become very much in the news every day.”

GREEN CAR JOURNAL: And the result?

PICKENS: “I think it will eventually come down to economics. If you can deliver some alternative that's competitive, it will be used. We're going to go into an interesting period here. The only way you can kill demand is to kill it with price, because every time you lower the price you'll increase demand. So, you've got to get the price up to kill the demand. We'll just see how the market treats all this, but we're getting ready to have a very interesting period.”

GREEN CAR JOURNAL: So you see this happening in real time, now.

PICKENS: “I see it coming up on a brick wall at about 60 miles per hour.”

GREEN CAR JOURNAL: You've talked a lot about natural gas in the past, and you're clearly a proponent. How could we best use the substantial natural gas reserves we have in this country?

PICKENS: “Well, we could use it for power generation, but we should hold onto that for transportation fuel. Right now the power generated by natural gas is the most expensive power you have. It's better to do that work with coal and nuclear. About 20 percent of the power generated comes from natural gas. That's a lot of gas, and that gas could be shifted out of power generation into transportation fuel. That will happen, I think, and it'll happen over the next few years. It will all happen because economics will push it in that direction.”

GREEN CAR JOURNAL: Could you talk a little bit more about the role that nuclear could play?

PICKENS: “I think you're going to have to expand nuclear. I don't consider myself to be a nuclear expert, but there's no question that it's been successful.”

GREEN CAR JOURNAL: How would you rate the natural gas vehicle field at present?

PICKENS: “Well, you've got to know that I haven't been very good on predicting this. I thought back in 1988 that it would be a real market in three years. And so, I think we're now going into the period I thought we were going into 15 years ago. So, that's 15 years wrong on that prediction. But I think we're on the threshold of increasing natural gas in the transportation market.”

GREEN CAR JOURNAL: Why do you think your projections were off by that amount?

PICKENS: “It was always economics. Plus, you had the major oil companies opposed to it, so we had a strong lobby from the other side to continue to use gasoline and diesel regardless how much more you become dependent on foreign sources. I think that now, as the public better understands, we have been able to sell natural gas substantially cheaper than gasoline and diesel. Consequently, it is going to be a push in that direction over the next few years. I think it's going to be a great business. Up until now it's been struggling, but I think you're going to be able to expand this business dramatically in the next three or four years.”

GREEN CAR JOURNAL: Of all the countries commercializing natural gas vehicles, how does the U.S. rate?

PICKENS: “We've got to be on page two because other countries have natural gas. In their defense, they don't have an infrastructure like we do for fuel - gasoline and diesel. That's been number one for us, and consequently the infrastructure is there. Look at a country like China or India, and if they have natural gas and their infrastructure's coming in place, it'd be obvious they would look at natural gas in preference to gasoline or diesel.”

GREEN CAR JOURNAL: So would you say that our biggest obstacle in this country is infrastructure?

PICKENS: “I would say that has been probably the biggest obstacle. It's just, you know, people don't like to change. And so, when we offer natural gas fuel, we have some things that have to be worked out in that delivery system. I think that our technology has advanced light years over the last five years, and it has put us in a position to be more than competitive - the fuel emissions are much cleaner and the price is cheaper, and it's a domestic fuel.”

GREEN CAR JOURNAL: What role should the government play in growing the use of natural gas vehicles?

PICKENS: “I'm not much for going to the federal government on this for help. I think they could give us some help on taxing the fuel. But I'm not keen about mandates. I think mandates kind of leave a bad taste in people's mouths. I'd like for them to use the fuels. I'd like to sell the fuel for all the right reasons, and have some taxes and incentives that would help push in that direction.”

GREEN CAR JOURNAL: Where do you see transportation fuels 10 to 20 years in the future here in the U.S.?

PICKENS: “I don't know...10 to 20 years is a long time. But I would say that natural gas will have a substantial place in transportation fuels. It would be great to have a second infrastructure in the event of some horrible disaster that cut off the supply of foreign oil in the United States. I don't know what it would take to have that kind of infrastructure, but I can envision in 10 to 20 years that you could have maybe 10 percent of the market, maybe as much as 20 percent. But it all depends on events around the world that unfold during that 10 to 20 year period.”

GREEN CAR JOURNAL: Do you see natural gas providing a transition to hydrogen vehicles?

PICKENS: “I do see that, but I saw how slow it took to get natural gas into the market. I don't think that all the obstacles we had would be the same ones that hydrogen fuel has, but I know that some of them will be. Infrastructure is going to be expensive, and it's going to take time to get it in place. And, of course, you've got to have vehicles that use the fuel. I think that hydrogen could receive more of a response.”

GREEN CAR JOURNAL: Any parting words about natural gas?

PICKENS: “I think our time has come, and I think we're ready. You might say, well, if you're talking about Monday morning, probably not. But I'm talking about the next two or three years. I think there's going to be some real changes in the use of this fuel.”