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Pickens: Natural Gas Could Hit $14; Cheap Oil Gone Forever

April 7, 2008
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The price of natural gas may be poised to go as high as $14/Mcf in the near future, according to independent oil billionaire T. Boone Pickens.

"If you look at the historical comparisons, the seven-to-one ratio on $100 oil...would make natural gas $14. We're at an $8.75 ratio right now. I think that will close, and I think it will close rather quickly within the next year," Pickens said during a recent interview with the Southern Gas Association. "Will it go to seven-to-one again? It will in time. Maybe a year, probably two or three years. But right now natural gas, I think, is going to move up to $10-plus and could go to $14."

According to Pickens, domestic oil production will never return to the 10 million bbl/d high it reached in the 1970s, and a dramatic fall in the price of imported oil is unlikely.

"I don't think any of us will ever see $60 [per barrel] oil again," he said.

The beneficiaries of such sustained high oil prices will be economically viable wind power projects, cleaner-burning coal projects and the natural gas industry, he said. Using natural gas as a transportation fuel could help to reduce the United States' dependence on foreign oil by as much as 30% and be an important tool in cleaning up the environment, Pickens said.

"Natural gas is a cleaner fuel source, and North America has an abundance of supply to tap into," Pickens said. "Just look at what's occurring with shale development throughout the country. It's real and it's happening everywhere -- from Northeast British Columbia to the Barnett Shale in Texas; from the Appalachian Basin to the Fayetteville Shale in Alabama. In today's business and economic environment, natural gas is much more exciting and promising than oil. It is the premium fossil fuel."

Last year Pickens -- the largest single investor in a natural gas supplier to heavy vehicle fleets of buses, trash trucks and airport shuttles called Clean Energy -- said more nuclear generation plants are the future of the electricity sector and natural gas should be concentrated on for use as a vehicle fuel (see NGI, May 7, 2007).

Pickens said renewables, particularly wind power, will be key in any effort to reduce the United States' dependence on foreign oil.

"We've got a requirement for 150,000 MW of power that has to be developed in the next 10 years," he said. "We're using 987,000 MW now...you're going to have to use other fuels conjunctively with wind, but wind would be the backbone of [efforts to meet that need]." Massive wind projects could be built at sites from the Texas Panhandle north to the Canadian border, he said.

Last year Pickens' Mesa Power filed documents with the Electric Reliability Council of Texas for a 4,000 MW wind farm, which could cost upwards of $6 billion and would be the world's largest wind farm. The project could have as many as 2,700 turbines on up to 200,000 acres in Roberts and adjacent counties in the Texas Panhandle. The project has an in-service date of late 2011. If completed, the Mesa project would dwarf the current record holder for largest wind farm: FPL Energy's Horse Hollow wind farm near Abilene, TX, which generates 735 MW.

Pickens, founder of independent producer Mesa Petroleum and chairman of the private equity firm BP Capital Management, has an estimated net worth of about $3 billion, according to Forbes.

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