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Matt Simmons speaks about President Bush and Iraq

Matt Simmons - energy investment analyst
(Interviewed on camera in Houston, Texas on 10th February 2003)

Matt Simmons in a wide ranging discussion of oil, gas and related energy issues, including observations on what the White House knows about oil peak, what they want the public to know, problems with hydrogen, and where Iraq fits indiscussing oil peak; natural gas; what the President knows; hydrogen; and Iraq in Houston, Texas.

  1. How do you introduce the oil peak & decline phenomenon? [8:55] mp3 |
  2. Can you tell us about the growing problem with natural gas (NG) in North America & is it particular to the US? [10:57]
  3. What are some of the important differences between oil and natural gas, what is 'conventional' gas, and in particular what is coal-bed methane? [3:01] mp3 |
  4. How did we get into the current situation? [10:47] mp3 |
  5. When you are interviewed by mainstream media, do you try to tell them about oil peak & decline? [2:10] mp3 |
  6. How did you come to be an advocate for oil peak and decline? [5:24] mp3 |
  7. What is the significance of paying for oil Euros vs US Dollars? [10:28] mp3 |
  8. Does nanotechnology have a role to play in the future of energy? [11:34] mp3 |
  9. What is your attitude to being called an energy 'bull'? [1:59] mp3 |
  10. Can you tell us about your role in advising the Bush administration on energy matters? [9:17] mp3 |
  11. Does President Bush want the American public to know about oil peak? [3:25] mp3 |
  12. Was the mention of 'Freedom Fuel' (hydrogen/fuel cells) in the State of the Union speech an admission that the Bush administration doesn't know what to do about oil peak? [1:36] mp3 |
  13. Many people view the proposed US military attack on Iraq as really being mainly about oil - is that your view? [6:16] mp3 |

 

Q1.   How do you introduce the oil peak & decline phenomenon?

It is such a simple concept, but it is so hard for people to grasp what you mean. Let's start with the United States, because this is a classic case study of an area that did peak.

The story of the Peaking of the U.S. is really a mind boggling story when you figure we weren't Afghanistan, or deep in the heart of Africa, or before we had newsprint, and so forth. The story really goes back to 1956 when a scientist, a senior scientist at Shell Oil Company, Dr. M. King Hubbert, the infamous Hubbert curve today, after apparently several years of looking carefully at the resource base of the U.S. and where we were on the scale of how much we produced, prepared a paper that he was going to deliver at some scientific association. I believe it was the U.S. Association of Petroleum Geologists. It's a matter of public record now.

The senior management of Shell pleaded with the guy not to produce this paper because it sounded so harebrained. But, apparently, King Hubbert was a crusty enough old guy that he just delivered it anyway, and his message was that, in the early 70's, the U.S. would peak as an oil province, and it created phenomenal controversy. A bit of hysteria, because, at the time, we were, basically, twice as big an oil producer as anyone else on Earth, and we'd been that way for the last 100 years. So this would be like someone today in Saudi Arabia saying, "ten years from now, we're going to peak." That's impossible! That was 1956.

By the late 60's, Dr. Hubbert has fallen into such disrepute that he'd become, apparently, from just from going back an reading all the literature, almost a joke. (They'd say), "Remember that guy in '56' that said we were running out of oil?", like I hear people talking about the Club of Rome and "Limits to Growth" today, who said we're going to run out in 1990, or 2000, which wasn't, in fact, the case at all. 2050 to 2070 is actually what they wrote about, and it's quite a different story.

One of the classic reasons people dumped all over King Hubbert was that, in 1970 when we were supposed to quote "run out", we'd never produced more oil; the year we peaked. In 1970, the United States, this was before Alaska, (we discovered Prodhoe Bay but it was years away from being developed, and it was before a gleam that we could do deep water), and, really, Alaska might have well have been in Russia. In fact, at one point, Russia owned Alaska, and deep water could have just as easily been in Mexico.

So, you really have to apple and apple, and have to go back and realize he was just looking at the lower 48 and the shallow waters off (the) Gulf of Mexico and California. His assessment was that, once we peaked, it wouldn't make any difference how much we drilled, we would then start into a steady decline, and ultimately, at some point, be down to a very long tail, probably never run out, but once you're down to 10% left, it's like a 93 old guy. He might live another 25 or 30 years, but he's not very productive.

Anyway, in 1970, we were producing 9.6 million barrels per day, Saudi Arabia was producing 4.3 million barrels a day. Go back and look at the literature. Not a single other person had even commented that we just might be reaching a peak.

By 1981, we'd had a 10 fold increase in price, we were drilling four and a half times more oil wells every year than we were drilling 10 years before that, and 9.6 (mbd) had already declined to 6.9 (mbd). If you look at the same number today, again you have to keep Alaska off, and keep deep water in the Gulf of Mexico, we're down to some where between 3.1 and 3.5 (mbd).

Turns out that King Hubbert was unbelievably right, and what I find so uneerie about this is why was he the only person, and why was the message so hard to get across, and why did he almost get destroyed in his reputation for being so ahead of his time?

Today, there are a handful of scientists and Colin Campbell, and Jean Laherrère, Dr. Baktiari in Tehran, that are doing the same work, using sort of the same diagnostic techniques as Dr. Hubbert was in 1956, but now they're armed with fabulous data, all of these computers, and they scratch their head and they look at a bunch of phenomena and say, "we're nearing the day when, in all likelihood, we're going to, basically, peak, or Plateau." Maybe 'Plateau' is a less jarring terminology, and I hear that, and I see their numbers, and I say that's really interesting. That could, possibly, be the case.

Other people hear that, and, with some passion in their voice say, "that's just stupid. the world will never run out of oil." There was a talk I gave in Paris last Thursday afternoon, saying "I never heard any of these scientists ever say we were going to run out. I hear them say we're likely to peak, and I hear them say that we're really coming to the end of conventional oil, which is easy to get out, flows real freely, usually has a lot of pressure so that, actually, your biggest task is keeping it in, verses sucking it out. I don't know why that's such a hard message to get through to people.

The people who seem to have the hardest time digesting it, ironically, are the people that call themselves the world's energy experts. I find that really interesting. I tend to, basically, I speak so often on energy programs, I've sort of gotten to know both sides of this camp, and I've talked to both sides and I listen to what they say. The scientists are very concerned and their opponents spend so much time dumping all over the scientists, and I continue to say, "guys, where's your data?". By and large, their data is....

I am, basically, just an optimistic person, and I really believe in the resourcefulness of human nature. Well, luckily, King Hubbert didn't think that. If it turns out that the scientists are right, what makes me concerned is that they haven't set a trap door in society for what would we actually do if we did peak? What are the social consequences? Do we have any idea of what the future cost of energy actually has to be if we're turning more, and more to unconventional oil? Canada, for instances, has vast amounts of unconventional oil in their tar sands and heavy oil, but it's really hard to get at, it takes an awful amount of energy and water to convert it from non-usable into usable energy, and it's expensive.

So, yes, we have a lot of it, but do we have any idea of what the economic consequences are of having to rely on it, and what I find fascinating, from just an observing society, is why did we ever let such an important message go unaddressed for so long, and then the handful of people that tried to thoughtfully address it get really badly abused, (by being called) crackpots, chicken littles, as opposed to there's a serious side of ... that might not be right. The dialog has been odd.

Q2. Can you tell us about the growing problem with natural gas (NG) in North America is it particular to the US?

It's particular to the U.S.in that natural gas is so hard to transport. You can't put it on a tanker. You transport it one of two ways. You either have a steel pipeline that is totally galvanized, highly pressured, or you liquefy it and then put it on a vessel and send it across the ocean. So, it has always tended to be a very regionalized source of energy.

Luckily, the United States had a prolific amount of natural gas. Oddly enough, we, basically, went for almost a century while we were a major oil producer, really not paying much attention to what natural gas was all about. In the 50's, we were still flaring most of our natural gas. If it hadn't been for World War II, we might have never put together this amazing pipeline system that started the natural gas industry as we know it today. But, we priced it as a waste product.

You go back and look into the 60's when oil was a $1.50, natural gas was ten or fifteen cents. It was really just, essentially, like "well, there was hardly any use for it." When natural gas prices started to be deregulated inside a state and the prices got high enough, we could really get active exploring for it.

We had the oddity of two back to back cold winters in 1977-78 and it jolted the natural gas system because, all of a sudden, seasonable demand was way higher than supply, and many people had to shut down, and schools and industrial plants in the midwest were shut for about two weeks. Out of that came the worst pieces of energy legislation in the history of the United States, "The Fuel Usage Act of 1978." We, literally, banned a bunch of users of natural gas from being able to use the stuff, because of a perception that we were running out. This comes back to the schizophrenia we've had with energy; we either have too much, or we're running out.

Finally, these dates are not as cut and dry as I make them, ... in the early 90's, the United States got real and started appreciating that natural gas was our most precious energy supply. It was abundant here. We didn't have to worry about OPEC. We didn't have to worry about all these over the water transportation problems, and it was unbelievably clean and efficient. Ironically, the Clinton's administration started, in their Department of Energy terminology, actually describing the industry as the Natural Gas and Oil industry, even though, for the last 100 years, it had always been the "Oil and Gas", just to emphasize that natural gas was our primary fuel. Without a lot of forethought, we, effectively, held hostage our entire future of our economy to a concept that we had abundant, and locally available natural gas, as we, effectively, said we ran out of electricity generating capacity. We said every single, new power plant we're going to build will be gas fired, because we don't like nuclear, we hate coal, we've used up all the dam sites, and oil has always been a very inefficient use of oil to make kilowatts.

So, between '99' and 2002, we went on the biggest splurge of new power plants in North American than we've ever done and, effectively, 97 of them were using natural gas. What no one spent any time looking at, and I was one of the people that was arguing loudly we were probably making a mistake at the time, is that in all the previous eight years, as fast as we were drilling for natural gas, all we were doing was keeping the supply flat. If you dug into the data, the existing base was starting to decline, instead of 10% per annum, 20% per annum, 25% per annum, all of a sudden there was some studies coming out at the turn of the 21st century that the new vintage gas was maybe 50% gone by the end of the first year.

This was the decline rate (that) a decade ago you would have said, "that's physically impossible. You couldn't suck the stuff out fast enough," and then we, all of a sudden, the price of gas exploded in 2000. By the end of 2000, it was $10.00 nationally, it was over $60.00 in California. That's, in oil terms, $320 dollars a barrel, and people got panicked about natural gas and started looking at....

Then we went into a drilling boom. We actually had the best drilling boom we've ever had in North America for natural gas, and all the players just assumed, "well the drilling boom was going to, finally, bring on a lot more supply." When it was come and gone, it just kept the supply flat. Then we started seeing the supply start to tilt south.

This year, we entered last winter, or we ended last winter on April 1st, because we had abnormally mild winter, we had a weak economy, and we had, maybe, 1% or 2% extra supply, we ended up with about an 800 billion cubic feet overhang in gas storage from (the) previous year when it was too low. Now, a lot of our most astute gas analysts were wringing their hands saying, with all that extra gas in storage, by the time we get to the fall of 2002 storage will be so full there's going to be no place to put gas, and gas prices are likely to fall to $2.00, or maybe even a $1.00. By the time we got to the fall, for some reason, or another, our overhang had disappeared.

We didn't have any statistics to reliably say, was that just because we finally had hot weather in the summer, or was it, actually, that supply decline was accelerating? Last week, we finally got the numbers through the end of January, and we're now down 811bcf (Billion cubic feet) year over year from where we were a year ago. So, in the course of ten months, we swung from a surplus of 800bcf to a deficit of over 800bcf. We've never had a swing like that in the history of the natural gas industry.

Because our data is so lousy, we don't have any idea.... I think people can, intuitively start to guess what the answer is. It's a little bit of both. We've clearly, finally gotten back to, not the coldest winter we've ever had, but a normal winter like we used to have year after year and, clearly, supply is falling by many producers, because you can see it in the published reports.

Unfortunately, we still have two months to go before we're out of the woods for winter, and from the recent trends, it's seems pretty clear that we will end this winter around about as low as we ended the year of 2001, which is when we had this bout of $10.00 gas. Now, we have, clearly, less gas supply than we did then. There's no sign that we're going to have another drilling boom. It would appear that we've probably just run out of prospects. It doesn't mean that, long term, we're out of prospects, it just means that all of the tedious work that people have done, or things they were going to do, they did them during the drilling boom. We just compressed into a year and a half what was normally going to happen over four years. So, the idea that supply is going to turn around is really far fetched.

My worry is that as we enter the injection season, this funny 214 days we have to get ready for next winter, we will be hard-pressed to get back anywhere near as low as we were going into the winter 2000, which created $10.00 gas.

What's really interesting is to just project yourself ahead to November 1st and say what would be the response if we, basically, had, say 2.5 bcf going into the winter, which would effectively mean even a mild winter, and we're likely, effectively, physically start running short of natural gas. So, one more time, how did we miss it? Well, where was King Hubbert when we needed him?

The serious question that I have is, if you step back to this flatness that we had for eight or nine years, in fact it really wasn't flat, because if you pull out coal bed methane, which is unconventional gas, and you pull out, and there isn't very good data available so you have to do some estimates of that, deep water gas, associated gas with deep water oil fields, which is not, vaguely conventional gas, you know what picture you get?

We peaked about 5 years ago! Just like we peaked in oil in 1970, and just like in 1970, nobody noticed it until it was too late. So, I think there are some very sober things going on right now in natural gas. I guess what makes me so flabbergasted as I think about all this is that we're not Angola, or Brazil, or Argentina, or Russians who are just learning about transparency, this is the United States of America. With all of this transparency, all of these analysts, and yet so many people were so convinced that natural gas prices would never get above $3.00, where did that notion come from?

Why did we think that if we wanted to use it, it would just automatically increase? It gets back to this whole issue of how a few people really understand what energy is all about, and how complicated it is to create energy.

Q3. What are some of the important differences between oil and natural gas, what is 'conventional' gas, and in particular what is coal-bed methane?

By and large, oil and gas come from the same basis, but one is so different than the other. One's a vapor, the other's a liquid. We use a totally different terminology. I find it interesting how few times you find an oil person that really understands natural gas, and conversely, a natural gas person who really doesn't understand oil.

As an energy analyst, one of the things that I really worked on in the early 90's, when I started realizing that I really didn't understand natural gas real well, is to get the terminology right. I kept going back and learning how to quickly convert back to oil on a barrel of oil equivalent because someone would say, "you know, we use up to 52bcf a day," and I'd say, "I don't know what that means." Well, if you say we use 9 million barrels a day of natural gas, as someone who learned the industry through barrels per day, that actually means something.

So, the terminology's different. Then you get into conventional gas. It's a little bit like conventional oil; there's no box you can tidily put it into and say what is conventional and what is unconventional. But, by and large, it the same as with oil. You have conventional oil which is the easiest stuff to get; the easiest stuff to process. Conventional natural gas is dry methane, where you don't have to take lots of impurities out of it. You kind of get it in most conventional formations.

Now, we're getting into a world of unconventional gas, and one of the unconventional sources is called coal bed methane, where, I'm not a technician, so I'm going to defer, but, effectively, you go into coal seams and you use a lot of water and, like fracting, you open the coal seam, and you capture the entrapped gas that's embedded in the coal seams. This is called coal bed methane, methane being natural gas.

There's probably a lot of coal bed methane around the world. The problem is that it requires a profusive number of wells, no individual well is very productive, and it takes an awful lot of water. What we don't really know, and there a big controversy in Wyoming right now, is does it, basically, taint the water, or is it a good water creator? The critics all say it taints the water. I occasionally run into somebody who says that's baloney, they've never had better water, but I don't know the answer. It gets back to the passionate arguments that seem to come up whenever we're talking about energy.

Q4. How did we get into the current situation?

How did we get into our current situation? Boy, that's a good question. Again, we're not a backwards society, we have more talking heads than you can shake a stick at, we have scores of people that think of themselves as some of the best energy experts in the world.

I think the first thing that probably went awry, is that, in the hysteria of the 70's, when we had our two energy shocks, actually there was three energy shocks, the 1973 oil crisis, the running out of natural gas in the winters of 77-78, and then the 79 oil shock, we developed a deep seated belief that energy prices were going to go to the moon. OPEC was omnipotent, demand would rise forever, and we were going to have $100.00, $200.00 oil.

In fact, if you go back and look at the data, it's amazing to see that demand was slowing down. We had a drilling boom that had been going on for a decade that was bringing new supply on. Supply and demand does always work. Markets actually ultimately, do sort themselves out, and when you have more supply than demand, you rarely have a price that's already up tenfold, double, or triple again.

So, as we went into the 80's, it turned out to be just exactly opposite than the hysteria that came to a head as we entered the 80's in both oil, and natural gas. We spent a real painful decade in the United States, really globally, but particularly in the United States, coping with, what I continuously call, the great oil field depression. The glut in oil and natural gas was so awful that our red count fell from a peak of 4500 at the beginning of 1982, down to about 600 a decade later. Literally, the job destruction was... no one will ever know exactly how many jobs (were lost) because the (?) codes don't do a good job of characterizing the fact that its not one area, it just continues down the food chain, but we probably lost a million jobs.

We shuttered up almost every one of the petroleum equipment plants that made the Houston economy work. We had such a surplus of extra drilling rigs that most people thought it would be thirty or forty years before we'd ever build another rig. And, we stopped hiring new people. In fact, all we did was downsize for a decade and a half.

Our energy experts, who tended to be a small group of people who were energy economists, who were, ironically, the same people, to of person, warned us that we would have $100.00 oil, started becoming a general fighting the last war, and loudly proclaiming that they know the future; demand isn't going to grow. Demand is slowing down. If the price ever gets high, it's a sucker's bet, because it will bring on vast amount of new supply. We're now going through the normal sort of evolution of just like what happened to manufacturing everything, the price just gets cheaper, and cheaper, and cheaper.

So, by the turn of the 90's into the 21st century, there were some classic publications like "Foreign Affairs" had a cover story called "The coming oil glut; two decades of cheap oil." That was just one of scores, and during the midst of all of this hysteria and also, we had three very painful collapses in the price of oil during the 90's. All three based on the presumption that the glut was eroded, with the benefit of hindsight afterwards. In all three cases, it was just phoney data, and hedge funds betting on oil.

And this is sort of when, all of a sudden, this Darth Vader group, Colin Campbell, Jean Laherrère started publishing the end of cheap oil, and this group of energy economists just jumped on those people like they were... and started calling them nasty names because they were positive that this is all the mistakes we made back twenty years ago. I started giving talks in the middle of the 90's that the three bubbles had, pretty much, disappeared; our gas bubble, our oil bubble, and our rig bubble, as I was just looking at supply and demand.

This is what, basically, just plagued this industry for a decade, and occasionally one of these energy economists would be on a program with me and say, "Well, you must be a Club of Romer!" I had no earthly idea what the Club of Rome was, or a Malthusian. I said I remember who that guy was. He's the person that said we're going to run out of food sometime. About the eightieth time I heard someone say, "Well, you're just like the Club of Rome, you believe that we're going to run out of oil by 1990 or 2000," I finally ran into that book and I decided to actually read it. That was four years ago. It's amazing. The book was published in 1972. It's called "The Limits to Growth" and I finished reading it, I was just skimming through it and I missed a chapter. So, I carefully read it a second time and the third time I actually did a white paper called "Revisiting the Limits to Growth; could the Club of Rome have been right?" What I found to my astonishment was there was nothing in the book that talked about running out of oil in 1990 or 2000.

They were talking about if you model the trends going on by the early 70's, and extrapolate what that means in exponential growth verses linear growth, it's really hard to figure out by 2050 to 2070 where the resources would ever come from. Isn't this amazing. Here we go again, pretending that we heard something that we didn't ever hear. So, we, basically, just blissfully went through a decade and a half affectively assuming that our growth was slowing down, while we steadily grew even more the largest consumer on earth.

Then we started finally saying that it's just SUV's, "if we just start tightening our belt!". Well, you know what, it's not SUV's, it's our whole economy; it's the fact we have 285 million people; it's the fact that we never did mass transportation and we can't do mass transportation; it's the fact that we embrace suburbs as opposed to being like Tokyo and just stacking people into little units into 100 story buildings. It's the fact that, for some reason or another, decided we wanted a little bit large footprint house, and we decided we like 8 and a half, to 9 foot ceilings. These are irreversible things. We ended up being an enormously big consumer, and we had a group of people who said, "I hate energy" while they consumed it.

So, we systematically shut down a lot of areas where we could have produced more energy, probably, and we made it harder and harder to do any form of new energy whether it was coal...to punish natural gas because we had an oil spill in 1969 was just intellectually, immorally, wrong. You cannot spill natural gas. It's a vapor. That didn't have any relevance to the people, who with such passion said, "we will never again explore for oil, explore for energy, in the Pacific Ocean. We will never again explore for energy in the Atlantic Ocean, even though we sure want to use oil and natural gas from the maritimes, but that's the maritimes." Even the eastern part of the Gulf of Mexico is too close to Florida, and even though that's natural gas, what if people saw a rig?

All we did was passionately embrace tanker traffic which is like automobiles, we'll never prevent tanker accidents. So we just, as a society, got it just about as wrong as you could ever get with the future of our economy. Now, why were we that dumb. I don't know. I think it was tragic. These are fairly easy things to get your hands around if you just..., and I think part of it is the emotion that energy emotes in people. Occasionally, I've actually wondered whether... I didn't appreciate this whole story until I read Ron Churnew's great biography about John D. Rockefeller, "Titan".

He has a wonderful story about this unbelievable author, Ida Tarbell, that thought that John D Rockefeller was the meanest man that walked the face of the earth. She wrote this preposterous story about him, and he was so shy that he just assumed nobody would believe it, but she was probably the inventor, at the turn of the twentieth century, of the concept that "make sure you hate oil." So, ever since the days of Ida Tarbell, we as Americans have seemed to be very suspicious about energy.

In the 70's it was those funny guys in robes, having just come back from Saudi Arabia for six days, those are lovely human beings that pride themselves as being our most reliable supplier of energy, but we've always though that there's some devious about those people. Energy has really, basically, had a funny role in the United States. It's the most important thing we have, and yet, somehow, we're suspicious that it's always about to do something bad to us.

Q5. When you are interviewed by mainstream media, do you try to tell them about oil peak & decline?

Personally, I think I'm very fortunate, because of having been thrust into creating this firm and being a serious student of energy and all we do is energy. I do believe I have a very sound understanding of the real numbers. Our whole firm is based on a, the real culture of our firm is (to) kinda stick to real numbers. If it's a painful message, don't worry about that, as long as the numbers are real.

So, it's been easier for me to talk candidly about problems of energy, because I've done the numbers myself. I think one of the reasons that my name keeps coming up when the Dow Jones Wire Service, or ABC News, or BBC, or Canadian Broadcasting is doing a story on energy is that in their (opinion) this is a guy that, if he doesn't know, is the first to say, "I don't know", and if he does know, he'll give you a number. You'd think there would be scores of people like that. For some reason, or another, there aren't all that many. I'm not sure why. But I do think this is an extremely important topic.

After 911, I made the comment, many, many times that I think it would be very hard for terrorists to destroy the U.S. economy. You deal in a good old fashioned energy crisis, and make it serious enough, and we can rip this economy apart faster than you'd ever believe. So, it is something that I worry about, and there's so much bad information floating around, theories as to how if we just quickly did this, we wouldn't have a problem, that I think the few people who have done their homework really owe it to the system to speak out.

Q6. How did you come to be an advocate for oil peak and decline?

I'm a great believe in the power of analysis, and that's the bedrock of all of our investment banking projects. Analyse three times before you come to a conclusion, and so as I became more, and more of the student of energy, I am more, and more a believe that you can't over analyse a subject. I can't quite remember how I stumbled on to what was happening in depletion, because I'm not a petroleum engineer, or a petroleum geologist. I've never, basically, paid attention to reserves.

I wouldn't know how to... if someone came in and said here is all my data on reserves, I'd bring in some technicians to tell me what it means. But, particularly since our core expertise has always been the oil service industry, and the petroleum equipment suppliers, this is the sort of (thing) where operating leverage is the best or the worst. You really have to pay attention to rig count, and daily supply, and daily demand.

Sometime during the 90's, [I started], I believe I was preparation for giving a talk about what was going on in the North Sea. The North Sea has some fabulous data on field by field production statistics because the UK sector to the North Sea there's still only about 130 fields, and they all have English names, so it's not like, field 9200-X; it's the Fortis field, and Brent field, and so forth. The UK government puts out an official Brown book every year, where they list every field and the last ten years production.

In about 1995, I was preparing this talk to give in Aberdeen, and I started through the Brown book. We kind of grew up, our friend kind of grew up in the era of the North Sea getting started, and so many of our early clients were heavily involved in building up the Fortis field and the Brent field, and Statfourd and Echofist, these giant oil fields of the North Sea. I looked at this data, and I was stunned to see that these giant fields were pygmies. They had depleted. That's when I started into this. It's amazing how little we seem to know about depletion.

I wasn't using depletion as a concept as 'we've run out', I was using that as euphemism for that production was in decline. Little did I appreciate that, the more I got into this, I said this is amazing. All of these forecasts seem to assume that the base is always flat. So, you're producing 2 million barrels a day in the UK sector of the North Sea, and you have two projects coming on of a 100,000 barrels per day, you should see next year's production of 2 million 2. (2.2mbd) I've looked at these fields, and they are in decline. So, I started speaking out the issue of depletion, and raising the question, "have we forgot about the concept of depletion?"

I recall reading some excerpt about this Scientific American article about the end of cheap oil, and someone alerted me that there was this guy named Colin Campbell that had written a book about depletion. So, I ordered the book, and as I was skimming through it, I saw an appendix at the back. I thought, now, I'm going to figure out, they must say some wonderful things, and I saw my name quoted ten times.

When I finally met Colin Campbell, he said, "My compliments to you. You were actually speaking out on this more frequently than anybody else!" Now, I didn't know that. I was just doing analysis. In fact, one of the interesting things about, as I've gotten to know these wonderful scientists, and they are just delightful people, and I admire their tenacity, is I've actually been using a different language than they have.

They are all looking at the total ultimate resource, and I have no confidence to even to know how to do that. I'm looking at the physical rate of decline, that you can measure. Even more importantly, how important it would be to measure what it would have been had you not exponentially spent more money. So, it's accidentally brought a different discipline to what the scientists have been working on. Now, did I understand I was doing that myself? No! I was just a curious analyst.

It's been a really interesting odyssey to find myself in an area that I never though I would, basically, be discussing. It was interesting being inside Arabia last week, and speaking to the Finance Minister, and the Minister of Petroleum, and telling them some aspects of things they should be worried about. I'm not sure many people have spoken about depletion inside Arabia before. They should be.

Q7. What is the significance of paying for oil Euros vs US Dollars?

Let me switch into an even larger, more important thing, and then I'll come back to the (original question) as that's sort of the icing on the cake. I'm particularly intrigued to follow the dialog right now because, like it or not, we have $34, $35 oil, and there is a deep seated sense by many of our leading economist in the world that $30 oil and recession are Siamese twins.

It's a destructively high price for oil, and the OPEC countries, you know I thought a lot about this just having coming back from a week in Saudi Arabia, the OPEC countries are being lectured all the time of, "Now, you guys need to remember, don't be greedy, or you're going to kill the goose that lays the golden egg. What you really need to do is bring oil prices down to 15 or 20 and then our economies will be healthy." So, this doesn't matter if it's 15 or 20 Euros, or 15 or 20 Dollars. That's kind of the noise at the margin.

Conversely, the various leading authorities within OPEC, in particularly the past two or three years, have quite passionately spoken out about the urgent need to create a fair, and stable price for energy that works for both the consumer and the producer. If the producer doesn't get enough the risk is that they don't, basically, continue to spend enough to keep supply going, and then we really have a problem.

As I hear this conversation going on, I hear Dr. Luteman, who has been Secretary General of OPEC, now he's the Nigerian Petroleum Minister or [Ali en Ami?] who I visited last week, whose the Petroleum Minister of Saudi Arabia, speak out on, and their cautious to not become harsh in their language, but I translated into the gross hypocrisy of the OECD on lecturing OPEC about why the OECD doesn't actually get oil prices up too high when they can't even balance their budget.

When, in fact, the price the OECD countries charge their consumer has two to three times more tax added on top of the wellhead price. What the OPEC countries are saying in desperation is, if you think the price is too high, lower the tax, but we have to have a price high enough to balance our budget, and high enough to be able spend enough money to make sure we have our supply there. So, you have, again, Mr. 'A' talking to Mr. 'B'. Then, in America, we go on, and on, and on about the fact that our economy needs $20.00 oil, $15.00 oil to be vibrant. Let me tell you how wrong that is.

In the best data we have around, which is '99' so far, I haven't seen any good data for total, but you can guess at the number, is that the total residential energy bill, exclusive of motor gasoline, which we'll come to in a minute, in 1999, totaled about 140 billion dollars, (it was 135), divided by 110 million households;.that's $1350.00 per household. That's, obviously, a lot of money, but let me tell you some of the other things we spend money on in the United States.

That same year, we spend 165 billion dollars on recreation and sports, going to movies, going to football games. We spent a 150 billion dollars on alcohol and tobacco. We spent 205 billion dollars on consumer advertising. (These are things that are?) never seen. So, you add those three things up, which are things we could do away with if we had to, of course, you can't do away with energy. I just identified a pool of 515 billion dollars that we could reallocate if we had to, to, basically, make sure we had enough money for energy.

Now, another phenomenal real statistic. I mentioned that's the residential bill, other than motor gasoline. It turns out that about 45% of the personal energy bill is motor gasoline, and 55% is what you spend on the residence for your heat and power. In motor gasoline, remarkably, in 2001, we had two months that both hit 20 year records in the same year. In May, we had a 20-year high of $1.81, this is with tax included per gallon. In December, we had a 20-year low, $1.20. Now, $1.20 was so low that it would have destroyed the refineries, so it's really a phoney price.

If you take the Delta between the 20-year high, and the 20 year low it just happens to be $.61, and if you look at the U.S. consumption statistics, we happen to use 600 gallons per vehicle. Well, 600 times $.61 just happens to be $366.00 a year savings if you could keep that low, or incremental if the high. That happens to be, conveniently, $1.00 a day. You know how much you can buy for $1.00 a day in the United States?

Go into a 7/11 store sometime. You can't buy a single thing at Starbuck's, which is interesting. You can buy 4 and a half cigarettes. It's really hard to spend $1.00 a day. Yet, serious economists seriously believe that one price destroys the economy , and the other price is an elixir to the economy. I look at that and wonder if these people ever spend any time doing numbers? So, the whole issue of what do we know about the cost of energy is a bizarre cause.

The very last evening I was in Riyadh, last Wednesday night, one of the senior economists of the United States embassy there, we were chatting at this dinner, he said that he'd recently read a report that $19.00 was sort, seem to be a breakeven mark that below $19.00 it was hard to justify drilling for oil, and over $19.00 the economics seemed to work. He said, "Does that number mean make sense to you?" and I said, "No". He said, "Why?" I said, "Well, we don't have any idea what we really need to spend to create the energy we need over the next 10 years, and $19.00 is $19.00 per barrel. What it's the equivalent of...", and then I used the example of this building, and I said, "...have you been to Houston?".

Turns out that this building is the most expensive building built in Houston, Texas. It was actually built, it's kind of a monument to $100.00 oil that we thought we were going to have, and one of my favorite examples is how much this building costs. When he asked, I said it cost $.07 per square foot. He looked at me and said that's, obviously, wrong. I said no, it's actually right. He said, "Okay I give, what's your gimmick?" I said the building actually cost, a little over $300.00 a square foot. It was an expensive building, but what I've done is take an estimated 25-year life and divided it into the cost and given it in a square foot per day.

Now, the number doesn't mean anything. First of all, if that's all you ever spend on the building, by 2003 we wouldn't have any tenants. That's, literally, you $19.00 a barrel. What we really need to do as a society is figure out how much energy we need to add over the next 10 years, 15 years, 20 years, and think of it in terms of a 2 million square foot building, and before you start telling someone how much the rent's going to be, figure out how much the building's going to cost you. At least, estimate it. Maybe we'll get some bids and then figure out what rent would I have to charge to, basically, get a fair return on my investment. If it turns out its $19.00 a barrel, terrific, if it's $28.10, if it's $42.17.... If you don't know that, you don't have any idea what future energy will cost.

That's the biggest missing mark, so it really doesn't matter whether we're talking about Euros or Dollars. Far bigger cost is, do we have any idea what future energy cost even need to be to make sure we actually have sustainable and reliable energy?

Q8. Does nanotechnology have a role to play in the future of energy?

Our office got a call last fall from, while I was traveling my assistant said, "Dr. Smalley at Rice wants to set up a couple of hours to meet with you", and said, "do you know him?", and I said, "I think that's the Nobel Laureate in Bucky(tubes) technology. No, he must have somebody else in mind." Now, my brother's actually just becoming a trustee of Rice, so I just assumed he had the wrong person. Nope, he knew exactly who he wanted.

... I went out and spent the morning with Dr. Smalley, and I started out, "I certainly hope you don't want to talk about nanotechnology, because I tried to pull up some stuff on the website last night and I don't have even the vaguest idea of what it even is." He said, "No, in fact I want to talk to you about energy, or want you to talk to me about energy." Then he told me that he had started a couple of years, maybe a year ago, trying to think through what are some of these special uses, because it's clear that we are going end up figuring out this new element called nanotechnology, which is where, essentially, a strand of hair will, basically, (be) stronger than any metal we ever (had), lighter and stronger. He said, "I'm not sure we've yet figured out the highest and best use for this."

Somehow he got on to energy and he said, within a short period of time, he realized, bear in mind that this is a world-class scientist, how little he understood about energy. So, he got real curious, and he said, "the more I got into this, I got just mesmerized about these issues seemed complicated. If they are, I wonder why none of my scientific colleagues are talking about it." And he then said, "One of the biggest mistakes you can make in science is to leap into some area that really isn't your cup of tea, grab a hole and have no one following you, and all of a sudden the hole collapses on you." So he said, "I quickly backed out of my hole," and said, "this must be wrong!"

About three different colleagues of his said, "Have you ever heard Matt Simmons talk about energy? I think he's talking about the same thing you're looking at." So, he said, "I'm going to shut up, and just educate me about energy." It's a fairly intimidating thing to start, "Well, okay! Let's just start with the basics. Here's what intrigues me," and I started out by giving him some really raw numbers. "Here we are, 6 billion people on earth, 12% of the people use 54% of the energy. This is not total energy, this is not oil and gas, this is oil, gas, electricity. Two billion people have no access yet to modern energy.... They use what I call 'ancient' energy which is charcoal, agricultural residue, animal dump. Those three things are the most filthy pollutants on earth. There absolutely bad in every way, shape and form. The rest of the world, you got the 12% that use 55%, one third that don't use any, and the rest, basically, use a little. Then even in the 12% that use 54%, you get the United States that uses twice as much as Japan, Korea, and Europe."

So, the more we get into this discussion, the more Rick Smalley says, "how much of this do you have written down?" I said, "I have a ton of stuff written down." So, we shipped him off a Care package, really a couple of boxes, and within a couple of weeks he digested all of this and said, "this really is a serious issue, isn't it?" I said it's the most serious issue on earth. So, a couple of weeks ago, we had a program that both of us spoke at, and this is so ironic that it was only three months ago that I...

It was called 'The future of Energy, and Houston's role in this and Nanotechnology", and it was sponsored by the MIT Enterprise Forum, The Center for Houston's future, The Houston Technology Center, The Baker Institute at Rice University, the Rice Alliance, and about 350 people from our sciences and academia and a lot of business people and the media. I was the predinner speaker, and Dr. Smalley was the afterdinner speaker. I decided to, basically, frame my talk on a 'Dicken's Walk Through Energy'.

I began with the ghost of energy past, talking about the history of energy, and ancient energy and how there are still 2 billion people using it, and how King Cole came along and introduced modern energy. In 1901 we introduced the two great revolutions that changed everything, the internal combustion engine and 'Spindletop', the first giant oil field we ever had; the phenomenal growth we had over the twentieth century, and then that ends the first visit.

Then we have the ghost of energy present, January 22, 2003, and all the statistics about how modern energy has been around for a long time. It's the biggest industry on earth. It's, in round terms, a three trillion dollar a year business, and agriculture is half of that, defense is 25% of that. It's a huge business. There's very little understood, and, basically, most people don't like it, and yet it's the underpinnings for everything we now do. Without energy there's no water, without energy there's hardly any food, without energy there's no..., and so forth. Then I go into... That's the second visit.

Then, finally, the ghost of energy's future, and these are just some unbelievable statistics that we ought to be paying attention to, that there are signs that we are peaking in oil production. Whether we have already peaked, probably haven't, but peaking might be right around the corner. Natural gas is supposed to go twice as fast as oil, but we know the U.S. is in decline, we know that Russia is in decline from what they're now producing. We know that Canada is in decline, and we know that the UK is in decline, and that's almost 60% of the base, 55% of the base.

It's really hard to grow our supply at two and a half times if 55% is in decline. So, and most of the ... never seen a drill bit. These are computer estimates. Look at all the other sources. We have an abundance of coal, but coal will never be clean, and it's very inefficient. The amount of energy you have to use to convert coal into being energy is unbelievable. Nuclear is unbelievably efficient, but it's even more unpopular than any of the others. The alternative stuff that we know about today, it just doesn't scale, and it doesn't dispatch. So, what do we do about it then. Also, we, basically, think the population is going to grow to, maybe, be nine billion people somewhere between 2030 and 2050. Well, look at the past numbers.

I just turns out that there were 1.5 billion people on earth in 1890, and it took 60 years to add a billion to get to 2.5 billion, and it took thirty years to add two billion. In the last twenty years, we added a billion and a half. Well, we added as many people in the last twenty years as we had on earth in 1890, and for some reason that's going to slow down? No! It's just slowing down in the most affluent countries, but the most fluent countries... 400 milllion of the six billion. Saudi Arabia has a birthrate of six or seven people per female, about the same as almost all the poor countries. We could actually end up with twelve billion people by 2030 just as easily as 9, because health is getting better.

But where will the energy come from?

So, I finally ended up with this classic Charles Dickens, the Ghost of Energy's Future pointing to the tombstone, but it didn't say Scrooge, it said Society. My quotes were, basically, it is, the wonderful Dicken's quote, is this the future as it's going to be, or the future as it may be unless we change. After dinner, Rick Smalley got up and, basically, gave the hope for the future, but the daunting task of getting there, because we need, basically, and energy Sputnik call. We need an Apollo program, and if we don't get there, we really do have a dim society, dim future.

There are some things we possibly could do to really bona-fidely create a new form of energy that really works, and it will be on the back of things like nanotechnology, this unbelievable lightness and strength, and it's things as radical as going into the mantle of the earth where there's phenomenal energy with metal that affordable and strong enough that you can just mill it, and capturing the biggest energy source we ever had called the sun with waystations on the moon, or satellites that bounce the energy, but this is way beyond the edge of the envelope, and it will take thirty years to do. What are we going to do as a bridge?

I found afterwards that there were a lot of people who heard me give a talk before, and I would find, to my astonishment, that they would come up and say, "Boy, that was a bullish talk!" and I'd say, "It was?" People just heard, and implied within what I was saying that energy prices were going to go up. All of a sudden, I think the two of us in concert, started genuinely alarming some people as we needed to do.

Q9. What is your attitude to being called an energy 'bull'?

I came back from being away a few years and I decided that I was so sick and tired of people saying "ah, you're a bull, or you're a "bear" and I was seeing in reports we had (that said), "this is bullish or this is bearish."

I said, "you know what? For the entire (year of) 2003, we are going to ban the use, in our firm, of the term bullish or bearish."

Now I've started to see "this is positive". Said, "No". I said, "we're going to ban that too." Positive for what, or bullish for what? Trying to say bullish, but bullish for what, as opposed to "Well, I just have an optimistic forecast". Optimistic for what? Optimistic for society? Optimistic for price? Optimistic for your own pocketbook?

Let's actually learn how to communicate. It's really (is) amazing how the term "You're a bull" or "You're a bear" (crops up), and too many people just assume that you, obviously, came up with a cockamamie thesis to support your bullish view, or your bearish view.

When this group was putting together the National Petroleum Council, I got accused of being "Well, the problem is that, Matt, you're just a bull." And then, about an hour later, somebody said, "the problem is, Matt, you're just a bear". I said, "C'mon guys. You can't be both. Did any of you ever thought that, maybe, I was just an analyst?

It really is amazing how, and again, (...) energy just devotes strong passions, and most people start out saying "I know where the answer is."

Q10. Can you tell us about your role in advising the Bush administration on energy matters?

I became very good friends accidentally with Secretary Richardson, who was the Secretary of Energy in the last two years of the Clinton administration, with one of his senior assistants who became director of U.S. oil policy. I knew that they were, and we became friends when she was doing a white paper for Secretary Richardson, after he'd become Secretary of Energy, of what are all the serious issues, and I was asked to join a small group of people. Oil prices were at ten, and a lot of people assumed they'd be at ten for the next five years, and I was very outspoken, that day, about how serious ten-dollar oil was and why it would destroy the industry.

I was impressed that, rather than roll her eyes, she was really taking down careful notes. So, anyway, we sort of started exchanging emails once in a while, and I read in the paper that she and Secretary Richardson were headed out to the Middle East about a year and a half later when oil prices were at 25. This was what the media derisively called the "tin cup begging for oil" trip that Bill Richardson made. But, when I read that they were going to visit every single OPEC country, I emailed this person and said, "You know, while you're on this trip, if I were in your shoes, Secretary Richardson's shoes, what I'd really want to try to find out is how much extra spare capacity do we actually have out there, because it doesn't do any good to cajole these countries into producing more if they can't."

At the end of the trip, I got a call from this person, and she said, "Whew, holy mackerel", she actually used a little bit different language, but said, "This is just awful. Hardly anyone has any oil left." We had a very somber conversation, but a half an hour. I went to a reception that evening, and I ran into a good friend of mine, who is first cousin to, then Governor Bush. I pulled him aside and I said, "Listen to this interesting conversation I just had with a person whose actually visited every OPEC country other that Iraq, Iran, and Libya. You know what this means? We're probably going to have an energy crisis, and, boy, I hope there's somebody in Austin that is working on this issue, because this is one thing that your cousin really..., and what I would worry about is if..., all the major oil companies have no idea of these problems. They really think we're going to have..., that these are just passing sort of things," and I remember he said, "Well I'll... I'm not sure what we're doing on that," because it wasn't an issue on anyone's radar screen in the spring of 2000.

To make a long story short, I got a call the next morning from this guy on the campaign strategy team, and he said, "I understand that you have some concerns about energy. What are they?" About an hour later, he said, "Do you have anything you can send me to read," and I said, "How much do you like reading?" By the fall, I have had the privilege of, effectively, editing every word that went into the George W. Bush comprehensive energy plan that he put forward four times during October as a candidate. It wasn't that I created the idea, but I was one of the people that was asked to, basically, say, "you have no axe to grind. We want to make sure that this is as technically correct as we could possibly do." I was so impressed with the intellectual rigor that went into this, and I knew, categorically, because I had too many conversations, that they had not earthly interest in wading into this issue.

Why? Because as much as they were distain don't run a campaign for polls, you can't run a campaign..., and everytime Bush mentioned the energy word, his polls went into the tank, because the other side, "big oil, big oil, big oil," and he wasn't a big oil guy. He survived the oil and gas business during the 80's so I found to my surprise he was very knowledgeable about how these issues were all about, but it was a painful... it was something that there was no appetite, natural appetite within the campaign to, in fact it was to the reverse. I got quizzed one day by one very senior people who called and, effectively, said, "I don't want to be rude, but let me ask you very bluntly, and very honestly. Is there anyway you're, basically, putting an extra spin on this just to get our attention, because you have gotten our attention."

My answer was, "it would pain me badly to feed either campaign any bad information just to get their attention. I'm a passionate fan of Governor Bush, but I also think its important that this message get out, because I wouldn't want to be President of the United States having not told the American people that were going to have these problems. If it costs you the election, it costs you the election." So, I watched with unbelievable pride as Bush waded in in October to four very tough.... The fact the media hardly picked these speeches up is neither here, or there, but the one place they did resonate, West Virginia. First republican candidate to carry West Virginia. That turned out to be just four votes. But you can argue, but without those four votes we might have heard President Gore give his State of the Union speech two weeks ago.

Once the campaign was over, and we finally, remember we didn't have another President for another almost six weeks, by then it was uncontroversial that these problems were problems. By the eve of the inauguration, ironically, California had its worse blackout since World War II, the Kinder-Morgan product pipeline shutdown at one of the two California airports, and it looked like they would have to halt all flights so it couldn't have been a more classic "look how real these problems turned out to be."

I'm told that maybe the first actual business meeting held on Sunday morning, the inauguration was on a Saturday, was beginning to form this emergency team that became known as the, not the transition team, but the Cheney Energy Task Force. Which, really, the only people who served on that were Cabinet Officers. This big controversy that finally erupted about who were all the people who were talking to.... I have no earthly idea of who... Lots of people were lobbying to make presentations, and I don't know who those people were, because I had already done my work. I sent lots of emails to the staff as I would see data saying here's some more, because that's the kind of role I was doing during the... and I would get lots of emails occasionally saying what do you think about this. Is this a real issue, or not?

When I read the comprehensive energy plan that President Bush unveiled in the middle of May, 2001, the..., first of all, I probably understood what his program was when he was Governor put forward, because I edited every word of it, and there was only one significant... there were a lot more T's crossed and I's dotted in this 117 page report than the brief things they had time to do it, but the only significant change between what he put forward as a candidate that I could see was a subtle, but very important tilt away from reliance on natural gas to a need to embrace more seriously, nuclear. Of course, the media made a big todo over it, "some must have got to him in the nuclear business." No, he was looking at the same thing I was; the decline curve in natural gas. We just had a drilling boom and it wasn't working, so, therefore, it was absolutely clear that we had problems in natural gas that we didn't even vaguely comprehend.

I've, basically, only briefly shaken hands with Vice President Cheney, and I haven't seen President Bush very often, but the few times I have, he's a very serious guy, he is a unbelievably quick study, and he clearly understands a lot about energy and takes it very seriously.

Q11. Does President Bush want the American public to know about oil peak?

I was going to be testifying at a Senate Energy hearing the next day, and he said what are you going to say, and I said, "Boy, you have some complicated things to deal with, what can people like us do to help you?" He looked as me and said, "Matt, you continue to speak out, loudly and honestly, about how serious our energy problems are. You have no axe to grind and it really helps."

You know, when someone says, "Can you do this?" and it's sort of inconvienent, I do think about that. Bush has spoken out a lot of times about energy. For some reason, or another, the media... I mean part of the problem with being a politician is you can speak many, many, many times, but how often do you speak get covered, or don't they. They've had a very hard time, from my perspective, getting the message across, and then, when 911 happened, they were just totally preoccupied, so I think that's been a different issue. I remember about four weeks after the comprehensive energy plan got unveiled, and I listened to about three different lengthly talks on C-Span that Bush gave. Those are really first rate talks.

Even though I though Bush was a very good speaker, but the media kept saying, "the guy can't speak at all". I think after 911, we began realizing that he's not a bad speaker. What's interesting is, I remember reading an article in the New York Times, an editorial by Paul Krugman, who is a very well known economist, and it was called 'Dick Chaney's Dirty Math; Burn Baby, Burn'. I thought it was just scumbag stuff. Where's this guy coming from? Doesn't he realize that were talking about energy? He was, effectively, saying these two guys are just making this stuff up so they dole out goodies to their love buddies!

They actually, for some weird reason, believe like I do, that energy is the glue that makes our [incomplete]

Q 13: Many people view the proposed US military attack on Iraq as really being mainly about oil - is that your view? Say all goes well in Iraq- not a vast number of people are highly convinced of that – say America were able to get control of Iraqi oil – although it has been explained yesterday It’s not about oil – but most people who understand this thing it is…”

Simmons: “Which is wrong”

Q: “It is wrong, OK. It’s not about oil?”

Simmons: “It’s about WMD”

Q: “Right, OK.”

Simmons: “made more serious because Iraq happened to have a lot more money.. because of oil”

Q: “If the US somehow was able to massage more oil out of Iraq by whatever means, would that seriously help the energy situation in the US?”

Simmons: “We have some real serious concerns about who the regime running Iraq is, as to how badly damaged the oil industry already is as a result of a decade of abuse of their fields. Lack of the ability having the sort of modern equipment and just gross overproduction of the fields. And so my worry is that the morning after… what we need to do is a very rapid diagnostic review of what can be saved and what is probably not throwing good money after bad. Then figure out how you basically, economically come in as fast as possible and rehabilitate a very sick oil field because it’s really far-fetched to re-build Iraq and let the oil industry collapse. There is no scenario, in my opinion that Iraq floods the world with oil. There is a scenario that they end up 5-10 years from now producing half as much as today which would be really bad news. There is obviously a doomsday scenario that they blow up their own oil fields on the theory that if I can’t have it, nobody can. Which is why I am absolutely convinced that it would be far easier for the military planners to work out plans what they think to do militarily if they didn’t have oil there. And unfortunately they do. This idea this is just about oil- we come in to carve up their oil fields – I felt that for ages. I was in Paris last week I read E.Fleischer saying categorically “Irq oil belongs to Iraq” There is some real confidence among the Northern and Souther oil companies of Iraq and the ides we are just bringing in Big Oil that won’t happen”

Q: “Why not?”

Simmons: “First of all what would they do other than basically hire the same people. Big oil companies don’t come in and rehabilitate oil fields. They hire people to do that. And they need a return in capital. And they don’t like putting capital in risky areas”

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