Pickens Plan Part D?

It is well know that T. Boone Pickens wants the good-ole'-boys in Washington to mandate that all transportation vehicles be converted to Natural gas (NG) through the use of compressed natural gas (CNG) or liquefied natural gas (LNG).

I kind of agree with him, but on a modified scale. I first want all government fleets to convert to either NG or NG/electric hybrids (the latter for local vehicles with a driving area of 40-miles or less), then get extremely large fleets like UPS and FedEx to switch second. It is easier to install the fueling station infrastructures (mainly due to red-tape safety concerns) at a government or corporate yard than it is to set up public fueling stations. So, lets do one thing at a time instead of trying to make the entire country switch all at once.

I have the same ideas in mind that Mr. Pickens does save one, I wont make billions off of the conversion that he would should his plan be adopted. But the other ideas, 1) less dependence on foreign oil, 2) less reason to kill ourselves in the Middle-East, 3) better for the planet, 4) more jobs at home, 5) better price stability for oil. I think we can agree on those.

But, getting the D. of C. to do what I want is like me trying to roll a pea up Mount Vesuvius with my nose. (I stole that from the British TV program As Time Goes By.)

For every $1.00 that guys like T. Boone Pickens, J. Larry Nichols, Aubrey McClendon, Clay Bennett, and David P. O'Brien, etc., can spend in Washington the guys from the Middle-East can spend $100.00. So the "Pickens Lobby" is at a severe disadvantage. When it comes to a fight between a company like Chesapeake and a company like ExxonMobil, well guess what, it is not really a fight. And then there is the men from Saud, they can out do the Devon's of the world without breaking a sweat.

Pickens's idea might work better in a country that is an net exporter. Australia would be perfect for this. Take all their vehicles and convert to NG (CNG/LNG). Then, export all of the oil that they were using internally and send it to Europe, China, the U.S., etc. Right now companies like Chevron are spending billions building LNG export terminals like Gorgon in northwestern Australia. But, with the price differential between oil and natural gas at twelve times per BTU (the normal ratio used to be six times), shipping the oil is a much better idea.

The transportation infrastructure in place for oil is very mature, while LNG is new and still under development in many places. So, if you just stopped using oil in isolated places like Australia and New Zealand, and instead shipped the oil out and kept or used the NG locally, there would be more supply for the rest of the world for oil, and more demand for NG locally. Island locations would make the most sense, you get a majority of the vehicles there to run the preferred fuel and you don't have to worry about vehicles that drive across your border needing something different. Not too many people drive to Australia or New Zealand.

The next step would be to get a place like Japan (another island) to convert. Then, if all the top 20 oil companies banded together, they could convert Africa into doing the same. Instead of flaring all of that NG at the wellhead in places like Angola and Nigeria, they could pay for converting the local vehicles there to NG, replace a lot less fueling station infrastructure, and save that locally consumed oil for export to us thirsty countries. These places may only combine for around 10-15% of world-wide oil experts, and even less of consumption, but changing the distribution of as little as 5% of the supply of something like oil can have major ramifications. It brings on more net supply of oil and uses more gross natural gas.

The amount of conversion would also be more achievable. You would have to convert far fewer vehicles in places like Australia, New Zealand, and even Africa, than you would in the United States or Europe. Even if China decided to convert their vehicles, they could shift the use of oil imports to other things, making those products cheaper. It would also be a lot easier to get China to switch if that is what the Chinese government mandated they wanted. Russia could do it to and then sell more of their oil to those aforementioned places.

Even in Alaska it makes more sense. They are flaring all of their NG or using it as an injector in lieu of water, they want to build a pipeline to the lower 48, but at these prices that doesn't make sense. But, if they used the NG there, and shipped the net oil to the lower 48 with the existing infrastructure already in place, it would be a lot easier.

If you got something like this work in a place like Africa, they use the gas and ship out more of the oil, and even at 5% on the margin, well that is just more bribes to go around isn't it?

No, I think Mr. Pickens just might have to modify his plan to another country. Call it 'exporting the idea.' A country that is a net exporter of oil and and island would work best. Or a place like the West Coast of Africa where the total net vehicle count is a small fraction of what it is here. But, any place where the government can react faster would be better (that is a lot of places).

The net result would still be the same:
1) getting gas back to the six times BTU factor it has historically traded at, and then even less
2) use less net oil (lowing the reason to shot over it)
3) greener
4) divert NG transport now coming to North America to where it is drilled (less import supply flooding the U.S. market means more locally drilled supply
5) Pickens makes millions (or is that billions?)

The net effect of this would be like finding a new major field that was previously undiscovered. You use more NG and extend crude oil at the margin.

Just call it the "Pickens Plan Part D."

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