Speaker 1: Hello, and welcome to the Texas Tribune Tribcast for Tuesday,
Speaker 1: January twenty seventh. I'm Eleanor Klebanoff, wearing real pants for
Speaker 1: the first time since Thursday. If anything could get me
Speaker 1: into the office in an ice storm or a post
Speaker 1: ice storm, it is Tribcast. I am not joined this
Speaker 1: week by my usual co host, Editor in Chief Matthew Watkins,
Speaker 1: whose love of tripcast is not as strong as mine,
Speaker 1: and he would not put on hard pants to come
Speaker 1: in and do this.
Speaker 2: No.
Speaker 1: I believe he is slightly inconvenienced by Austin schools still
Speaker 1: being out and a little bit of our post ice
Speaker 1: storm chaos. But we are not here to talk about
Speaker 1: the ice storm this week. We are looking at how
Speaker 1: a decision made hundreds of miles away in Washington, d C.
Speaker 1: And executed thousands of miles away in Venezuela can have
Speaker 1: huge impacts here in Texas. Of course, talking about oil,
Speaker 1: a huge part of our economy, a bigger part of
Speaker 1: our lore as a state, and to discuss what the
Speaker 1: impact of the Venezuela upheaval will have on Texas. I'm
Speaker 1: joined by Texas Tribune Energy and Industry reporter Paul Cobbler,
Speaker 1: thanks for joining us.
Speaker 2: Hey, Eleanor, thanks for having me. I am also wearing
Speaker 2: pants for the first time in quite a few days
Speaker 2: and feeling like a human again, so that's definitely nice.
Speaker 1: And it's important that we say that because we're sitting
Speaker 1: behind a table, so people can't tell if we're wearing pants,
Speaker 1: but we are, and we'd like to be clear about that.
Speaker 1: And our other guest, Jack Balaysia, the executive director of
Speaker 1: the Kay Bailey Hutchinson Center Energy Center at the University
Speaker 1: of Texas.
Speaker 3: Jack, thanks for joining us.
Speaker 4: Thanks owner, Paul, I'm glad to be here. Thanks for
Speaker 4: having me.
Speaker 1: Jack served as vice president and general counsel for Exon
Speaker 1: Mobile from twenty ten to twenty sixteen. Prior to his
Speaker 1: two decade career at Exxon, Jack was in private practice,
Speaker 1: specializing in oil and gas business litigation and First Amendment law.
Speaker 1: He is also and I should I want to put
Speaker 1: a disclaimer on how we ended up getting Jack on
Speaker 1: the podcast. I said to Paul, we're going to do
Speaker 1: an episode on oil in Texas and Venezuela.
Speaker 3: Who do you recommend?
Speaker 1: He said, there's this guy at the Kay Billy Hutchinson Institute,
Speaker 1: Jack Balaysia, I said, fantastic. We should perhaps loop in
Speaker 1: our ace investigative reporter, Kate McGee Balaysia. You guys probably
Speaker 1: know Kate McGee as our you know, phenomenal investigative reporter,
Speaker 1: my desk mate, perhaps what you might call, in popular parlance,
Speaker 1: my work wife. She is, in the eyes of the
Speaker 1: law more formally married to her actual husband, Michael Balaisia.
Speaker 3: Who is your son, Jack, right?
Speaker 4: Correct? Correct?
Speaker 2: And to be clear, I just know Jack as an
Speaker 2: expert on Texas oil and yes, and now I know
Speaker 2: he wears multiple hats.
Speaker 3: Yes, and side note.
Speaker 1: As much as I love Kate, we love Michael, one
Speaker 1: of my favorite people on the planet.
Speaker 3: So big fan.
Speaker 4: Well that makes that makes three of us, big.
Speaker 1: Fan of the Balasia household. But that is again also
Speaker 1: not what we're here to discuss. So Jack, maybe you
Speaker 1: can start just tell us a little bit about the
Speaker 1: Ky Balasia I'm sorry, the kay Bailey Hutchinson Energy Center
Speaker 1: and the work you all do there.
Speaker 4: Yeah, you bet. The Kay Bailey Hutcheson Energy Center was
Speaker 4: started about eleven years ago on campus. It was a
Speaker 4: joint project of the Law School and the Business School.
Speaker 4: Today with the Engineering School and the Geoscience School participate
Speaker 4: as contributors to to the to the Center. Our goal
Speaker 4: at KBH is to try to encourage students who are
Speaker 4: studying all aspects of energy, whether it be renewables, all
Speaker 4: and gas, geothermal, nuclear. We want to make we want
Speaker 4: to make the University of Texas a safe place to
Speaker 4: study all kinds of energy. So we want to help
Speaker 4: students who are pursuing careers in any of the energy
Speaker 4: fields that are that are available. Last year we touched
Speaker 4: about a thousand students through some of our programs. That
Speaker 4: number keeps going up, and of course our goal is
Speaker 4: to have it continue to grow. We have a Student
Speaker 4: Advisory Council where students can participate in our activities and
Speaker 4: have an Energy Studies Minor, which is a summer program
Speaker 4: that allows students to have a concentrated curriculum and energy
Speaker 4: that goes on their transcript. We have a graduate Fellows
Speaker 4: program right now. It's limited to the Law School and
Speaker 4: the Business School where we select high achieving students to
Speaker 4: participate in the Fellows program and write op eds and
Speaker 4: research papers on energy issues. And then probably our biggest,
Speaker 4: our other big event is our symposium We have an
Speaker 4: annual symposium every year. We just had our eleventh annual
Speaker 4: symposium in September Exceon Mobile CEO Darren Woods was our
Speaker 4: keynote speaker, and we had the largest audience we've ever had,
Speaker 4: almost seven hundred people. So that's kind of what the
Speaker 4: center does. We continue to grow our programs to increase
Speaker 4: participation and it's just it's a way to encourage students
Speaker 4: who are interested in energy careers at the University of
Speaker 4: Texas Amazing.
Speaker 1: Let's sort of just talk about where the oil industry
Speaker 1: stands right now in Texas. I know oil prices have
Speaker 1: sort of been down, Paul, I don't know if you
Speaker 1: want to sort of set the table on where the
Speaker 1: oil industry, let's say go pre Venezuela going into twenty
Speaker 1: twenty six.
Speaker 3: How are things looking.
Speaker 2: Yeah, so I they're fine, I think would be the
Speaker 2: best way to describe it. I mean, prices are around
Speaker 2: sixty dollars a barrel, which is not you know, you're
Speaker 2: not going gangbusters in terms of the money that you
Speaker 2: can make, but it's not a total collapse of the
Speaker 2: market either. And so that's been fairly in studies. Something
Speaker 2: that folks have been watching. You know, we've all seen
Speaker 2: I think gas prices go down over the past couple
Speaker 2: of years, but the expectation is that they're going to
Speaker 2: go up at a certain point. That there's energy demand
Speaker 2: globally is rising, and Western nations due to AI and
Speaker 2: developing nations, there is a really intense demand right now
Speaker 2: for dispatchable power units like natural gas as those countries
Speaker 2: continue to energize more and more. And so the expectation
Speaker 2: is that there is going to be a greater need
Speaker 2: for oil in the years to come, and those prices
Speaker 2: are going to start going up, and you know, the
Speaker 2: Texas market is poised to capitalize on that. It's basically
Speaker 2: the situation going into Venezuela.
Speaker 3: Again at end of this year.
Speaker 1: I mean, Jack, what is your sense of having watched
Speaker 1: the market for many decades, where are we sort of
Speaker 1: in the inevitable boom and bus cycle here in Texas.
Speaker 4: Yeah, I think we're in a kind of a stable place.
Speaker 4: I think Paul did a good job predicting or his
Speaker 4: predictions about what might happen, I think are fair. I
Speaker 4: think the economy is growing. You know, from the pandemic
Speaker 4: was kind of the low point of the oil business
Speaker 4: price of oil at some point when actually negative for
Speaker 4: a day, I think, and since then it has rebounded,
Speaker 4: it's backed down. It's in a place now where gasoline
Speaker 4: prices are low, where companies now have the ability to
Speaker 4: produce oil at a much lower cost. So even sixty
Speaker 4: dollars oil is attractive to them. So I think the
Speaker 4: outlet for the industry is excellent, especially in Texas, right.
Speaker 1: And I mean, as we've already seen over the last
Speaker 1: couple of years, global affairs can have a huge impact
Speaker 1: on the oil industry. We saw a huge impact from
Speaker 1: the war in Ukraine. Now obviously we've added this other
Speaker 1: variable with Venezuela. Jack talked just about just Venezuela and
Speaker 1: the sort of what Venezuela represents in the oil world.
Speaker 4: Well, as you said, I think it's the largest, maybe
Speaker 4: the largest reserves of oil in the world. A little
Speaker 4: bit of history, you know, American oil companies went into
Speaker 4: Venezuela in the nineteen twenties after oil was discovered, and
Speaker 4: they were very active in Venezuela. At one point Venezuela
Speaker 4: was the largest supplier of crude oil to the United States,
Speaker 4: and then in the nineteen seventies, the industry was nationalized.
Speaker 4: The government took over the assets of the American oil companies,
Speaker 4: and then in nineteen ninety two, the president of the
Speaker 4: country reprivatized the industry. All the oil companies went back
Speaker 4: in and then in two thousand and seven, President Chavez
Speaker 4: renationalized the oil companies by requiring that ninety three percent
Speaker 4: of the assets of the production go to the government.
Speaker 4: Exxon mobil and Conco Phillips refused to those terms, and
Speaker 4: they were their assets were taken over by the government.
Speaker 4: Chevron continued agreed to that to that arrangement and continues
Speaker 4: to produce there to this day. So that's sort of
Speaker 4: a quick history of the Venezuelan and American oil company experience.
Speaker 2: And I think economically it's it's worth sort of thinking
Speaker 2: of Venezuela as one of like the original Petro states.
Speaker 2: Like when you when you think of that, I mean
Speaker 2: their their economy is pretty singularly motivated by oil and
Speaker 2: by oil prices. I mean, they do not really have
Speaker 2: any other exports. They used to export coffee in big
Speaker 2: in big ways back in the day, but that economy
Speaker 2: has really become dependent on oil prices. And you know
Speaker 2: this this government, the socialist government spends a lot of
Speaker 2: money on social programs for its citizens, and so with
Speaker 2: these kind of boom and bus cycles that you see
Speaker 2: in oil and gas, and with that spending from the government,
Speaker 2: that has also created a lot of economic problems really
Speaker 2: throughout the deca I mean, we're going back to the
Speaker 2: seventies of you know, there are these periods where they
Speaker 2: are rich and they can spend their money on sort
Speaker 2: of anything they want. But the sort of lack of
Speaker 2: a rainy day fund being created there has created a
Speaker 2: lot of issues, especially going into the two thousands, and
Speaker 2: then with US sanctions beginning under the Trump administration in
Speaker 2: twenty sixteen, it's really destabilized their economy in a big way.
Speaker 3: It's really interesting.
Speaker 1: I mean my understand just from reading about this a
Speaker 1: little bit, right, It's like, if you know, just purely
Speaker 1: based on the amount of oil underground in Venezuela, if
Speaker 1: this was like in Texas or in you know, somewhere
Speaker 1: where there were sort of not these economic issues, these
Speaker 1: sort of political instability issues around, it would be you know, gushers, right,
Speaker 1: Like this would be like there's a huge amount of oil.
Speaker 1: The issue is more above ground in how we're accessing
Speaker 1: that oil.
Speaker 2: It seems like if only it was that easy, Yeah,
Speaker 2: and it was just a like.
Speaker 1: Fingers yeah right, Well, I mean that is certainly I
Speaker 1: think sort of how it's President Trump is talking about
Speaker 1: this as like we can come in. He has said
Speaker 1: to quote him and I won't do the voice. The
Speaker 1: oil business in Venezuela has been a bust, a total
Speaker 1: bust for a long time. He said, We're going to
Speaker 1: have our very large United States oil companies, the biggest
Speaker 1: anywhere in the world, go in, spend billions of dollars,
Speaker 1: fix the badly broken infrastructure, the oil infrastructure, and start
Speaker 1: making money for the country. Obviously, we cannot just snap
Speaker 1: our fingers and start doing that, you know, Jack, What
Speaker 1: do you see as the barriers to suddenly, you know,
Speaker 1: trying to create this oil or get the companies in
Speaker 1: the United States companies to sort of rehash the Venezuelan
Speaker 1: oil market.
Speaker 4: Yeah, I think Eleanor, I think there's some irrational exuberance
Speaker 4: in some of those statements coming out of Washington. A
Speaker 4: couple of things that oil companies look for. They look
Speaker 4: for stability, political stability, economic stability. These are companies that
Speaker 4: are prepared to invest billions and billions of dollars, and
Speaker 4: they want to make sure that they get a return
Speaker 4: on those dollars and that those investments are being protected.
Speaker 4: They need a stable US policy. You know, US policy
Speaker 4: keeps flipping back and forth, so that kind of weighs
Speaker 4: against going into a place, a place like Venezuela. Venezuela,
Speaker 4: and oil production today is seven is less than it's
Speaker 4: decreased more than seventy percent since its peak in the
Speaker 4: nineteen nineties, and it's going to take I've seen some
Speaker 4: reports that suggest it's going to take one hundred billion
Speaker 4: dollars just to get the infrastructure back to where they
Speaker 4: can go back to producing at the peaks they were
Speaker 4: in the nineteen nineties. And to ask people to come
Speaker 4: and to ask companies who have to answer to their
Speaker 4: shareholders to put in hundreds of billions of dollars in
Speaker 4: a place where the stability is questionable, I think that's
Speaker 4: a that's a that's a big ask.
Speaker 1: Yeah.
Speaker 2: And I think it's also that that number of one
Speaker 2: hundred billion, and I've heard as much of one hundred
Speaker 2: and fifty billion all the oil companies combined in the
Speaker 2: world last year invested about seventy five billion dollars, so
Speaker 2: just anything in all their activities, Yeah, in general investments.
Speaker 2: So what you're saying in one country, the amount of
Speaker 2: money that would be needed to get them back to
Speaker 2: where they were, you know, twenty years ago, would take
Speaker 2: more than every oil company in the world spent last year.
Speaker 4: That's and you know, Paulish, that's that's a really good point.
Speaker 4: And I don't mean to interrupt, please, that's a really
Speaker 4: good point. But the other thing I want to mention
Speaker 4: is that all publicly traded AILL companies today are much
Speaker 4: more disciplined than they were before the pandemic. And one
Speaker 4: thing that investors have demanded of those companies is fiscal
Speaker 4: discipline and cash flow, and those are two things that
Speaker 4: they're very very confident, very conscious of, and have to
Speaker 4: come into play when deciding whether to put an investment
Speaker 4: in the Permian and the Anadarko basin, or am I
Speaker 4: going to go to Venezuela where the risk is much
Speaker 4: much higher?
Speaker 2: And you know that risk is I think the important
Speaker 2: part the situation on the ground is really I think
Speaker 2: what a lot of folks are looking at. We don't
Speaker 2: have a lot of clarity on and you know, I'm
Speaker 2: certainly not going to ask Jack to speculate on the
Speaker 2: future of Venezuelan politics. But you know something I was
Speaker 2: struck by in the days after this operation to capture Maduro.
Speaker 2: I mean, there was a State Department memo warning Americans
Speaker 2: to get out of the country because there were armed
Speaker 2: gangs roaming the streets. I mean, that is not a
Speaker 2: country that sounds like a safe investment right now. And
Speaker 2: you know, obviously President Trump and the Venezuelan Vice president
Speaker 2: now president have been apparently been having good conversations. It
Speaker 2: seems like there's some efforts towards reconciliation there. But you know,
Speaker 2: this is still the Maduro regime, who many conservative members
Speaker 2: of Congress are happy would like to see completely rid of.
Speaker 2: You know, there's questions about what and elections might happen,
Speaker 2: who the next leader might be. I don't you know,
Speaker 2: I don't think any of us have the answer to
Speaker 2: any of these things. And it seems that the administration's focus,
Speaker 2: you know, recently has been on Greenland and now Minneapolis,
Speaker 2: and you know, it's kind of unclear what's going to
Speaker 2: come next. I think that's a lot of what everybody's
Speaker 2: waiting for is like what is going to be the
Speaker 2: next shoot to drop in Venezuela. And I don't know, right.
Speaker 1: Because it's not just money, right, Like I mean, I
Speaker 1: was reading some interviews with people who talked about, you know,
Speaker 1: sort of in the previous era when there were more
Speaker 1: American oil companies on the ground there. I mean people
Speaker 1: talking about they lived in Venezuela for periods of time,
Speaker 1: they brought their families to Venezuela, like there was a
Speaker 1: degree of sort of American compounds American oil cities there.
Speaker 1: I mean, you need people, you need engineers, you need
Speaker 1: so much there to rebuild that that's not just money.
Speaker 1: And like you said, I mean, if you're telling if
Speaker 1: the State Department is saying don't go to Venezuela, and
Speaker 1: we're also saying we need oil companies to put a
Speaker 1: lot of boots on the ground in Venezuela to get
Speaker 1: this back up and running, that's a conflicting message.
Speaker 3: Lint yea, Yeah, yeah, I mean Jack, what is your sense?
Speaker 1: I mean you talked about sort of this preps fiscal discipline,
Speaker 1: maybe a little bit like risk aversion from the oil
Speaker 1: companies right now, just in general, when we think about
Speaker 1: sort of investing, like you said, like you can invest
Speaker 1: in the Permian or you could invest in Venezuela. I mean,
Speaker 1: what do you think and then adding in on top
Speaker 1: of that, you've got President Trump, who is obviously a
Speaker 1: very influential figure, and sort of how do you think
Speaker 1: that these companies are balancing all of these competing pressures.
Speaker 4: Well, that's a that's a really good question. If you
Speaker 4: look at what they said at the press conference or
Speaker 4: at the meeting in the White House. I think the
Speaker 4: Excellon Mobile CEO Darren Woods called Venezuela uninvestable. There were
Speaker 4: some some of the some of the executives from some
Speaker 4: of the smaller companies seemed to be a whole lot
Speaker 4: more enthusiastic about it. But I'm very I'm very I'm
Speaker 4: pessimistic that we're going to see a lot of activity,
Speaker 4: American money, American employees heading into vend as a way
Speaker 4: to start on some brand new venture. I just think
Speaker 4: I think things are still too unstable for that to happen.
Speaker 4: You know, Chevron is there and they've been operating there
Speaker 4: for a long time, and they seem to be able
Speaker 4: to continue the operations that they're doing under their US license,
Speaker 4: but can they are they prepared to grow that investment.
Speaker 4: I just I can't say.
Speaker 1: I don't know right what would be the impact or
Speaker 1: what potentially is the impact for let's say Texas and
Speaker 1: the West Texas oil fields and things like that, if
Speaker 1: suddenly there was a lot more oil gushing out of Venezuela.
Speaker 4: Well, I think realistically, even if we assume that everybody's
Speaker 4: ready to go in there, you're not going to see
Speaker 4: any significant increases in production for some time. And you
Speaker 4: know the way the markets work. You know, oil is
Speaker 4: a worldwide market. It's influenced by obviously by supply and demand.
Speaker 4: It's it's influenced by economic activity, it's influenced by political events.
Speaker 4: So it's it's kind of hard to predict. I do
Speaker 4: know that there are some American refineries that were set
Speaker 4: up specifically to handle this kind of heavy crude. They
Speaker 4: would probably welcome that crew because it's cheaper and can
Speaker 4: be refined into products and improve improve the margins. So
Speaker 4: I think it's I think it's uncertain. I don't I
Speaker 4: don't really expect it to be to all of a
Speaker 4: sudden happen and and and glut the market with crude oil.
Speaker 4: That's just not that's just not in the near.
Speaker 1: Term, right I think, you know, we didn't even really
Speaker 1: see immediately oil prices shift that much. Like the market
Speaker 1: isn't really necessarily freaking out in response to this, certainly
Speaker 1: not that there doesn't seem to be this immediate threat
Speaker 1: of like everything's going to change overnight.
Speaker 2: Yeah, and that's that's what I've heard from from energy economists,
Speaker 2: from you know, oil companies, is they they are not
Speaker 2: really worried about this right now. I mean, obviously they
Speaker 2: are going to be worried about the comments for the
Speaker 2: president and sort of how they're going to handle all
Speaker 2: of that. But as far as like economic concerns of
Speaker 2: there being an oil glut, like Jack mentioned like that
Speaker 2: is that is not something we're worried about in the
Speaker 2: short term. What it's like what I said earlier, what
Speaker 2: I think folks are really thinking about is the rising
Speaker 2: energy demand across the world and meeting those needs. You know,
Speaker 2: if suddenly Venezuela came online in a big way, that
Speaker 2: would help a lot with those energy demands. But that
Speaker 2: is just for all the reasons that we stated in
Speaker 2: the last couple questions, that is not something that we
Speaker 2: think is going to happen anytime soon with the caveat
Speaker 2: also though that markets can change very quickly, especially in
Speaker 2: oil and gaess. I mean I was I was thinking
Speaker 2: when Jack was talking about the negative price of oil,
Speaker 2: and then it was two years later that the war
Speaker 2: in Ukraine started and gas prices skyrocketed, and you know
Speaker 2: they've stabilized since then. You know, who knows where we'll
Speaker 2: be in twenty twenty seven.
Speaker 3: Right, Like, if there's anything we know about oil, is.
Speaker 2: It boom and busts?
Speaker 3: Yes?
Speaker 1: But I will say you know, there obviously will always
Speaker 1: be some people willing to take the risk or to
Speaker 1: try to get in. Their reuters had some reporting about
Speaker 1: you know, some of these smaller I mean they were
Speaker 1: even calling you know, like these like wildcatters, sort of
Speaker 1: reminiscent of the era of you know, discovering the Texas
Speaker 1: oil fields, of like people who are going to try
Speaker 1: to like make a buck off of this, people who
Speaker 1: are going to see, like can we get something up?
Speaker 1: I mean, the CEO of Halliburton was saying on an
Speaker 1: earnings call that you know, his phone was quote ringing
Speaker 1: off the hook. They exited Venezuela in twenty twenty, but
Speaker 1: they're working on securing licenses to return. Another the former
Speaker 1: head of Chevron in Africaan Latin America who's now with
Speaker 1: a group in Houston, saying that they've been preparing for
Speaker 1: years to enter Venezuela, but you know, saying they're in
Speaker 1: early stage talks, you know, to raise as much as
Speaker 1: two billion dollars, which, as we said, is a lot
Speaker 1: of money, but it's not quite even close to what
Speaker 1: it would take to meaningfully stand up the energy economy
Speaker 1: in Venezuela. Do you expect Jack to see I mean,
Speaker 1: sort of is this the kind of thing where you
Speaker 1: can see like incremental steps and incremental projects or is
Speaker 1: your sense that it's like you're we're either going into
Speaker 1: Venezuela in a big way or it's not really gonna
Speaker 1: have an impact.
Speaker 4: No, I think I think. I think it's going to
Speaker 4: be incremental eleanor there may be some small companies that
Speaker 4: are willing to go in there and as you say,
Speaker 4: sort of be the wildcatters and take a chance, but
Speaker 4: I don't think that will make a significant difference in
Speaker 4: what we see in Venezuela. They won't. I don't think
Speaker 4: it'll be dramatic in terms of increasing production. I think
Speaker 4: until the infrastructure is fixed, and that's going to be
Speaker 4: a long term effort, I don't think we're going to
Speaker 4: see much improvement in oil and gas oil production from
Speaker 4: from Venezuela.
Speaker 2: And I think what the way things are sort of leave,
Speaker 2: Chevron is the biggest potential winner out of this. I mean,
Speaker 2: they're they're the ones who already there, who have staff
Speaker 2: on the ground, who have equipment on the ground, and
Speaker 2: certainly needs to be built out and improved. But you know,
Speaker 2: they are the ones that stayed, and I think the
Speaker 2: expectation that they did have their stock prices go up
Speaker 2: a little bit, uh in the wake of the invasion,
Speaker 2: kind of just with the expectation that they are, you know,
Speaker 2: the best position one to take advantage of this. But
Speaker 2: it's it's not again, it's not in any big way.
Speaker 2: There's still not any major expectation that this is something
Speaker 2: that's going to happen in the next months or even
Speaker 2: year or more.
Speaker 1: Right, And you know you mentioned this, Jack, that there
Speaker 1: are some refineries here, I mean, particularly on the coast
Speaker 1: of Texas and Louisiana that were built specifically to process
Speaker 1: the oil out of Venezuela, which you know, as I
Speaker 1: understand it is sort of is it's stickier, it's cruder,
Speaker 1: it's like less. You call it sour, Yes, it's sour
Speaker 1: next door sweet sweet tex oil.
Speaker 2: No one is actually tasting the oil. I want to
Speaker 2: make that clear. I had to.
Speaker 3: I had to look as I don't know, I can't
Speaker 3: attest to that.
Speaker 4: I think I think the word elander is viscous. It
Speaker 4: is a very thick viscus. It's a very thick, almost
Speaker 4: tar like substance.
Speaker 2: Well, very interesting, and just the kind of the science
Speaker 2: on this is there's high amounts of sulfur and heavier oil,
Speaker 2: and that's kind of where the sour versus the sweet
Speaker 2: thing comes from. And the Permian basin, like you said,
Speaker 2: has a lot of the sweet, lower sulfur content oil
Speaker 2: and its we used to get heavy oil out of
Speaker 2: it in the eagle Ford Shell, but it was the
Speaker 2: fracking boom that really started and gave us access to
Speaker 2: more of this lighter crude oil. And so it's these
Speaker 2: refineries along the Gulf coast, they really are just like
Speaker 2: not getting the heavy oil they used to since we
Speaker 2: started importing from since we stopped importing from Venezuela and
Speaker 2: we get a lot of our heavy crude oil now
Speaker 2: from Canada. In Canada, is someone we're thinking about. Is
Speaker 2: we kind of discussed the winners and losers out of
Speaker 2: potential access to Venezuelan and oil.
Speaker 3: Because they are sort of providing that hit there are.
Speaker 2: Primary crude importer right now.
Speaker 1: Yeah, and do we sorry, this is like an oil
Speaker 1: novice question. Do we need crude oil and sweet oil
Speaker 1: or does crude oil have to be turned into sweet
Speaker 1: oil to be useful?
Speaker 3: Jack, I don't know if that's a distinction.
Speaker 4: But no, they it does not have to be turned
Speaker 4: into sweet oil. It's actually turned into well, I guess
Speaker 4: some of it is probably turned into some sweet oil.
Speaker 4: But they use the they have the ability to extract
Speaker 4: the sulfur to do the things and make product out
Speaker 4: of out of everything that's in that viscous crude. So
Speaker 4: then nothing goes to waste. And as I said earlier,
Speaker 4: it is cheaper because it is a less attractive crude.
Speaker 4: It has to have more, it has to be refined more.
Speaker 1: And so potentially, you know, again long down the road,
Speaker 1: if we are able to get you know, meaningful oil
Speaker 1: out of Venezuela. That would be a boom potentially for
Speaker 1: these refineries that were built to handle that.
Speaker 2: Yes, correct, because it's it's it's like Jack said, like
Speaker 2: in its purest state, this heavier oil is cheaper, so
Speaker 2: it's easier to bring in. It's going to more and
Speaker 2: it takes more advanced equipment to be able to refine.
Speaker 2: And I think something worth kind of when we think
Speaker 2: of the Venezuelan infrastructure that they have one of the
Speaker 2: largest refineries in the world there, but it's it is
Speaker 2: employ It employs about seven thousand people, largely whom are
Speaker 2: loyalists to the current regime because they actually fired all
Speaker 2: of the previous employees back in the two thousands under
Speaker 2: Hugoshaves and since then there have been a number of
Speaker 2: issues with accidents, with corruption, and that refinery's capacity has
Speaker 2: dropped in the year since then. So like that's kind
Speaker 2: of just it's not even just an equipment issue. It's
Speaker 2: like a human capital thing too. I mean, I think
Speaker 2: when we think about the immigration crisis that we saw
Speaker 2: at Venezuela, I mean, these are you know, these are
Speaker 2: experts in the oil industry. Is their primary expert that
Speaker 2: we're leaving the country and or you know, Texas is
Speaker 2: presumably benefiting from that in some way. Also, there are
Speaker 2: Venezuelans that live in the Midland and Odessa area that
Speaker 2: I've talked to that you know, work in the oil fields,
Speaker 2: and you know that is not an e thing to
Speaker 2: just quickly reverse. And so yeah, like it's it's you
Speaker 2: need these advanced refineries that Texas has that Venezuela doesn't
Speaker 2: really have in a big way. So if we are
Speaker 2: going to see heavy increased exports of heavy oil from Venezuela,
Speaker 2: it's probably probably gonna have to be come into the Gulf.
Speaker 1: Interesting Jack, when if we sort of think separate from Venezuela,
Speaker 1: or if we're like being realistic that Venezuela is not
Speaker 1: likely to be a major you know, shifting majorly. What
Speaker 1: is happening in the Permian base and in Texas's oil economy.
Speaker 1: What are the challenges that Texas's oil economy faces, sort
Speaker 1: of separate from the Venezuela question. What were the issues
Speaker 1: beforehand and what are the prognosis.
Speaker 4: Well, I think the Permian is is still going great guns,
Speaker 4: but it is it is. I don't know whether it's
Speaker 4: peaked yet or whether it is on a decline. I
Speaker 4: know that the prediction is that the whales in the
Speaker 4: Permian will continue to decline. But I think what we
Speaker 4: always forget about when we think about the decline of
Speaker 4: oil and gas production, we forget how important technology is
Speaker 4: and innovation is, and how that can change the outlook overnight.
Speaker 4: That's certainly what happened with fracking, with horizontal wells. We
Speaker 4: went into shales which before nobody could could get the
Speaker 4: crew or the gas out of those those were That's
Speaker 4: kind of where the where the where the products actually
Speaker 4: were born originated. So I think the outlook for the
Speaker 4: industry is great. I heard an economist with Golden and
Speaker 4: Sacks last week say that the outlook in Texas for
Speaker 4: the Texas only gas industry in twenty twenty six is excellent.
Speaker 4: So my expectation is that the industry will continue to thrive,
Speaker 4: it will continue to innovate, and I think we're in
Speaker 4: pretty good shape.
Speaker 2: And I think that's that's kind of like one as
Speaker 2: long as we're comparing Texas and Venezuela. I mean, the
Speaker 2: Texas drilling industry is one of the most, if not
Speaker 2: the most advanced in the world. I mean, there there
Speaker 2: are these refineries we've discussed, but I think even just
Speaker 2: thinking about like the state, how big the economy is
Speaker 2: in the state of Texas. You know, we've got the roads,
Speaker 2: we've got the power lines, we've got the ports, we've
Speaker 2: got the refineries, we've got advanced technology that is allowing
Speaker 2: us to find and discover oil and gas in new ways.
Speaker 2: You know, this this is not a market that can
Speaker 2: be undercut very easily.
Speaker 1: And stability, which I think you has both sort of said,
Speaker 1: was a key difference there. I mean, even as Texas
Speaker 1: is becoming a leader in a lot of different renewable energies,
Speaker 1: the state has made it clear they really continue to
Speaker 1: want to continue to prioritize and invest in oil in
Speaker 1: a big way exactly one thing and then please go ahead.
Speaker 4: No, I'm sorry. Well, not only are we the largest
Speaker 4: oil and gas producer in the US, but we're also
Speaker 4: the largest producer of renewable energy in the US. So
Speaker 4: I think these two are these I think these these
Speaker 4: two different types of energy production or living side by
Speaker 4: side and doing so very well.
Speaker 1: Right, just uh, Texas the energy hub, you know, no
Speaker 1: caveat needed, right, We're not being picky about what kind
Speaker 1: of energy we're creating.
Speaker 3: We just have a lot of it, just a lot
Speaker 3: of energy.
Speaker 1: Yeah, well, I mean on that and Paul, you've this
Speaker 1: is a slight pivot, but you've written about recently sort
Speaker 1: of this demand for more energy coming out of data
Speaker 1: centers AI. I mean, what is the the outlook there
Speaker 1: in terms of what Texas will need energy, whether it's oil,
Speaker 1: renewables or anything in the coming years.
Speaker 2: Well, the forecasts are pretty eye popping. You know Urkott,
Speaker 2: who is our nonprofit that basically manages the grade in
Speaker 2: the state of Texas.
Speaker 1: After the last week, everybody knows Arcott. If you forgot Urkott,
Speaker 1: you were never Kot.
Speaker 2: After the last couple of days, it was there was
Speaker 2: I was talking to somebody about this. There was a
Speaker 2: time in twenty twenty where no one had ever heard
Speaker 2: of her. Now I'm from Texas and I had never
Speaker 2: heard Arcott. No.
Speaker 3: Urkott would have preferred that.
Speaker 2: Yes, absolutely, But you know, so they had this this
Speaker 2: forecast a couple of years ago that the Texas is
Speaker 2: going to I have a demand of about one hundred
Speaker 2: and fifty gigawatts, which may you know, just one fifty
Speaker 2: one hundred and fifty gigawatts is one thousand megawatts, and
Speaker 2: you know, we keep kind of building this out from there,
Speaker 2: but like that is a huge amount of energy demand.
Speaker 2: And our peak that we have ever had, our record
Speaker 2: peak is about eighty five gigawatts, So we.
Speaker 1: Will need one hundred and fifty gigawatts and our peak
Speaker 1: has been eighty five five.
Speaker 2: Right, so quite a bit more jump, yes, quite a jump.
Speaker 2: And this is by twenty thirty and this is this
Speaker 2: is driven, like you said, by data centers. Texas has
Speaker 2: also become recently the crypto capital of the world, ever
Speaker 2: since China banned the practice a number of years ago.
Speaker 2: And so basically, like there there is an acknowledgment that
Speaker 2: we need a lot more power and it really doesn't
Speaker 2: matter where it comes from, you know. I think sort
Speaker 2: of the politicking over fossil fuels versus renewable energy is
Speaker 2: really not something that you hear when you talk to
Speaker 2: these folks. You know, they're kind of just trying to
Speaker 2: make it work to have a diverse grid. I think
Speaker 2: something that a lot of folks aren't thinking about right
Speaker 2: now too, tied to data centers, is the growth of
Speaker 2: storage capacity of batteries that the technology around battery storage
Speaker 2: has just jumped by leaps and bounds over it just
Speaker 2: like the last five years. And we now have the
Speaker 2: ability to put these batteries on the grid that can
Speaker 2: hold like one hundred megawats, two hundred megawats, three hundred
Speaker 2: megawatts of power, and they can just basically, like think
Speaker 2: in a twenty twenty one ury situation that when we
Speaker 2: start losing generation capacity because oil pipelines are freezing or
Speaker 2: because solar panels are covered in snow, these batteries can
Speaker 2: turn on in the blink of an eye and suddenly
Speaker 2: be providing that power to give or cut time to
Speaker 2: sort of manage whatever situation is happening. And so that
Speaker 2: is also becoming a huge thing, and they played a
Speaker 2: big part this weekend coming online in situations where there
Speaker 2: was strain on the grid. These batteries now really provide
Speaker 2: a pretty significant to what we're doing. So I think
Speaker 2: there are a lot of exciting things happening right now.
Speaker 2: I think that you know, we have a market that
Speaker 2: is truly free in the Texas energy market, and it
Speaker 2: currently looks like it's meeting these demands and sort of
Speaker 2: new and advanced ways. But you know, I think we
Speaker 2: have along road ahead of us the next five years.
Speaker 2: And then there's also like a lot of questions about,
Speaker 2: you know, how how legit are these forecasts going to be.
Speaker 2: I think there's a lot of a lot of building
Speaker 2: that is happening right now from these data centers, But
Speaker 2: you know, will all of that materialize? You know, where
Speaker 2: where will the AI industry go from here over the
Speaker 2: next five years? You know, I think there's been a
Speaker 2: lot of questions over a bubble. It certainly seems like
Speaker 2: it is a very very valuable industry one way or
Speaker 2: the other. But you know, is it going to be
Speaker 2: a further what is it sixty five gigawatts of generation valuable?
Speaker 2: I'm not totally sure, but it's it's definitely something that
Speaker 2: at this point in time the grid operators are meeting. Jack.
Speaker 1: Is that your sense that we're sort of and expanding
Speaker 1: are all different forms of energy in a way to
Speaker 1: sort of meet the demand that Texas is going to
Speaker 1: pose or Texas gonna require in the coming years.
Speaker 4: Yeah, and I think Paul did a good job outlining it.
Speaker 4: I think the numbers are huge. Are they real? That's
Speaker 4: the other question I think not I think they're probably overinflated.
Speaker 4: I think when it comes right down to it in
Speaker 4: terms of actually, you know, moving putting the shovel in
Speaker 4: the ground and moving the dirt, I think the numbers
Speaker 4: are going to be less than that, and I think
Speaker 4: Texas is well poised to probably meet that demand.
Speaker 3: Yeah, I'll tell you.
Speaker 1: I mean I was out in West Texas for like
Speaker 1: another story, and you know it's oil Derek's next to
Speaker 1: the wind turbines, next to the data centers, next to
Speaker 1: the solar farms. It's just all sort of coming online
Speaker 1: or remaining online.
Speaker 2: And there's probably a battery in there too.
Speaker 1: Absolutely, Yeah, they're building battery farms. Yeah, it's really amazing
Speaker 1: to see.
Speaker 3: Great. Well, this has been wonderful. I think we'll leave
Speaker 3: it there.
Speaker 1: But you know, if we suddenly start investing billions of
Speaker 1: dollars in Venezuela, we'll bring you guys back and talk
Speaker 1: about you know what that future looks like.
Speaker 3: Thank you so much, Jack for joining us.
Speaker 4: We appreciate it, Thank you my pleasure, really appreciate it.
Speaker 1: Yeahs Paul, thanks for being here and putting on hard pants,
Speaker 1: and we will leave it there. You can get the
Speaker 1: trip cast anywhere you get your podcast. We're also available
Speaker 1: on YouTube. Our producers are Rob and Chris. They also
Speaker 1: wrote the theme music and we will see you next week.