It’s not often you hear a former major oil company executive speak despairingly about oil and gasoline, but that’s exactly what John Hofmeister has been doing with his time since leaving Shell. He is not anti-fossil fuels, however, and sees great promise for natural gas as an oil substitute in the transportation sector.
Hofmeister has been playing a strong and active role integrating groups speaking about US national security and energy security through greater natural gas use, he recently told Breaking Energy. He spoke on behalf of Fuel Freedom Foundation, “a non-partisan initiative dedicated to breaking our oil addiction with cheaper, cleaner, American-made replacement fuels by removing barriers to fuel competition,” according to the group’s website.
“It’s a great energy and economic story,” said Hofmeister. The total spend involved in converting to natural gas for vehicle fuel could be an economic stimulus that boosts gross domestic product growth by 4 to 5 percent per year for decades based on imported oil savings, he said. “Instead of sending money out of the country, we spend it internally on natural gas infrastructure,” and invest in producing more gas.
“The biggest burden the economy is carrying is paying for imported oil – that’s why nation is in crisis, that’s why we have such a large [balance of trade] deficit,” Hofmeister said.
Counting Down to US Oil Independence
Hofmeister ran through some top-line figures to illustrate his point: We now produce about 7 million barrels of oil per day and could get that to 10mmb/d. In order to fill the remaining gap between domestic consumption and production, natural gas output would need to go from 65 billion cubic feet per day today to 100 bcf/d.
“That additional oil and gas output requires $1 trillion/year in capital spending, which is where the GDP growth comes from,” and with that you get a multiplier effect of supply chain benefits, said Hofmeister, referring to all the firms that provide goods and services to oil and gas companies.
You would be lifting an incremental 3mmb/d of oil and 35Bcf/d of gas and also have to sustain it, he said, meaning conventional production declines must also be accounted for, which often gets overlooked. By doing this, you are increasing the tax base and tax revenue by employing 6 million more people, estimates Hofmeister.
Overcoming the Challenges
And he is undeterred by potential supply, market or regulatory challenges. “We have so much natural gas. Just look at one formation in West Texas – the Woodbine – which is estimated to be 1,500 feet thick.” Hofmeister is also not concerned about a demand-driven natural gas price spike. “That’s only a concern if we are not allowed to develop it [the natural gas resource base].”
Asked whether anti-fracking regulations could leave some US gas reserve volumes undeveloped, Hofmeister said technology remains the key to sustainably producing the nation’s oil and gas resources.
“If EPA determines fracking is problematic, then the industry will change fracking techniques from water-based to waterless fracking technology,” he said.
“EPA works for the American people so it cannot do anything to harm people because that’s against their charter. They can do things against technology, so we can change technology,” Hofmeister said.
His focus on backing out US oil imports with greater natural gas market penetration sounds quite similar to billionaire oil man T Boone Picken’s “Picken’s Plan.” When asked if they are working together, Hofmeister said, “I visit periodically with T Boone and we are in harmony.”
Nascent natural gas fueling infrastructure remains an obstacle to greater US natural gas vehicle proliferation. While it may sometimes seem there is a gasoline station on every corner, the same cannot be said for natural gas. “What it requires is positive signals from government,” said Hofmeister, which include a focus on flex-fuel engines and EPA regulations that permit widespread use of compressed natural gas, liquefied natural gas and methanol. “If the federal government said they support these initiatives, that would get us well on our way,” he said.
Without those signals, we have a classic chicken or egg problem of how to build infrastructure when demand is not yet there. “Do we build cars then build stations, or the other way around?” he asked.
So encouraging those government signals is important, but not the only challenge. “Frankly, yes we can talk to government officials and are doing so, but we also need to talk to the American people so they know what’s at stake,” Hofmeister said. This public outreach includes a book he wrote titled “Why We Hate the Oil Companies – Straight Talk From an Energy Insider,” in addition to his not-for-profit (501(c)(3)) nation-wide membership association, “Citizens for Affordable Energy,” which he represented during a New York Energy Forum talk last year.
“I do want to say that I’m still focused on all the points I made at the New York Energy Forum – a broader-based US energy system remake that includes upgrading and rebuilding the entire US power generation system, which is old and inefficient with new technology. Though this is longer-term goal,” Hofmeister said.
