By Ed Crooks
Visiting T. Boone Pickens’s office suite in Dallas is like walking into a museum. The lobby is crammed with memorabilia: a whole wall of Mr Pickens’s face on magazine covers, a picture of him with Ronald and Nancy Reagan, a spectacular aerial photograph of the Oklahoma State University football stadium, rebuilt thanks to his donation of about $200m.
The room is dominated by a striking painting by Texas artist G. Harvey called ‘Boomtown Drifters’, showing horsemen riding past a line of primitive oil derricks in the early years of the 20th century. The message is unmistakable: the Old West and the modern oil industry are closer than you might think.
It feels like a memorial for Mr Pickens’s career as one of the great mavericks of American business, first as an oilman from the 1950s to the 1970s, then as a corporate raider in the 1980s, and most recently as a prophet of “energy independence” for North America.
Meet the man himself, though, and any sense that he might be living off past glories is quickly dispelled. An imposing physical presence – he played basketball in college – he is energetic and passionate about his arguments, rattling off details and occasionally seizing paper and pen to illustrate his points.
He turned 86 in May, and married his fifth wife Toni Brinker on Valentine’s day this year. His office buzzes with employees coming and going, offering information and seeking decisions, passing on gossip and discussing deals.
His time is spent mostly on trying to make money, for investors in BP Capital (nothing to do with the oil company), his energy investment firm, and for himself.
Last year he dropped off the list of American billionaires published by Forbes magazine, which estimated his net worth at $950m. He has now given away more in charitable donations, about $1bn, than he has left.
Although he tweeted when the news broke last year “I’m doing fine”, it is clear that he wants to be back on that list. “I’ll be back, don’t worry,” he says. “I’ve come back from a lot further down than that.”
Like many in the energy business, his fortunes have been roiled by the past decade’s shale revolution, which has unlocked a flood of natural gas into the US market and sent prices tumbling. “Natural gas has screwed me so many times I can’t believe it.”
The latest example of this was when cheap gas killed off his ambitions to become a big player in wind power by making it less competitive against gas-fired generation. He lost about $200m on his plan to build the world’s largest wind farm in west Texas, which he shelved in 2009.
In energy policy, though, he argues that his loss is America’s gain. His “Pickens Plan”, launched six years ago this week, is a strategy for cutting US oil imports by switching a large proportion of the nation’s transport infrastructure to use that cheap abundant gas.
The shale revolution has also revived the US oil industry by similarly opening up previously inaccessible reserves – production is up more than 60 per cent since 2008 – but the country still imports almost half the crude it uses. Just under half of those imports, about 3.5m barrels a day, come from members of Opec, the oil producers’ cartel.
Mr Pickens’s focus, he says, is on “knocking out Opec”.
Switching 8m heavy trucks on US roads today from diesel to liquefied natural gas – supercooled to -160°C so a useful volume can be stored in a fuel tank – could save 3m barrels a day of oil consumption, he argues.
Shifting to gas would also cut air pollution and truckers’ costs. Gas in the US costs about a quarter of the price of the equivalent energy content in the form of crude oil. Even after the cost of liquefaction, LNG is still cheaper than diesel.
“If you’re a trucker and I’m a trucker, and my fuel costs half what yours does, I can tell you I’ll win,” Mr Pickens says. “Anybody that uses fuel is looking at natural gas, because it’s cheaper than any other fuel.”
On an energy-equivalent basis, the recoverable gas resources of the US are three times the size of Saudi Arabia’s oil reserves.
“It’s a domestic fuel, it’s cleaner, it’s cheaper, [it’s] abundant. It’s jobs, it’s everything you could imagine,” Mr Pickens says. “You have the dirty imported oil, and you have the clean domestic gas. You’d think a fool could see that comparison.”
Ending US reliance on oil from the Middle East, he argues, would also end the need for its military involvement there. “We don’t get anything for our hardware, our people over there,” he says. “We have lost 7,000 people over there in Iraq and Afghanistan, 35,000 have been injured . . . And that didn’t have to happen.”
Persuading Congress that the prize is worth some government support has not been easy. A bill creating new credits for gas vehicles and infrastructure, paid for by a tax on the fuel, was killed off in the Senate in 2012.
Mr Pickens is still campaigning, though, focusing on state rather than federal authorities. He plans another round of media appearances this week.
He has little sympathy for the argument that tax breaks would interfere with the free market in energy. “Do you think Opec is a free market? Well if you do, you’re silly,” he says. “Opec is not a free market. They tell you what the price is going to be, and then they adjust supply to fix the market.”
While he is seen as “a patriotic old man with a good idea”, he says, his vision of the national interest and his own personal interests are closely aligned.
He personally is the largest shareholder in Clean Energy Fuels, the biggest supplier of natural gas for transport fuel in the US, with about 500 stations across the country. His 20.2 per cent stake is worth about $210m, and is his largest single investment.
BP Capital also has holdings in some of the leading companies in the US shale industry, including Pioneer Natural Resources and Anadarko Petroleum, as well as in ExxonMobil, the largest US gas producer by volume.
As an investor, though, Mr Pickens is much less active than he was in the 1980s, when his audacious raids on underperforming oil companies including Gulf Oil, Phillips Petroleum and Unocal made him a household name.
He is still interested in corporate governance, and has a proposal for giving shareholders more power to nominate and select company directors, but he can no longer afford to give it much attention.
“Hell no. I’ve got to go and work on that if I’m going to do it,” he says. “I’m running out of time to work on corporate governance.”
Instead, he is working on how to profit from “so many opportunities here” in US oil and gas. “I’ve got enough deals going on. I’m going to collect on some of the things I’m doing,” he says.
“I’ll be just fine. It’s great to drop down $150m – show ’em you can come back.”
The CV
Born:
1928, in Holdenville, Oklahoma. Son of an oil company land agent
Education:
High school in Amarillo, Texas; Texas A&M University; Oklahoma A&M University (now Oklahoma State); graduates in geology
Career:
1951 Joins Phillips Petroleum
1954 Sets up on his own
1964 Initial public offering of company, now called Mesa Petroleum
1970s Successes in dealmaking and oil discoveries build Mesa’s assets to $2bn
1982 Mesa makes hostile bid for Cities Service, a company 20 times its size, representing the first in a series of ambitious tilts at larger companies including Phillips, Gulf Oil and Unocal
1985 Delaware Supreme Court ruling in Unocal vs Mesa becomes a landmark in restricting managements’ defences against takeover
1986 Pickens founds United Shareholders’ Association to campaign for investors’ rights
1988 Drawn into takeover battle for Koito, a Japanese car parts supplier
1996 Founds supplier of gas for road transport. Company later renamed Clean Energy Fuels and floated in 2007
2008 Launches “Pickens Plan” for energy policy, advocating great use of gas for transport and renewable power generation