How To Break the Middle East Oil Habit

By RICHARD WOODBURY MICHEL HALBOUTY

Q. You have said we must end our dependence on Middle East oil. Given our huge reliance on the Arab countries, is it possible ever to become entirely free of them?

A. There are plenty of reserves to be found in our own hemisphere. We must work more closely with Canada, Mexico and the Central and South American countries so that we don't have to worry about Middle East political volatilities and the problems of transportation over long distances.

Q. Where else are the big untapped fields?

A. The Arctic offers giant possibilities. So does the entire Pacific Rim -- Indonesia, Australia, China, even Vietnam. And there's Eastern Europe, the North Sea, Africa. There's as much oil, and more gas, to be discovered worldwide as we've found throughout history.

Q. Is Russia a viable source?

A. No question, but their oil potential is vastly undeveloped, and much of their production is failing. With our technical help and equipment, they could increase output by 20%.

Q. What will it take to bring all the foreign oil home?

A. We must build a relationship with the producing countries that will encourage them to ask the majors to come in and drill. Look at Vietnam. It's a hot area. Other multinationals are in there, but American companies can't do business there yet. In exchange for permission to drill, we can offer our expertise to a lot of undeveloped countries in extracting their big mineral reserves.

Q. Will this alone be inducement for our big oil companies?

A. It will if the Administration comes up with a firm energy policy that supports such exploration. I've told President Bush and anyone who would listen that we must create a hemispheric energy policy. I thought he liked the idea. But nothing has been done.

Q. How much of our needs can new foreign supplies provide?

A. They can provide two-thirds. The rest must come from the U.S. itself.

Q. But our reserves are shrinking. The domestic industry is largely in mothballs, and even the near doubling in oil prices since the Iraqi invasion has done little to get it going.

A. It's going to take some real stability in the price. If the price steadies out at $25 to $28 per bbl. and stays there six months, then at least wildcatters and investors won't be scared off.

Q. But haven't many of our bigger fields been drilled nearly dry?

A. There is still as much oil to be found in the U.S. as has ever been produced. And some of our largest fields were drilled under terrible economic conditions. But as long as we have environmental moratoriums up and down the coasts, in Alaska and in the West, we certainly won't find them.

Q. What more will it take to bring the industry back?

A. We need to have the tax incentives to drill. The backbone of our domestic industry has always been the independents. They've found 80% of the nation's oil and gas. But we once had 62,000 small drillers and operators, and now there are fewer than 1,000. The government has thrust one disincentive after another at the industry.

Q. In what areas are the tax breaks most needed?

A. For the operators of thousands of small marginal "stripper" wells. Collectively they produce about 1.2 million bbl. per day. Many of these old wells have been shut down or need to be reworked.

Q. Will an oil-import fee help?

A. It could be counterproductive and hurt our friends. Are we going to sock it to Mexico and Venezuela, which are helping us in the pinch now? If we just levied it against Middle East oil -- great.

Q. Where do alternative fuels fit into the picture?

A. It is vital to develop alternative fuels. Shale, nuclear, biomass, windmills, all of them. We need an energy mix. Natural gas will fill a great deal of the demand. Solar has been sorely neglected in the West -- it works. I don't think Congress has a perception of the situation. It's going to take federal subsidies at the outset, of course, because no company is going to go in and try to produce shale oil when it costs more to get it out of the ground than the oil is selling for.

Q. When you talk subsidies, isn't that going against your good Republican grain?

A. Yes, it is against my philosophy, but we must do this to help establish our own self-sufficiency. We must try to develop these processes. We've barely touched the iceberg's tip. There are 1 trillion bbl. of shale in the Rockies. When the price steadies to a point at which industry can produce shale oil by itself, then the monies would be cut off.

Q. Earlier projects, notably in shale, have fizzled. Where should most efforts be placed?

A. We should double our nuclear output by building 100 more power plants. Nuclear-generated electricity is already saving us 2 million bbl. of oil per day. With new technology, the additional ones could save 3 million more. Coal has great potential. We have 60 times more of it than oil, and we aren't exporting. It could be a boon to reducing our foreign deficit.

Q. Won't all this generate an environmental fire storm?

A. It shouldn't. Environmentalists are going to have to realize that certain things must be done for their own welfare as well as for the rest of the country's. Nuclear is really a very safe method of producing lots of energy cheaply. The problem with existing plants is that they're of different designs. New ones should be standardized, like filling stations, and placed at proper spots -- not on fault lines, obviously -- and only where electricity can readily be transported.

Q. How about the problems with coal burning?

A. There's no reason we can't take out the materials that pollute. The Germans back in World War II used coal to create gasoline. We should be perfecting that process.

Q. How long would it take us to achieve oil independence from the Middle East?

A. If we go on the fast track, it will take five years minimum just to get production moving fully. And we may have to pay quite a bit more for oil at the outset. But, what the hell, it's cheaper to subsidize, to get things cranked up, than to spend all those billions moving troops over there. Figure in all those military outlays, and oil today is costing us about $600 per bbl.

Q. Are there other problems?

A. The damage from the corporate raiders and the merger mania of the '80s is going to be with us for a long time. When companies began buying their reserves on Wall Street instead of exploring for them, drilling stopped. All they created was a mountain of debt but not one new barrel of oil or cubic foot of gas. There were 4,000 rigs running in the early '80s. Today there are only 1,000.

Q. You are 81. Any plans to retire?

A. No. I work hard. I've gone broke three times drilling wells, but I've been fortunate to come back. We're drilling a wildcat in Louisiana right now. I'm always looking for the big one.