- [Announcer] You're watching a One Question special, "The Permian to Putin: The Oil Industry Reacts" live from the Anwar Family studio at Basin PBS, with support from Diamondback Energy, sponsored by Permian Basin Area Foundation.

- Tomorrow marks a month since Russia invaded Ukraine.

Within a week, major Western oil companies, Exxon, British Petroleum, and Shell among them pulled their operations from Russia.

A few days later, the United States, Canada, and Australia banned imports of Russian oil and natural gas.

European countries more dependent on Russian oil have announced plans to cut the cord to Russia, though it is not known how long that will take.

The effects of Russia's invasion ripple across the oil-rich Permian Basin.

The eyes of the nation and the world focus on West Texas as a major source of oil and gas.

What does the war mean for us, for the future of the oil and gas industry, for our national security?

Tonight, we ask these questions of West Texas oil executives.

I'm Becky Ferguson coming to you live from Basin PBS Anwar Family studio with a special edition of One Question, the Permian and Putin.

If you, our viewers, have questions for our panel, please visit our Facebook page and we'll do everything we can to get them answered for you.

Tonight's event is made possible by our generous sponsor, the Permian Basin Area Foundation with support from Diamondback Energy.

So let's get started by introducing our panel.

Ben Shepperd is president of the Permian Basin Petroleum Association, an organization of more than 1000 member companies advocating the interest of the oil and gas industry.

Danny Wesson is Chief Operating Officer for Diamondback Energy, an independent publicly traded oil and gas company headquartered in Midland.

Tommy Taylor is Director of Oil & Gas Development at Faskin Oil & Ranch, a privately owned, more than 100-year-old Midland-based company engaged in oil, gas, ranching and real estate throughout Texas and California.

And Javaid Anwar is founder, owner, and president of Midland Energy and Petroplex Energy, privately owned Midland-based oil and gas exploration companies founded in the 1980s.

So let's get started.

Thank you, gentlemen, so much for coming this evening.

At a recent energy conference in Houston, both John Kerry, the special envoy for climate, and Jennifer Granholm, the Secretary of Energy, addressed energy leaders.

John Kerry said that natural gas will play a key role in the transit to clean energy.

Adding that the Biden administration is pursuing an All-of-the-Above approach.

Senator Granholm said we need oil and gas production to meet the current demand.

I'm here to extend a hand of partnership because we'll only be able to meet these challenges of oil and gas supply and climate change by working together.

She added, "For over 100 years, the oil and gas industry has powered our nation and gotten us where we are today.

We are eternally grateful.

And we want you to power this country for the next hundred years with zero carbon technologies."

Do these remarks signal the oil and gas industry a paradigm shift in the administration toward the oil and gas industry?

Ben, will you take this one?

- Thank you, Becky, and thank you PBS for having this discussion today.

Those are incredibly important issues to everybody.

First of all, I'd just like to say that our thoughts and our prayers are with the people of Ukraine right now, and the terrible invasion that they're facing.

And also with the president, who's on his way to Europe to try to broker some peace.

And these words that you've mentioned that we've heard in the last couple of days and over the last week from the administration, they're very encouraging.

Very, very encouraging, indeed.

I think they're correct that we do need an All-of-the-Above strategy.

I would say we're optimistic that there'll be some significant follow through, but if we take a step back and just look at where have we gone or where has this administration been since the beginning, even beyond January inauguration but in the campaign, but first day of the president's administration, in '21, he canceled Keystone Pipeline.

Within the next couple of weeks, he canceled federal leasing and federal leases.

There have been permit delays.

There have a multitude of new regulations, not to mention the kind of messaging that would indicate that oil and gas is not the preferred energy source moving forward and not necessary to be part of the transition as we move forward here and abroad.

So we're looking for some actions to match those words.

Just yesterday, the Securities and Exchange Commission issued a new rule requiring all publicly-traded companies to attempt to calculate their future greenhouse gas, I'm sorry, their climate impacts and calculate their greenhouse gas emissions in tier one, which is how much they would produce, tier two, which is how much is produced by the sources they use for energy on a daily basis.

And then even tier three, if you can think of that is basically automobiles or end users of the product, and just figuring out how to calculate some of those numbers, it seems a little bit daunting right now and not necessarily a policy that would promote ramping up oil and gas.

In fact, you're putting a business financial oversight group in a policy viewing and analyzing a position where it should typically be done by other regulatory agencies and, in fact, Congress.

- Do any of you other gentlemen wanna add to that?

- I think I just echo Ben's comments.

And Becky, thank you for having us here, and look forward to the conversations, but we're not asking for a whole lot of tangible help.

We really just, as an industry need, needs a show of support so that we can attract momentum and investors behind the space and attract capital so that we can, you know, to do the things we're really good at, which is deliver clean, reliable energy to the marketplace.

- I certainly wouldn't call it a paradigm shift.

Maybe they moved a little bit and realizing that, hey, we do need the All-of-the-Above energy plan, which includes oil and gas, includes nuclear, includes clean burning coal to power electricity plants and solar and wind and hydroelectric.

We need everything.

What took me back a step from the statement is, yes, they see that we need oil and gas now that we're in a situation where we'd be firing up, could be firing up a war machine if Putin doesn't stop at Ukraine.

But they go on to say, yes, this is gonna be, please provide us with zero carbon technology.

Oil and gas are hydrocarbons.

And yeah, maybe there's a technology in the future that we can sequester CO2, and there's companies doing that, but we're not there today.

But if we're gonna have, you know, we don't have a energy policy in this country.

And if we're gonna have a secure country, we need some surety from our government, in our regulations and how we treat the industries and treat 'em equally across the board.

The market will sort out the ones that aren't affordable.

But it's a terrible situation that we're setting here, and people are paying $5-6 a gallon for gasoline.

And we have this that produces this inflation surge across the whole spectrum.

But hopefully, they'll keep seeing and keep moving.

And as an oil and gas producer, we want to be good stewards of the resources that we have.

- [Becky] Of course.

- And do it right.

We're always looking for technology to produce oil and gas in a cleaner way, in ways that helps society.

But we need some surety from our leaders.

- Javaid, did you have something you wanted to- - Yeah, I just like to say Biden administration has to understand law and supply, demand and supply determine the prices.

No matter what they do, we can switch to hydrocarbon free energy, can the industry absorb that cost or not?

It takes long time to make a transition.

We cannot do it in few years, go completely free of hydrocarbons.

Hydrocarbon is a necessary part of this economy, necessary part of the energy the world requires.

And the way the last six or eight months, they're treating the oil like a stepchild.

They feel like they can replace it tomorrow, but that's not the fact.

- Danny, I wanna come back to you.

The day before the Russian invasion of Ukraine, the price of West Texas intermediate crude was just over $90.

This evening, it closed at $114.40.

So I think over 22% increase.

And then closer to the pocketbook of most folks, gasoline prices have increased by about that same percentage in recent weeks.

And so can you help we layman understand how a war halfway across the world results in these higher prices?

- Yeah, sure.

I mean, the oil is traded as a global commodity.

It's a global price.

It's not traded inside the walls of a country.

So any supply disruption in the world impacts the price of oil.

And gaso$line is traded also as a separate commodity while the majority of the price of a barrel or gallon of gasoline is founded in the barrel of oil.

There's a lagging effect there, but there's also a manufactured product.

And so, not only did the conflict in Ukraine, the war in Ukraine caused some supply disruptions to oil, which has increased that price, it also caused some supply disruptions to gasoline, which is manufactured as well in Russia.

And so you have a little bit of a double whammy with the price of crude oil going up from the supply disruption, as well as a shorting supply of gasoline being traded in the global stage.

And compounding that is other additives that go into gasoline.

Corn is used to make ethanol, which is blended in gasoline.

Those things also cost more because a gallon of diesel costs more.

And so it's just a kind of an exponential effect when you see these supply disruptions that raise the price of a barrel of oil.

- So when somebody suggests that prices should be lower in the U.S., that's a non-starter?

- Yeah, I mean, really, it's a globally-traded commodity.

So whoever can buy that gallon of gasoline for the most money, that's where that gallon goes.

- If I may.

- Please do.

- I think prices are lower in the U.S.

I mean, Europe has been facing a natural gas crisis since the late Fall, and their prices have quadrupled.

And so there are global effects, and we are very fortunate here.

I mean, it varies from state to state.

It varies within the state for many of those same factors.

Just a little bit more about the supply and demand, one of the challenges we're facing that's causing the going up on prices is, well, we all went through two years of total demand destruction through COVID.

Everything stopped.

I mean, nobody was driving, no planes were flying, manufacturing slowed down dramatically, and people quit producing.

Remember, there was a period in time where oil went negative.

- Minus $30.

- Well, it was minus $30, somewhere in that neighborhood.

I mean, no one came to our aid at that point.

We certainly weren't trying to, we didn't have our hand on the lever at that point, hoping that we had to pay people to take our oil or our gas.

On inauguration day last year, oil was $52 when president took office.

In January of this year, it was 82.

So there's been increasing inflation due to the coming out of the COVID and the demand ramping up rapidly faster than supply can keep up.

And that's really having an impact.

The war has just put an exclamation point on that.

- Well, let's talk a little bit about demand.

Do you worry that high prices are gonna destroy demand?

Bloomberg reported that BP predicted in 2019 that 2019 would be peak demand for oil.

What are you seeing now into the short and long term future, and will third world demand offset shifts toward electrical vehicles, et cetera?

Do you wanna take a stab at that, Tommy?

- Well, yeah, I'll just say that, like Ben was talking about during the pandemic, when people quit going to the office and quit driving, we did have what I would call true demand destruction, but I think the market got surprised by the appetite that people had as the pandemic went on and people wanted to get out and travel and move about.

I think it shocked everybody that it could come back as quick as it did.

Certainly, high process is gonna reduce demand, but I wouldn't say demand destruction.

I don't think I've ever seen a drop in the demand like we had in my career during the pandemic.

But still, even then, the world was using 80 million barrels oil a day.

And today, we're using probably around a hundred million barrels a day.

That's a lot of energy that the world needs to operate on.

There's a lot of other countries that aren't as fortunate as we are.

They want the lifestyle we have and they're gonna get it.

And so I think that's just another point in saying that we need all these energy resources at our disposal.

That's to have a very diverse energy system as secure for us, right?

Because things happen.

Hurricanes happen and refineries get shut down, and it's good to have diversity in the system.

- Javaid, a minute ago, we were talking about the administration, and I'm wondering if, Ben, you can address this, too.

Has anyone of the administration called any of you all or contacted the industry about ramping up drilling?

And if they have, can you do it in over what period of time?

- Nobody from the administration ever called us to ramp up drilling.

I think it's unfortunate.

There is not enough energy expert on oil and gas that is work for Biden administration.

The people I talked a little bit, they are completely naive about oil and gas like you were, and that's to say most of the third world country would go to gas.

So I mean, electricity.

Electricity is mostly produced by natural gas, coal or whatever.

So yeah, you can call it electricity, but where the electricity come from?

It's from natural gas.

I mean, so they're really naive about that.

Yes, electricity is clean, but to generate electricity, you're burning gas.

So it's just amazing.

They think electricity is clean.

Yes, but where you getting the source?

- Hey, Danny.

Oh, Tommy, you want to add something?

- I was just gonna add that on to increased drilling.

Today, we're running in the United States about 650 drilling rigs.

About half of those are in the Permian Basin.

In 2014, when the process were in this range that we're sitting in today, we had 2000 rigs running.

- [Becky] Wow.

- So to say we could add 1300 rigs today, it cannot be done.

It can't be done overnight because we're still suffering from supply chain issues from the pandemic.

You'd have to put out those rigs, you're gonna have to find people.

You're gonna have to source water.

You're gonna have to source power.

You're gonna have to get frac spreads to come out.

We don't have that kind of equipment because during the pandemic, all that industry was decimated.

Negative oil process really, really are gonna have an impact going forward.

Can we put out more rigs today?

Yes, but not quickly.

And not enough to increase the production in the United States to offset what Russia was sending to us, even though it's six or seven percent of our supply.

It will take time to do that.

- Danny, did you wanna add something?

- Well, I mean, I think there's some bunch of points being made here.

I think the supply chain issues are real.

They're not just related to you getting a package to your doorstep that you order online.

We have real shortages of steel, of steel manufacturing, of labor, of drivers to move equipment around.

And it's unlike anything we've seen in the last decade in this space.

We've dealt with shortages, whether it be steel or labor or whatever it may be.

Throughout this last decade, through the cycles, but we've never had 'em all compounded one.

We're seeing that today.

And so can we ramp up?

Absolutely, we can.

It's just not gonna happen overnight.

There's a lot of dominoes that have to fall to get the supply chain issues worked out, and we need help, really need help from the administration to help figure out what's the bottlenecks of these supply chains, 'cause they exist.

We have the manufacturing capacity to do these things, but for some reason, it's not coming to the table.

- Tommy.

- Along the lines of tubular goods and steel products, a significant source of the oil industries casing comes out of Ukraine and Russia.

- [Becky] Wow.

- And even some of the pipe that we buy from a plant in Ukraine, the plant's been bombed off the face of the earth.

And so we're gonna see these kinda- - [Becky] Compounding.

- Yes.

And I agree with Danny.

We've had one or two of these things to deal with over time, but we have a bunch of them.

- [Becky] This is a perfect storm at an inopportune time.

- Yep, yep.

- The Europeans have announced intentions to cut the cord to Russia, though it isn't known how long that's going to take.

Germany has announced plans to build plants to process liquified natural, U.S. solidified natural gas.

And in the meantime, does that mean more reliance on coal particularly in Europe and what are the implications of these moves for the U.S. oil and gas industry?

Ben, do you mind talking about that?

- Happy to take that one.

I don't know all that much about coal.

I do think what we're seeing is that we expected it will increase the dependency on liquified natural gas.

Hopefully, increasingly from the United States, increasingly from the Permian Basin.

We're also seeing in Europe that some of the plans to mothball nuclear powerplants are being delayed because they've gotta get their electricity from somewhere, and it's uncertain where those supplies will come from.

The feed stocks are important, and natural gas is gonna continue to play an increasing role in that effort.

- Danny, you've talked about, you think that some folks are gonna increase the use of coal during this period when there's a shortage.

Would you talk a little bit more about that?

- Yeah, coal's just, it's cheap and accessible.

I mean, you look at what, you know, just look at China.

As they've grown their energy consumption, it's been really met with coal.

And because it's easy and cheap to procure and it's cheap to put in the power generation.

I think, Europe, what you're gonna see is a shift towards more natural gas as a base load energy.

Natural gas is a fantastic resource for power generation.

It is reliable, it's steady, it's cheap, it's very clean.

And just so happens that the U.S. has a tremendous resource of natural gas that we can supply in a very sustainable way to global markets, not just our own market.

And it can help strengthen up and be sustainable and secure.

Delivery of that product to our trading partners across the pond, so I think that seems to be the way they're leaning, and I don't know what's gonna happen in the short term.

You may see some more coal generation just to meet the needs, but I think long term, U.S. natural gas and U.S. LNG is a tremendous solution.

- And LNG means?

- Liquified natural gas.

They liquefy it to put it on a boat and ship it across the world.

- Okay, good.

According to energy expert David Yergin in 2008, the U.S. imported 60% of its oil.

Today, we are energy independent on paper, a net zero importer, but we still import oil.

So are we energy independent?

And does our current status protect our national security?

Ben, are we energy independent?

- I think we are closer to it in recent years.

We're closer to it than we've ever been.

I think one of the complicated things about the hydrocarbon industry is that not all oil is alike, and some of these engineers here can give us a quick and down and dirty lesson on some of that.

But suffice it to say, you've got all kinds of grades of oil.

We produce West Texas Intermediate.

It's a lighter, clearer, sweeter kind of crude that has certain uses.

For other kinds of gasoline and gasoline blends, you need a thicker, heavier crude that is produced elsewhere.

Sometimes, that's in other parts of the country.

Sometimes, that's in places like Venezuela and overseas.

So I think we can, we have energy independence in our grasps.

No doubt about it.

We can be allowed to drill.

- Yeah, I think a good way of putting it, and I think the EIA, the Energy Information Administration puts out these numbers, but I think the way you put it is we're net energy neutral.

- [Becky] Okay.

- In other words, if you take all the energy that we use in a daily basis in the U.S., and then you take all our sources, oil and gas, coal, nuclear, green energy, and everything we export and import, we're very, very neutral.

In other words, we make and bring in and send out about what we use.

That is a very, very powerful place to be.

I can remember as a 13-year-old boy, in the '70s, the first energy crisis and thinking, oh my gosh, and learning from my parents how much oil we import and how reliant we were on the Middle East and how fortunate for the United States and our allies that we are able to send out LNG today, because 15 years ago, or maybe 18 years ago, that wasn't even a thought we were thinking about, having to bring in LNG from other places.

But can meet our own needs and our partners in Europe.

That is a tremendous thing to be able to do.

- Tremendous progress.

Javaid, did you wanna add something?

- Yeah, I say while in the Trump administration, we were becoming energy independent.

With Biden administration, it was a setback because they don't want to welcome hydrocarbon.

But you can see, like Tommy said, in the '70s, we were so much dependent on Middle East oil.

And right now, Permian Basin has come long ways and would have been if Trump would have been in office.

Maybe more energy independent than ever, but the oil companies see that administration, major oil companies don't want to put big money where administration is just discouraging them.

So the future, you wanna put billions and millions of dollar where you know down the line, you can make money with that stuff.

With Biden administration, you get wrong signals.

- Well, we've often talked about being secure nationally because of oil and gas.

And do you feel like we're in that position right now?

- I think we're in a much more secure position than we've ever been before, frankly.

I do think that there's some discouraging signs out there, discouraging investment right now.

Hopefully, those attitudes are going to modify somewhat now that we see the necessity back to the pricing.

I mean, we're all living with these high prices and the high inflation.

It's not good for anybody, from the oil and gas and having to purchase the different steps of the process to the parents trying to go out and buy food.

I mean, gasoline in your tank, you name it.

It impacts all of us.

And we need to be able to produce more.

And we're fortunate here in the Permian Basin in that we have the best rock of any place in the world.

We have some of the smartest people and some of the best infrastructure.

And we need to unleash that.

We also produce the cleanest barrels, but people forget in these discussions about other countries where we're asking some other country to increase supply in the Middle East so that it'll help balance things out.

We have the strictest environmental regulations of any country on earth.

And so every barrel that's produced here in America is cleaner than barrels produced anywhere else.

And so it is a win-win.

I mean, we can still keep our eye on cleaning the environment and cleaning up the environment and making sure that we're reducing emissions, and all of those things remain important.

We can do that while we're increasing production.

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Welcome back to tonight's special edition of One Question, the Permian and Putin coming to you live from the Anwar Family studio here at Basin PBS.

When we left off, we were talking about national security as it relates to oil and gas.

And Javaid, you wanted to talk a little bit about that.

- What I have heard from very famous geologist and expert, we have more oil.

If we are allowed to drill, we can produce more oil than Saudi Arabia and Russia.

We could be number one producer in this part of the world, given the time and the facilities to let us operate and bring oil from the ground.

We can provide more oil than Russia and Saudi Arabia, which I think Saudi Arabia can produce over 10 or 11 million barrels a day easily.

So can Russia.

We can beat that number too, based on new technology.

- Tommy, you had something you wanted to add.

- The Permian, if you go back to 2007, we were making a million barrels of oil a day.

Today, we're making over five million barrels a day, and that's after this very tough pandemic.

I mean, without the pandemic, we might be up at six or seven million barrels a day.

So I really agree with Javaid.

We have that capability, if we're given the opportunity to do that.

We've talked many times about the storage of high level nuclear waste in the Permian.

And that's one of my passions that I talk about often.

But I think this, as terrible as it is, but it allows us to see, when Russia went into Ukraine, what's the first thing they did?

They took over Chernobyl.

They bombed a nuclear waste site.

They took over the biggest nuclear power plant in the world and had the outskirts of it on fire.

And so we do have this great resource here.

This multi-layered, we call 'em pancakes of sedimentary rocks that are full of oil.

And we just need to get at 'em, but to cite all of the nation's high level nuclear waste in the middle of the Permian Basin, it's economic malfeasance.

You wouldn't put that risk here because if somebody wanted to do something bad to us, and the bad people, the terrorists, they're all about disruption.

And man, we're just setting it up for them to do something easy.

So I just wanted to make that point.

- [Becky] Absolutely.

- That's very, very important.

- [Becky] That is an important point.

- With respect to those production numbers, Tommy's exactly right.

But what gets overlooked that those are actually, as I understand it, those are record production numbers.

So we have been, in the last several months, continue as we've come through the pandemic.

We're now hitting record production numbers, and it continues to grow ever so slightly each month.

These are positive sides and we get, I think, unfairly criticized for.

- Well, that brings me to our next question, being unfairly criticized.

- Okay.

- Since 2015, over 600 energy companies have filed for bankruptcy, representing tens of thousands of jobs and hundreds of billions of dollars in assets.

A decade ago, energy companies represented 15% of the standard in Forbes 500.

At one point in 2020, they represented less than 2% of the S&P, though it is clear that higher prices come as a relief to the industry, even though we would never wish them under these particular horrible circumstances.

In recent weeks, some have accused the industry of price gouging and massive profits.

Can you respond to those charges, Ben?

- Well, as I was just alluding to, I think we, well, to the first part of your question, I think there's no question that in the last decade, particularly, there's been some fits and starts, but we've been in consolidation mode, and there's been multiple mergers and acquisitions.

And you've seen the major oil companies come back to the Basin because, as Tommy says, we have the best geology and some of the best workforce you can find.

So the independence are finding it a little more difficult.

These horizontal wells that we're drilling are much more expensive, and the completion technologies are quite expensive, and so it's, some of them are being squeezed out of the market a little bit.

I think there's no question.

But interestingly, two companies right now in the Permian that have the largest number of rigs running are privately held companies.

They're not publicly traded.

So there's a lot of shaking out that's going on in the industry.

And it's just sort of part of a bit of a natural process.

- Danny, do you mind addressing the charge of price gouging?

- Yeah, absolutely.

I mean, we talked about it earlier.

The oil and gas market is a global market.

We are price takers.

We don't set the price.

In 2020, when price went negative, if we could control the price, we wouldn't have allowed it to go negative.

It's an easy thing to say if you're trying to point the finger, but the reality is it's a very complicated industry with very complicated supply and demand economics.

And we just have to take the price that's set on the market.

And we try to model our company off of some mid cycle oil price, which is below the price we're trading at today.

And look, when prices come up, activity increases, and you're seeing activity increase.

I mean, the rig counts up tremendously over the past six months.

200 rigs added in the last six to nine months.

You're seeing investment creep into the space.

'And we've talked about the supply chain limitations.

They're real.

And I think if we had some clarity on when those things could be addressed.

I think you'd see activity ramp up even quicker.

You hear many stories today about people who wanna add activity, who wanna deploy capital, but just simply can't.

And I think we've gotta address the real issues in the room, which are, how do we get people back to work?

How do we get our manufacturing facilities up and running and start delivering barrels to the market on top of the million barrels we're already gonna add to U.S. supply this year alone.

- We have a question from an audience member that addresses some topics that you all brought up a little bit ago.

She's asking, what are the specific ways the current administration can provide support to our industry, to enable us to furnish oil and natural gas, to our allies in Europe, who wants to take that?

- I'll take, I'll start.

And maybe Ben has some good points here, but I really think it's just as simple as having an honest discussion about oil and gas or hydrocarbon's role in our energy policy and supporting hydrocarbon development, responsible of hydrocarbon development in the United States, things bring back the Keystone Pipeline.

Don't cancel offshore leasing.

Show that the federal government is not going to impede development of oil and gas.

It's going to make sure it's done responsibly, but it's going support development of oil and gas.

In that way, it doesn't impede from bringing investment into the space.

- We need sound regulation.

And none of our companies are against good regulations.

We don't need regulations designed to put us out of business, and we don't need the rhetoric coming out of the federal government saying, we're gonna keep it in the ground.

We need regulatory certainty.

All businesses need that.

We need tax certainty.

And the market will, you know, we have our own process.

We'll drill more wells, right?

And hopefully, that'll give us more supply.

And it's a balancing act.

- Did you wanna add something, Javaid?

- Yeah, it's very important that the government part give a signal that they are not going to interfere in oil prices someday.

You remember what Jimmy Carter did back in '78.

He called it old oil, new oil, and then old oil was selling for a lot less than new oil can be drilled for.

So we don't want all these regulate.

Let the market determine what we have to pay for the oil and gas and hydrocarbons.

That's the way, let it freely operate.

And that's a wrong statement that all companies are gouging.

We cannot gouge very long.

If somebody's selling their oil cheap, go buy it.

So, I mean, this is just to make public happy.

Political people make a statement, those oil companies are gouging you.

It's not; it's free market.

Anybody can buy oil from somewhere else, and we should be the world leader in producing oil because we can provide certainty and stability in the oil market, because unlike Russia or Iran or somebody else, we should be leader in producing oil.

We have the capacity.

Let the Permian Basin drill its capacity.

See how many more billions of barrels of oil we can add.

- You mentioned a minute ago cheaper oil.

Today, I think a barrel of Russian oil is priced at $85.

Some people have suggested that our Western boycotts of Russian energy will have little to no effect if the Russians will sell their products to other countries like China or India.

What are y'all's thoughts on that?

- I'll start off.

I think it's gonna hurt them.

I think there's gonna be, China and India are gonna buy that oil.

They're gonna see it as a good deal.

But not just the oil, but we're boycotting everything out of Russia.

And like the steel mills, that's gonna hurt.

People are gonna have to make sacrifices.

I mean, it's gonna hit all areas of the market.

And so, when we do this, people need to realize that, yeah, we really are gonna be making sacrifices.

- Well, I have to say something.

What happening in Ukraine is inhumane.

People, children are dying.

I don't think so, I like to support any kind of Russian industry that a country leader or whatever goes in and slaughter people and kill innocent people.

They have not done anything wrong.

So Russia needs to learn a lesson that the whole world cannot tolerate this.

Even we may have to suffer in some areas of oil and gas or some other areas, but if you let everybody do it, tomorrow, China can invade Taiwan, Hong Kong.

- Well, you all seem to be suggesting sort of a war time mentality that citizens need to be willing to make some sacrifices in the coming weeks and months.

Would that be an accurate way of summing up what you're saying?

- So up to a certain extent, yes.

The oil prices, other thing will be disturbed, but would you let Russia do whatever you want and become hostage every time Russia does anything?

Oh, we better not say anything because the oil prices or other commodity casing prices will go up.

Yeah, it will go up, I understand that.

But Russia has to understand, and China, they cannot do anything in this 20th century, invade a country which has done nothing wrong because they think they're planning to do.

That's ridiculous.

- Danny, you look like you wanted to add something.

- Well, yeah, I was just gonna say, I think, if you look at kind of the way the world has changed over the past few decades, we've become a global trade world.

And we trade things with everyone.

And the way we've structured our foreign a policy is, look, instead of going and attacking somebody with guns, we're gonna attack someone who misbehaves with sanctions.

And that means that there's economic downfall because of those sanctions.

And one of those dominoes is that we're not gonna be able to buy things for cheap, because now, there's less supply of something that that country was making, and so the price for that good goes up.

And that's the reality of the world we live in today.

And so I think, yes, if we're in a war time situation and we're gonna use the economy to put pressure on the bad behaviors, we have to be willing as citizens of this country to take on that burden and do it for the people who are truly suffering.

And it might cost us a little bit more money at the pump or at the grocery store in this short cycle period of time.

But at least we're not having to go through what these millions of people in Ukraine are having to go through.

- Well said, well said.

- Anytime people can conserve energy is good for all of us.

- Well, we're gonna talk a little bit about conservation now.

Most of the conversation related to energy of light has been focused on meeting the immediate needs through oil and gas, but a part of the conversation has also been on moving toward renewables and carbon neutral energy.

What is the oil and gas industry doing to be a part of the carbon neutral conversation?

Ben, do you wanna take that one?

- Well, I think every company right now, for a variety of reasons, is analyzing ways that they can do things more efficiently.

The pressures, whether they be investor pressures, political pressures, shareholder pressures, or just internal pressures, everybody is looking to identify ways that create our product, reuse our product in a cleaner way, in a more sustainable way.

And the investment dollars that are going into to cleaner processes and technologies are just in the billions of dollars right now.

And I think that is a new trend over the last five to seven years that you're seeing.

And I think, particularly the publicly trading companies, have to report very regularly to their shareholders what they're doing, and they have to measure it.

I think we all that love oil and gas, we know that there's enough oil and gas in the ground, Javaid, for decades to come.

And I think it's all of our vision that we would like, we would like people to enjoy oil and gas and recognize the wonderful benefits from the process, from the equipment that's made, from medical devices to the transportation fuels we're talking about.

It runs the gamut.

You really can't find anything that doesn't have an oil and gas component.

But yet we've been vilified repeatedly by one group or another that oil and gas is bad.

We're killing the planet.

We've gotta keep it in the ground now.

So I think our reputation as an industry has suffered, and consequently, the industry has responded with billions of dollars of investment in cutting back on emissions, cutting back on flaring, reuse and recycle water.

We're very much in that conversation.

- Yeah, I mean, just Diamondback a couple years ago sat around the table with leaders of the company and we looked at it and said, look, we can do this better and we should do this better.

And we set long term targets, five year targets to reduce our greenhouse gas emissions by 50% and reduce our methane emissions by 70%.

And we're well on track to meet those or exceed those emissions and maybe even do so early.

I think all of our public peers for the most part have set those same types of targets in some form or another, and committed to net zero operations at some point in time.

And the industry's taking not just words, but they're putting action behind it and doing the right things.

And I don't see industry in other parts of the world doing the things that the U.S. E&P industry is doing here in the United States to significantly lower our carbon footprint and our methane footprint within our operations.

It's really remarkable.

I mean, just in the Permian, you look at what's going on from methane monitoring, sensors out in the fields that alert the operator to a methane leak instantly.

Whereas in the past, that leak may have gone on for months, maybe even a year before somebody would've found it.

So we're really stepping up our game as an industry.

And I think we're trying to get that news out there that the U.S E&P industry is really, really getting after it.

- Well, and a related question, Tommy, I'm gonna ask you this, and then you can add whatever else it was that you were just about to say.

This is not exactly related to the Russian invasion, but it's sort of related to what Danny just was talking about.

There was something called ESG.

Could you tell us what those letters stand for and what the implications are for the industry?

- They stand for Environmental, Social, and Governance.

I can hardly say that word.

But it's about companies being, like we've talked earlier, being good stewards of the resources we have, not wasting things, being engaged in the communities, being engaged with our legislation, our legislators, and our government to be sustainable, to be transparent, to be good community partners, to show people how we're recycling water and doing things in a, you know, I tell a lot of the young people at our company, we're not operating like the previous generation.

I mean, it's a lot different now.

We're a lot cleaner than we were.

We're also, I think people would be shocked at how much technology we use, particularly in the drilling operations.

We're big, big users in technology, and we're proven ground for a lot of technological advances.

And there's some of these bigger companies, I know Oxy has a big carbon sequestration project.

There's talk about using waste stream heat capture technologies.

And just look at the coal industry.

I mean, they have some plant designs that are much more efficient and much cleaner than it was two decades ago.

- But this ESG rating, as I understand it, it's something that all company have to report, and it can be a stumbling block for getting capital for oil and gas.

Is that correct, Dan?

- Yeah, so I mean, most public companies have to put out what we call a sustainability report, but the large investment funds typically all look at, there's a few firms that kinda give you a sustainability rating or an ESG score.

And the large investment funds will take that score and kinda say, okay, if you're not, at least here, we can't invest in your company.

And so, there's a lot of momentum that's been pushed behind the ESG framework and investment strategy, especially through COVID and people kinda looking at, okay, how do we wanna invest?

And the things they're asking for are the right things.

There's still a lot of things we gotta figure out about how do we truly rank somebody.

I think there's some subjectivity to some of the scores today, but the industry is really responding, and the industry's always been tremendous social stewards.

They've been extremely involved in the communities with which they operate and work and live.

I mean, look at the own community that we live in and how much good oil and gas has done for even the studio we're sitting in today.

But the E side is where we have to get better, and we have really made the commitment to do so.

And I think we can see these ESG scores improving as an industry and attracting some of that investment back to the space.

- Last summer, the Texas legislature passed, and the governor signed a bill that basically says, if you boycott Texas energy, I guess through ESG ratings, Texas will boycott you.

Can you explain that bill and tell us if you believe it helps or hurts investments in oil and gas bin?

- I think what you're referring to is Senate Bill 13.

And it did in fact pass and was signed by the governor.

Essentially, it says that if you, that the state of Texas, and you have to remember that we have billions of dollars that the state invests for teacher retirement system, employee retirement system, billions of dollars that are invested in all manner of funds.

And if a certain investor group or bank or others disparage, urge boycott, or various list of certain things, activities that they'll be put on a list.

The comptroller of public accounts has required to put together a list of those institutions that are creating havoc in the space and discouraging investment in oil and gas.

And they'll be sort of scored in such a way similar to the ESG score.

I think what it was a legislative response to, or an acknowledgement of how important oil and gas is to the state of Texas, because going back several years, there are certainly a number of very high profile investor groups that were highly critical of oil and gas, discouraging, limiting capital to companies doing all kinds of things, getting involved in shareholder activism and trying to get their own people put on the anti-oil and gas people put on boards.

So it was a response to that kind of activity, and the state has said, well, if you're gonna do that, then we're not gonna invest in you.

- Is it too soon to tell if it's had any effect?

- Well, I can tell you that I have heard from some of the major, major banks that have been making rounds, basically saying that they no longer hold those views they held two years ago.

And by golly, we're still invested in oil and gas and we love oil and gas, and we don't wanna be on the list.

- Interesting.

- But I don't know, the list hasn't been created and no action that I'm aware of has been taken yet.

- Y'all have all mentioned that markets love stability.

What would be a good market price?

Would you like the government to provide a floor?

Tommy?

- No.

- Okay.

(laughs) - Well, two years ago, almost to the day, we were on a conference with a railroad commission, and a lot of people were asking the railroad commission to prorate production, because we were in a negative price environment.

And we weren't in favor of that.

Anytime you have a government intervention into a market, it's not good.

And on this side, I mean, I wouldn't think I'd want them to intervene.

I mean, the free market will work itself out on the supply and demand.

It always does.

- Javaid?

- I remember back when Jimmy Carter was president.

He put ceiling in the oil for 42 or $45.

Same thing was going on until Reagan become president.

He said, let the free market determine.

Oil price went to 25, below 25 to tens.

And market worked it out.

Had Jimmy Carter would've been the president, we will still buying oil at 42, which will be great for oil industry, but it's not good for consumers.

So let the free market determine what oil prices we have to pay so that we can produce oil and gas at economical rate, not creating artificial ceilings.

- And on that note, we're going to have to go by, but thank you so much, gentlemen, for being with us.

Ben, Danny, Tommy, and Javaid for shedding light on this complicated issue, for giving our viewers a better understanding of the issues related to this historical invasion of Ukraine and its effect on our nation through the lens of the oil and gas industry.

We are grateful to the Permian Basin Area Foundation for generously sponsoring tonight's program and to Diamondback Energy for their support.

We also wanna thank our Basin PBS board and staff, along with the Elizabeth Reed Yeager family and the Anwar family for their generous support of Basin PBS.

Basin PBS could not bring this great quality programming without your valued viewer support.

If you wanna learn more about local programming or become a member of Basin PBS, please visit our website at basinpbs.org.

I'm Becky Ferguson.

Goodnight.

- Thank you guys so much.

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