Bobby Tudor

The U.S. shale revolution has been among the most consequential developments in the global energy sector over the last decade. The U.S. is a large net exporter of gas, and is on the cusp of becoming a net exporter of oil, with significant economic, geopolitical and environmental consequences. The outlook for U.S. oil and gas production is increasingly uncertain, however, as lower oil prices, investor demand for capital discipline, and questions about the pace of the energy transition increasingly impact the sector.   

In this edition of Columbia Energy Exchange, host Jason Bordoff is joined by Bobby Tudor, Co-Head of the Advisory business of Perella Weinberg Partners and Chairman of Tudor, Pickering, Holt & Co, a leading energy investment and merchant bank. Prior to joining TPH, Bobby was a partner with Goldman Sachs & Co., and a leader of its worldwide energy practice, and over his 30-year career in investment banking, has worked on many of the defining transactions of the period. In his volunteer work, Bobby is a patron of the arts and a passionate supporter of higher education, having served until recently as Chairman of the Board of Trustees at Rice University.

Jason and Bobby discuss the recent decline in the Permian and what's next for the U.S. shale revolution, peak oil demand, the energy transition and more from an investor's perspective. 

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Jason Bordoff:  Hello and welcome to Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University.  I’m Jason Bordoff.  The U.S. Shale Revolution has been among the most consequential developments in the global energy sector over the last decade. The U.S. is a large net gas exporter -- it’s on the cusp of becoming a net oil exporter -- with significant economic geopolitical and environmental consequences.  The outlook for U.S. oil and gas production is increasingly uncertain, however, as lower oil prices, investor demand for capital discipline, questions about the pace of the energy transition, and much more increasingly impact the sector.  Few people are better placed to speak to all of these issues than our guest today. Bobby Tudor is a Partner at Perella Weinberg, where he co-heads the firm’s Investment Banking Business. He serves as the Chairman of Tudor, Pickering, Holt which he formed and combined with Perella Weinberg in November 2016. TPH is a leading Energy Investment and Merchant bank.

Prior to forming TPH, Bobby was a Partner at Goldman Sachs, a leader of its worldwide energy practice and over his 30 year career in Investment Banking, worked on many of the defining transactions of the period.  It his volunteer work, Bobby has been a patron of the arts on the Houston Symphony and the Board of the New York Philharmonic and is a passionate supporter of higher education, having served as a Chairman of Board of Trustees of Rice University until recently.  Bobby Tudor, thanks for joining us once again on Columbia Energy Exchange.  It’s good to be with you.

Bobby Tudor:  My pleasure Jason, great to be back with you and at Columbia.

Jason Bordoff:  Thanks.  There is a lot to talk about that you have significant expertise on, and one topic that we read a lot of headlines about today is the outlook for U.S. shale whether peak shale is around the corner.  Can you just start there and tell us what you see and the outlook for U.S. oil and gas growth?

Bobby Tudor:  Well, you tell me what the price is going to be and I’ll tell you whether peak shale is around the corner.

Jason Bordoff:  So, in this price range of – 

Bobby Tudor:  Yeah.

Jason Bordoff:  60-ish, 65.

Bobby Tudor:  No.  We -- we think in the -- let’s call the mid 50s WTI, so between 50 and 55 WTI tide oil production in the U.S. and particular in the Permian Basin, we’ll continue to grow for the next call it five years -- 

Jason Bordoff:  Not at the pace it has been?

Bobby Tudor:  But not at the pace it has been, so that pace probably gets cut in half more or less.  So instead of adding 800,000 barrels a year you add 3 to 400,000 barrels a year.  So, that’s still meaningful growth in the context of total U.S. supply, but it’s a lot less than it would be at $65.  So, you know, what the market -- 

Jason Bordoff:  You’re talking about the Permian or talking about total Shale?

Bobby Tudor:  I’m really talking about total Shale, but the Permian has the vast majority of true growth particularly at these price levels because relative to -- to the Eagle Ford or to the Bakken -- 

Jason Bordoff:  Because -- just so the listeners understand the numbers you just threw out -- because U.S. production has been growing over million barrels a day -- 

Bobby Tudor:  That’s right.

Jason Bordoff:  But some of that’s offshore.

Bobby Tudor:  That’s -- that’s right.  That’s a net number.

Jason Bordoff:  Yeah.

Bobby Tudor:  And there are some shrinkages and some growth in there to get to that number, but the net growth number in the Permian has been you know, 6700,000 barrels and heading upwards at a higher oil prices.  So the question is at these oil prices at -- at 55 WTI does that moderate and we think, yes it definitely moderates.

Jason Bordoff:  And what do you think that means for global oil markets in the next year or two in terms of the outlook you see for demand obviously this concerns about the demand outlook now, but there’s a lot of other non OPEC supply out there?

Bobby Tudor:  Right.  We think it -- it really needs to moderate to avoid it to collapse in price.  So -- so -- 

Jason Bordoff:  Shale growth needs to moderate?

Bobby Tudor:  Yeah, Shale growth needs to -- needs to moderate.  So if you kind of add everything together between the _____ [00:04:06] in the North Sea between Brazil and between the U.S. onshore that’s not to mention excess capacity and OPEC not to mention Iran coming back online, not to mention Venezuela and Nigeria both effectively being you know, off the market.  There’s -- there’s just more supply at the moment than there’s demand growth.

Jason Bordoff:  And that’s assuming OPEC still takes some more action from what they’ve done so far?

Bobby Tudor:  That’s assuming -- that’s right, that’s right.  Assuming OPEC probably does one incremental kind of cut.  Now, we think that’ll balance itself out actually over the course of -- over the course of 2020, but we think certainly that -- early part of 2020 could be quite tough unless there is pretty significant growth moderation from the U.S.  Now, we’re seeing it.  So if you look at the recount in the U.S. in the Permian in particular every week -- every week it seems to be down another you know, five to – five to ten rigs.  And so the U.S. industry is actually responding as you thought that it might but they – you know, they need to do it quickly or the market is going to be pretty severely out of balance.

Jason Bordoff:  And those growth numbers you talked about are the new normal or is that we see over turned to hyper growth at some point or -- 

Bobby Tudor:  Well, you know, the interesting thing about the U.S Shale business is that it’s -- it’s short cycle stuff, right?  So, if -- if we add prices back at 70, growth would go back up to 800,000 barrels you know, quite quickly actually.  One of the real changes however in the business is -- is that and increasingly high number of rigs particularly in the Permian are operated by the major oil companies -- 

Jason Bordoff:  Yeah, I was going to ask you how -- 

Bobby Tudor:  Right.  So if you look at what -- 

Jason Bordoff:  Consolidation is going to change the price response -- the responsiveness to price.

Bobby Tudor:  And the reason it’s going to change it is that Chevron and Exxon and Shell all very, very large players now not to mention BP on the hills of the BHP acquisition.  They own the entire hydrocarbon value chain, so yeah had they rather the price be 60 instead of 50 they had.  On the other hand, they’re sending it to their refineries refining it and turning in into a refined products and selling into the market and in that sense low -- lower feedstock cost is helpful.  So, they’re not going to be as sensitive to the last three to five dollars in price as it is the normal U.S. independent whether public or private.

Jason Bordoff:  And in addition to that, tell me if it’s right we’re also seeing increasing hedging by producers generally.  So, did that -- is that another factor that also reduces the sensitivity to price change?

Bobby Tudor:  Yeah.  I’d say to -- to some degree.  That’s being forced a bit by their banks another very important development is -- is that the commercial banks that make the reserve base loans have become more cautious about forward looking prices and so when they take down their price tag it takes down borrowing capacity for these companies.  Not the big ones, not the super majors, but I’m talking about for the independents and -- and the privates.  And with that typically comes a requirement that you hedge and -- and so there is -- there is a lot of that going on as well.

Jason Bordoff:  And just -- so to put that in context to what it means from a macro standpoint for the role of Shale or U.S. production in the global market, is this a marginal change or -- meaning the ability for Shale to ramp up a million plus barrels in a year and then fall a million barrels you know, within 12 months or even shorter.  Is that going to just be a little bit less or is it going to mean actually a significant change where U.S. production is much, much more stable because that has really important consequences for how we think about global markets, what OPEC may -- may do in the future?

Bobby Tudor:  I think it just reflects why companies and particularly big companies like Exxon and Shale and Chevron like to have a meaningful amount of short cycle production in their portfolio.  You -- you can turn the switch on and off not relatively quickly and -- and moderate your capital spin according to commodity price.  That’s not true with the Deepwater Gulf of Mexico Project, it’s not true in the Black Sea, it’s not true in the North Sea.  It is true Onshore U.S. Lower 48 and that’s why more and more capital from the -- the major oil companies has -- has shifted to that business.  So it’s actually doing what the companies want it to do which is to say respond you know, relatively quickly and that’s not to say that you still can’t have some imbalances and because we have and it’s also not to say that there’s not a lot of pain involved in that because there is, but let me tell you if you’ve got oil in the 40s you’d -- you’d much rather have capital committed to the Lower 48 where you can turn off the capital switch versus a major Deepwater Gulf of Mexico Project where you can.

Jason Bordoff:  And so that - but it sounds like that you know, all we’ve been reading recently about increased demands from investors for capital discipline and for returns not just growth and productions that’s going to obviously impact smaller independence with -- 

Bobby Tudor:  Yes.

Jason Bordoff:  Sub investment -- than the majors.

Bobby Tudor:  That’s -- that’s right.  Capital is tighter for the smaller companies than it is for the larger companies and the majors in general and absolutely both equity and debt.

Jason Bordoff:  And when do you think it’s going to take to sort of reignite all streets interest in this sector?

Bobby Tudor:  I think it’s going to take some sustained period and now you’re going to ask me what is sustained period.  So, some sustained period two three years of the industry proving that it can generate returns on -- on capital employed above it’s rated average cost of capital and thus create economic value added versus destroy it.  So, the -- the investors are quite skeptical of the industry’s ability to do that, but for you know, a small handful of companies.  So, the industry needs to prove that it can and if it -- if it can it will be able to attract more capital and if it can’t, it probably won’t.  I think the -- the tough thing is there are -- there’s a whole set of companies public and private for whom sort of behaving in that way which is to say living -- living within your free cash flow generating returns on capital, returning excess capital to investors, all the things that investors are saying they want.  There’s a set of companies for whom that’s just you know, next to impossible to do and so then the question becomes what happens to those companies and our answer is it -- it probably gets consolidated both public and private.  You’re already seeing it in a lot of private companies private equity backed companies kind of getting mush together to cut out GNA trying to have better economies of -- of scale and -- and lower per unit cost.  And you’re seeing it on the kind of public company side as well with you know, several large-ish you know, public deals that have happened in the -- in the course of the past 18 months.  So, consolidation more consolidation is likely to happen.

Jason Bordoff:  And just say another word about what in your view drives the majors interest in – I mean we’ve seen really big announcements and -- and goals and ambitions from Exxon, Chevron for what they’re going to do in Shale there are other sources of low cost supply in the world maybe with geopolitical risk associated with them, but there’s some political risk in the U.S. too.

Bobby Tudor:  That’s right, that’s right.

Jason Bordoff:  There is a -- you sometimes you hear this narrative of well we like short cycle because of the option value it gives us maybe peak oil demands are around the corner, transition coming, is that really part of the thinking or is that sort of exaggerated?

Bobby Tudor:  I would say as regards to major oil companies that’s a bit exaggerated.  Once again they’re -- they’re not feeling so constraint for capital in the way that that others are.  Look the major oil companies will continue to have broad portfolios that that have conventional resources around the world, but it is clear that going forward a higher percentage of their total capital spend is going to be oriented towards what we call Shale or tight oil generally because they do believe they can generate attractive returns on their capital in the business.  They -- they actually think it is -- it is quite well suited to their skill space -- skill based rather.  It’s become a bit more of a manufacturing game where repeatability and engineering are highly priced and they feel like that’s -- that’s what they’re good at.  It’s also proven to have kind of more running room than they thought in the beginning which is particularly in the Permian Basins where there are multiple benches and just and off a lot of opportunity over time.  And it short cycle stuff where they can -- where they can turn the switch on and off you know, when -- when they want and volatile all price environment.  So, for a lot of reason they like it and they want to spend more money on it not less money on it.  They are unlikely to become exclusive to it, but it -- it will continue to be growing part of their portfolio.

Jason Bordoff:  Can the majors achieve the ambitious production goals they have for the Permian?

Bobby Tudor:  You look out wouldn’t put anything past Exxon, Global, and Chevron and Shale these are -- these are companies that are experts in managing very large projects and, and projects with repeatability and so I would think they -- they are going to be able to grow it.  I think the part of the business is going to be harder to grow is going to be the smaller private companies who don’t have the same economies of scale, whose GNA is simply a -- a higher percentage of their -- their total you know, kind of capital base if you will.  And the -- the game is getting harder for small private companies in the U.S. Onshore business.  It’s not getting easier, it’s getting harder.  And -- and so we think in general there will be less capital that flows into that over the course of the next you know, five years as supposed to the last five.

Jason Bordoff:  And say another word about how investor’s sentiment toward the sector looks right now and how did the private equity investments in the sector play out for some of these people?  Can private equity kind of once again come to the rescue of the people?

Bobby Tudor:  Yeah, it’s been a -- it’s been a tough you know, five plus years in U.S. upstream private equity and not that there haven’t been some success stories because they -- they clearly have been, but generally speaking the capital employed in the U.S. upstream business in the last five or seven years hasn’t really -- it hasn’t really turned out as advertised in -- in short.  All of the upstream oriented private equity funds are having trouble raising new funds or at least raising new funds that are as large as their old funds and -- and capital is just it’s just tighter there.  I will say the -- the private equity role is one where the whole issues around hydrocarbon and -- and climate weigh the most heavily and that’s for a couple of reasons.  One is that their investment time are rising it’s just longer and so if you are an LP meaning a large pension fund or sovereign wealth fund you actually are worried about what demand is going to be for these assets you know, in the next seven to ten years.  And so that that has clearly given pause to a lot of pension funds in particular.  In the public markets, that’s less of an issue.  The issue -- because investment time horizon in the public market are just not nearly as long you know, maybe Warren Buffett.  And so – 15 -- 10 year time horizon I’ve yet to meet one personally who -- who does they tend to have a 15 minute time horizon, but they are concerned is -- is simply that the companies can’t generate free cash flow in the business at a -- at a level that is greater than their cost capital.  So it’s a different concern in public markets.

Jason Bordoff:  And how much is the pressure for divestment to lower the carbon footprint of portfolios to invest in cleaner sforms of energy.  How big an impact is that having and capital availability for the sector?

Bobby Tudor:  I would say in the private capital world it’s having a meaningful impact.  In the public world it has more to do which is poor performance and less to do with that -- that pressure it’s not that there’s not some pressure in that regard, but -- 

Jason Bordoff:  So, the -- the oil company evaluations which have been depressed even relative to low oil prices that you know, you want to attribute that as much to this -- 

Bobby Tudor:  Well, I -- I would challenge your -- your assumption that they’re depressed even relative to low oil prices because I -- I think if you run $50 forever I would argue things aren’t particularly undervalued right?  And in -- in particular at $50 the companies who have large inventories which is say proven underdeveloped reserves PUDs will find that their PUDs really have no current value at $50 long-term.  Only if you are in the best of the best assets in the Permian or you name it what your PUDs have much of any value at $50.  And so part of the problem right now is the market is decided we’re in a $50 world for as far as I can see.  And if -- if that’s the case the market is skeptical you know, not going to get any help from a rising commodity to your return, so you better just via efficiency lower GNA productivity gains, etc.  You better be able to generate free cash flow that way.  And right now our markets like you know, I am not so sure we haven’t seen it at least consistently from the industry and until we do start to see it not willing to put more money in.

Jason Bordoff:  And you think that outlook is probably right to when we have a kind of depressed demand outlook people can have concerns about the global economy.  You can take six million barrels from up cake off the market and the price budget is for 15 minutes?

Bobby Tudor:  The -- the most important thing when you’re -- when you’re giving a -- a price premastication is not to give a timeframe.  So I’m not going to do that.  It -- It does feel like we could be in a flat-ish oil price environment for some meaningful period of time for the reasons we discuss some combination of -- of slowing demand and production this offline coming back on and the ability of Shale to turn on the switch on quickly you know, etc., etc.

Jason Bordoff:  And we were talking about evaluations a minute ago you know, something about how those are developed and how IPOs work, so one of the IPOs that’s in the news these days is what we might see in the next couple of weeks with -- with Aramco is that -- is that going to be successful?

Bobby Tudor:  Well, I don’t know how you turn with success I would -- I would definitely bet on the -- the Saudi Royal Family’s ability to -- to get that thing listed on the local Saudi market and it sounds like for sure that will happen.  Whether that is truly a really fully distributed IPO is the whole separate -- a whole separate question.

Jason Bordoff:  Do you see interest from it and -- and -- 

Bobby Tudor:  Oh, sure, sure.  Yeah, investors would be – and look even in today’s oil price that’s a hugely profitable company and remember it is heavily waited towards the refining business as well.  So, a -- a big portion of its profits come from the refining business and not necessarily just form upstream.  So it’s -- it’s a fabulous company, it’s a well run company with a unbelievable low cost position and the best reserve base in the world.  So there is a lot to like about -- about Saudi Aramco for -- for sure.  Remember also that if it ultimately gets listed on international exchanges it is going to be a huge component of any index.  So there’s -- there’s a built in amount of demand for something like Saudi Aramco almost by definition because any index investor kind of has to own it, really.

Jason Bordoff:  When you look at this, there is a lot of rhetoric and -- and questions about the policy outlook for oil and gas development in the U.S. and we’ve seen candidates on the democratic side talk about banning offshore production, how big an impact is that having an investor of sentiment now?  How big a risk do people see this to be?

Bobby Tudor:  I would say just – it’s just one on a long list of things that it’s keeping investors away from the sector right now you know, the whole hydrocarbon thing is -- is another.  The most important one though just to reiterate is poor returns and it’s -- it’s much easier to blame your lack of interest on longer term concerns about hydrocarbons or -- or something like that than it is poor return, but the fact is the matter is returns have just been awful, they’ve just been awful across the industry and so that’s really primarily what is keeping people away right now.

Jason Bordoff:  And -- and just explain so people understand kind of why that is because the -- the sense that Shale works at lower prices than people thought and there were these you know, breakeven cost curves a couple of years ago and it turns out Shale can keep going at lower prices, so just help people understand why the returns have been what they’ve been?

Bobby Tudor:  Well, it’s -- it’s a whole range of issues.  You know, one is that Shale does have very steep initial declines and so to keep your production stable over a long period of time requires very aggressive reinvestment of capital, so it is just a big consumer of capital.  And that would be as -- as compared to for example very flesh production in the Gulf of Mexico where it comes on and just stays at very high levels not for 30 years, but for 15 years, right?  And -- and the Shale business is just a fundamentally different business.  Now one of the beautiful things about Shale is when you’re drilling a well in the Permian Basin in West Texas you never drill a dry hole.  So your returns might not be great, but they’re not going to be zero.  When you’re drilling Rank wildcat exploration in the rest of the world you have a three out of four chance that you are going to lose all of your money doing that.

So -- so part of the appeal of Shale historically has been what -- what is perceived as just a lower risk profile for -- for the business.  The problem however is if you have to if you just have to constantly reinvest so much capital in the business it takes a very long time before the asset starts to generate any free cash.  And -- and so you know, the -- the market’s fed capital to the industry on the belief that ultimately you would get to the point where you did start generating free cash and that and then you could start to return that cash to investors.  It’s just taking a lot longer for that to happen than investors expect and I would even argue than companies expect it.  Now, look company managements would say look we were doing exactly what investors wanted us to do.  They wanted us to grow right.  So, EOG went from 200,000 barrels a day of production to 800,000 barrels a day production over -- over this period of time and that is -- that is remarkable right.  And then and theirs is just story after story after story you know, like that and so managements somewhat defensively -- 

Jason Bordoff:  You weren’t asking us to be -- 

Bobby Tudor:  Yeah, yeah exactly.  I was doing just exactly what -- 

Jason Bordoff:  Companies like Amazon and some others have done too. 

Bobby Tudor:  Yeah, yeah.  And you know, by the way when is Tesla remain any money right or you know, Drug Stocks or you -- you name it, right.  But -- the market is saying, well okay it’s shame on us, but ultimately you got to generate returns on capital.  And -- and we believe you’ve destroyed a ton of capital over this period of time.  We’re not giving any more until you can prove that you can actually make us a return.

Jason Bordoff:  And the – so what I hear you’re saying is when and -- and that’s going to the combination of major stepping in and consolidation in the industry that is going to minimize the impact of that somewhat that’ll stabilize production you know, a lot of people have large balance sheet that can help to support this, so we’ll see continued growth.  And if people can demonstrate returns and profitability and what I hear you saying is sort of that that yes there’s a push for shifting capital and investment towards cleaner forms of energy, but if the returns are there of the capital will be there.

Bobby Tudor:  Yeah, oh, for sure.

Jason Bordoff:  And I’m just is that do you see any signs that it could be a little trickier than that or it could change the level of concern and -- and marches in the streets and the sort of public attention, we see being paid now toward showing that capital is moving in a cleaner direction like do you see signs that could kind of meaningfully change that outlook?

Bobby Tudor:  I think as long as global demand is growing that the likelihood that supply gets disrupted in a way that can’t meet that demand is -- is low personally.  Because ultimately people actually don’t want to pay $5 a gallon for gasoline, they don’t want to see the -- the cost of heating in their home quadruple, they don’t want to see the kind of things that come with dramatically higher -- higher prices -- 

Jason Bordoff:  What let me just ask you what -- what if the demand – I thought about this I’m curious what you think if the demand outlook let’s say it’s growing, but really slowly or let’s say it’s even flat which would be a huge shift -- 

Bobby Tudor:  Yeah, yeah.

Jason Bordoff:  I mean if we had flat oil demand growth two or three years in a row you know, the newspaper headlines would be -- 

Bobby Tudor:  Yeah, that’s right.

Jason Bordoff:  Would be – that’ll be extreme.  You -- we still see decline rate of four or five, six percent -- 

Bobby Tudor:  Yeah, yeah that’s right.  We’re still declining five million barrels a year -- 

Jason Bordoff:  A year we would still need investment or said that -- 

Bobby Tudor:  Right.  Exactly.

Jason Bordoff:  But could we actually see a world where if we if people start to think peak oil demand is around the corner and this is an industry in long-term decline and very long time let’s you know, this can happen over night.

Bobby Tudor:  Yeah.

Jason Bordoff:  That the kind of large capital investments you need today to even stay even and need flat demand might not be there and we could see more of -- 

Bobby Tudor:  Yeah, yeah.  I think -- I think that is a concern and -- 

Jason Bordoff:  volatility and under investment?

Bobby Tudor:  And what yeah you could see under investment particularly in big projects, right.  So the -- the kind of advantage once again of the U.S. business which is why a lot of this capital has shifted away from big complicated Deepwater and other projects, Rank wildcat exploration and towards the U.S. Onshore is that it actually tends to require less upfront capital.  And -- and so you know, could you see pressures on that capital for sure, but the affect ultimately would be under investment and real price air pockets.  And -- and that I would argue that would actually be really disruptive to an energy transition that is -- that is much needed.

Jason Bordoff:  I testified in the center and we could go strategic petrol and reserve and one of the points I made was that actually people think if we start to see reduced oil demand we don’t need it anymore, but actually it could be a tool of transition because of some of these volatility issues.

Bobby Tudor:  Yeah.

Jason Bordoff:  That might arise.  Do you -- and just – and I just want to ask you to speak for the city of Houston or for the industry, it’s -- it’s pretty heterogeneous there is a lot of views I know people who are -- 

Bobby Tudor:  Yeah, yeah.

Jason Bordoff:  Deeply concerned about climate and some of them don’t believe it in the -- in the industry and in the city, but -- but it is a city that seemed some pretty severe flooding recently.  Do you sense a shift that people are increasingly starting to recognize that?

Bobby Tudor:  Yeah.  I would say broadly speaking people -- people view the effects of climate change as more personal if you will and -- and more direct and whether that translates into and therefore I’m going to dramatically change my personal behavior.  I think -- it is an open question and that’s not just a -- that’s not just a Houston question I think that’s a global question.  I would argue thus far despite the rising levels of concern -- 

Jason Bordoff:  There is a gap between the ambition and the reality.

Bobby Tudor:  Yeah, very much so.

Jason Bordoff:  Yeah. 

Bobby Tudor:  And I would say that’s true in Houston and it’s true in other places.  And look in -- Houston it’s Houston is a town full of engineers.  People go right to work on the problem you know, but -- but I would speaking broadly speaking the -- the concern around the -- the need to transition to a lower carbon future is very real in Houston, Texas.  And -- and you don’t get all that much push back really around whether that’s something that we need to be doing.  I think what you do get push back on is the -- is the view that the companies that are producing hydrocarbons are morally responsible for poisoning the planet, right?  That’s -- that’s where you do get push back because  the -- the view of I would say the populous broadly in Houston and in Texas more generally is that transitioning to a lower carbon future is actually a very, very complicated difficult long-term thing and what we all bear responsibility for it.  We also bear responsibility for the health well being and economic security of our citizens and -- and disrupting that has -- has major consequences too.  So, I -- I would say the debate around it is getting more balanced and the oil patch generally and in some sense it’s more balanced in the oil patch now than it is outside the oil patch I would argue.

Jason Bordoff:  Well, I mean that’s an important issue raised and one by the way that’s got several hyper of our law suits that are trying to assess that question right now.  Just -- we have a couple of minutes left on the intersection of policy and the outlook for production growth you talked about one of the -- I want to ask you to what extent you think infrastructure bottlenecks will be a barrier to the growth you just talked about because that will -- can come back to some of the ways that policy might affect it -- 

Bobby Tudor:  Yeah, there are still some pockets of infrastructure bottlenecks but though I would say relative to two years ago four years ago most of those are getting worked out effectively.

Jason Bordoff:  That’s true.  I mean just so you know, listeners and so that you’re talking about liquids or gas, two? 

Bobby Tudor:  Both.

Jason Bordoff:  Both?

Bobby Tudor:  Both.

Jason Bordoff:  And once a while and but we’re still flaring huge amounts of gas that’s a bad for the environment it’s bad economically it’s a -- it’s a black eye for the industry? 

Bobby Tudor:  Yeah, that’s -- that’s right.

Jason Bordoff:  That’s a infrastructure issue, that’s a regulatory issue?

Bobby Tudor:  I would say it’s primarily regulatory issue in -- in my mind and in my view is -- is that that’s an issue that the industry better take action on and better take action on quickly or it’s going to lose its socialize and still operate.  I think if you --if you about existential threats to the conventional hydrocarbon industry in the -- in the U.S. I would argue that that’s one.  You know, the -- the most responsible players in the space have taken leadership on it and you know, Chevron does not flare but for safety purposes when -- when necessary for example, but there are lot of people who do -- 

Jason Bordoff:  There’s a lot of flaring and it’s -- it’s gone up a lot -- 

Bobby Tudor:  And there’s a lot of flaring it’s going up a lot and it’s been terrible for the environment in my view it’s terrible for the industry and policy makers need to be pressured into -- into getting their arms -- 

Jason Bordoff:  You see the Texas Railroad Commission doing them?

Bobby Tudor:  Yeah, yeah, I would -- I would say it’s -- it’s rising on the agenda and I think the good news is the industry is taking leadership around it and being an advocate for -- for that -- 

Jason Bordoff:  Some of it right, some of the industry. 

Bobby Tudor:  Yeah, some of the industry.  But -- but you know, I would argue that that’s -- that’s ultimately the most effective way to get quick change is if the industry decides okay wait a minute we can -- we can help stop this too and we don’t have to wait on the government to help stop it.

Jason Bordoff:  And if you had strict limits on flaring and you said the infrastructure there this is not going to lead to liquid production being shut in because you can’t flare or -- 

Bobby Tudor:  No, no there are -- there are places, yeah there are places where you still need infrastructure you know, build out around it and you know, one of the things our firm’s research has been on now for two or three years is the -- is the growth and associated gas you know, coming out of the Permian Basin to a degree to which that was going to keep natural gas prices depressed in the U.S. for some substantial period of time.  We think that’s the case now that does assume a lot of that is finding its way to market.

Jason Bordoff:  Where -- where is it going what do we do with all of that _____ [00:33:07]?

Bobby Tudor:  Yes, going to yeah.

Jason Bordoff:  I mean I’m asking you like I don’t think there’s enough domestic demand for all of this?

Bobby Tudor:  Yeah.  The -- the idea is that it’s -- it’s ultimately going to get liquefied in export, right?  So, if you -- if you look at the number of L&G Projects that are it’s kind of on the books that would imply that that actually will be able to handle all the -- 

Jason Bordoff:  But on the books it doesn’t mean they’re financed, they take enough ID -- 

Bobby Tudor:  It does not.

Jason Bordoff:  Do you see the next wave the Tilari and projects and others do you see those happening?

Bobby Tudor:  Yeah.  Look if there are another pick your number 12 to 15 projects that have not yet been FID’ied, you know, but are in planning stages how many of those ultimately get done and get put into service in the next you know, kind of three to four years and the answer is probably half of them or something like that.  But look there’s you know, there’s a lot of export gas, but the truth is gas supply has been growing in the U.S. at a faster rate than gas demand has been growing in the U.S. and that even includes for export purposes.

Jason Bordoff:  Yeah.  And I guess a lot of those projects have necessary permits and stuff right I’d been having in the Obama administration when there was a kind of debate about L&G export permits, it will be -- it will be and even stronger one, but that’s more heightened I think if -- if given we’ve seen where some of the democratic candidates are and how strong the urgency is of trying to still progress on climate change and what that means for the kind of permits that would be needed -- 

Bobby Tudor:  Right.

Jason Bordoff:  For pipelines or for export facilities I think that’ll be just be greater next time.  Just good to close on kind of the -- the outlook what -- what do you what kind of keeps you up at night in terms of the macro or geopolitical risks what are the things that everything you just said what are the things that could in your mind be most likely to cause that to look very different?  Policy risk, geopolitical risk?

Bobby Tudor:  Look a collapse in global demand associated with just economic slow down a big recession in China you know, all of that if that drives oil prices down dramatically then we find ourselves once again in this boom and bust kind of cycle that I actually think is really damaging for energy transition.  And -- and I think we would be much better off with kind of moderated – moderated growth while we are making progress in transitioning to a lower carbon future in a whole range of areas and whether it’s transportation or petro chemicals or -- or you name it so. I -- look I am concerned about a big global slowdown a collapse in oil prices another whips off effect on the industry significant under investment ultimately and -- and traditional hydrocarbons leading to longer term price bikes and instability.  I -- I don’t think that’s good for anybody actually. 

Jason Bordoff:  Well, -- whatever people think of it one way or other it’s probably hard to dispute that one of the most consequential things to happen in global energy markets in the last decade or a decade and a half has been the Shale Revolution, so you’re right in the middle of it day to day, so I want to thank you for making time to be with us on Columbia Energy Exchange and sharing your views about what’s happening, what the outlook is and hopefully it’s changing rapidly and dynamically so hopefully we’ll have you back again to talk more again soon.

Bobby Tudor:  I would love to come back. Thank you.

Jason Bordoff:  Bobby Tudor, thank you for joining us.  Thanks to all of you for listening.  For more information about the Columbia Energy Exchange and the Center on the Global Energy Policy, visit us online at or follow us on social media at columbiauenergy.  I’m Jason Bordoff, we’ll see you next week.