Whether the topic is peak oil, climate change or commodity bull markets, Jim Letourneau tends to take the contrarian position. He's an unapologetic advocate of oil sands development and a shrewd analyst of the companies large and small that are active both in the Alberta oil sands and in the U.S. oil patch. In this interview with The Energy Report, he shares his insights into one of Alberta's largest oil sands players and one of its newest and smallest, as well as a well-positioned startup in the Texas Midland basin and northwestern Montana's Williston basin. Letourneau is the founder and editor of the Big Picture Speculator and is a geologist living in Calgary, Alberta. He is an early-stage investor in energy, metals, biotech and technology companies.
The Energy Report: How was your presentation, "Is Peak Oil Dead?" received at the Calgary Energy and Resource Investment Conference on April 5?
Jim Letourneau: It went really well. There are a lot of professional engineers and geologists there who work in the oil business, and most of them were agreeing that technology is a big factor that pushes out when peak oil is going to occur. For each pool or technology, there is going to be a peak, so peak oil is really the average of hundreds of different peaks, but I think my big-picture point was well received.
TER: Your point is that the theory behind peak oil fails to factor in technological breakthroughs that produce new drilling and stimulation technologies and tame hostile environments, thus leading to increases in production. If an oil shortage doesn't end the oil age, could climate change alone threaten oil's dominance?
JL: My take is that oil is going to be replaced by something better at some point. It can't be something like ethanol, where we end up using more water and increasing food costs. Ultimately, maybe we can shift to natural gas. From there we'll have to look at some of the alternatives that right now are expensive, but in 20 years won't be nearly as expensive. Politics always plays a role in energy policy. We just went through a renewable energy stock bubble created by government loan guarantees. Meanwhile, oil companies have lost the PR battle. This gives governments the option to punitively tax and regulate the industry as they see fit.
TER: If the future solution is natural gas, what companies do you see well positioned to meet that need?
JL: Right now, because we've found so much natural gas, the companies that produce it are in a pickle. I think the range of prices is going to be lower for a long time. We're not going to have an extended bull market. But the companies that use natural gas are pretty interesting. There are companies like Westport Innovations Inc. (WPT:TSX; WPRT:NASDAQ) that build natural gas engines for big trucks and transport units. Another company is called Clean Energy Fuels Corp. (CLNE:NASDAQ). But the actual producers are in a tough spot. If the price does get a little higher, a lot of supply can come on stream very quickly.
TER: You recently explained your new interest in biotech to The Life Sciences Report by saying, "The mining and energy sectors have reached a state of dysfunctional excess." What do you mean by that expression?