In Memory of Matt Simmons

This article was published in Spain’s on 08/12/2010

Last Monday I received a short email from Matt Simmons’ institute. Mr. Simmons, oil guru, visionary of clean energy and author of one of the most fascinating and controversial books of the recent past, “Twilight In The Desert”, had passed away at the age of 67 years old. I was shocked.

For those of us who study oil and energy, Matt Simmons was always an essential reference to understand the complex world of energy. To me, he was an amazing personality and an absolute master in his field. Matt was humble, open, always ready to discuss different theories and innovations in the field of energy, and what’s most important, always interested in other people’s opinions. Matt didn’t speak from an altar to share his wisdom. He engaged in dialogue and open debate. And listened. Patiently. To everyone.

His loss is immense but his legacy is outstanding. Let me centre this article on some of his many achievements.

On one side, his analysis of the oil fields in Saudi Arabia was groundbreaking not only for the wealth of detail and clarity of the arguments, but also because it was the first time that someone had questioned official information with solid data. It might seem strange to my readers, but before “Twilight In The Desert” no one really questioned the official figures of reserves provided by the producing countries. Only a few years before Matt’s book Newsweek was warning of an “oil glut” based on precisely those official numbers!. Today, all of us who study oil and gas try to make an effort to challenge official numbers and study the issues that might impact the figures of proven and probable reserves in countries like Saudi Arabia, Iran, Iraq, Brazil, Russia, etc. Thanks to Matt Simmons we are all a lot more cautious with predictions of new production and, most of all, in estimating decline curves. And this caution has proven to be right when, delay after delay and revision after revision, we can all see that global oil production does not reach the 89mboepd mark even counting with Iraq and Tupi.

It is true that some of the predictions of “Twilight in the Desert” have been delayed, mostly due to the global recession’s impact on oil demand. But even the Kingdom of Saudi Arabia is now showing an unusual level of transparency and recognizing the need to preserve current reserves and monitor the declines of Ghwar, Khurais or Khursaniyah.

Many have criticized the “Peak Oil” theory, but reality has proven that supply issues are only growing and even those who criticize the theory must admit that it has been essential to help promote innovation and alternatives. Even the IEA admits that the “deficit of discoveries” is so large that the world will need investments of $26 trillion to replace consumed reserves by 2030.

But Matt Simmons also left us a tremendously interesting analysis of the opportunities provided by shale gas when analysts and companies said it was uneconomical at $10/mmbtu. Matt was proven right when he mentioned that costs would drop aggressively and proving that profitability of shale gas in Marcellus, Barnett or Haynesville was solid at $4.5/mmbtu.

Mr Simmons’ analysis of the new paradigm of natural gas as a clean, abundant and profitable source of energy and his studies of other alternative sources were also essential for the US administration’s advances in energy policy.

The last time I spoke with Matt Simmons he came for a chat at my fund. We spoke about the challenges of the electric car as a viable alternative to traditional vehicles, the difficulties to develop a coherent and sustainable energy policy in the US and the Macondo oil spill, where Matt was right as well when he warned of a much worse spill at a time when most analysts and experts still spoke of 5-10kbpd. His last comments to me were about the work he was doing on alternative energies that would be efficient and viable without massive subsidies. I am sure his team will continue the good work.

To all my readers, I recommend you to read or re-discover “Twilight in the Desert”, and if you can, read some of his papers from the Ocean Energy Research Institute in Rockland, Maine. I will remember the chats and debates and his lively and open personality, and as soon as I can, I will enjoy a wonderful Maine lobster in his memory. Rest in Peace.

About Daniel Lacalle

Daniel Lacalle (Madrid, 1967). PhD Economist and Fund Manager. Author of bestsellers "Life In The Financial Markets" and "The Energy World Is Flat" as well as "Escape From the Central Bank Trap". Daniel Lacalle (Madrid, 1967). PhD Economist and Fund Manager. Frequent collaborator with CNBC, Bloomberg, CNN, Hedgeye, Epoch Times, Mises Institute, BBN Times, Wall Street Journal, El Español, A3 Media and 13TV. Holds the CIIA (Certified International Investment Analyst) and masters in Economic Investigation and IESE.

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