How North Dakota Became Saudi Arabia and Why OPEC's Days are Numbered

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    Oct 01, 2011 7:27 PM GMT
    http://online.wsj.com/article/SB10001424052970204226204576602524023932438.html?mod=WSJ_Opinion_LEADTop

    Harold Hamm, the Oklahoma-based founder and CEO of Continental Resources, the 14th-largest oil company in America, is a man who thinks big. He came to Washington last month to spread a needed message of economic optimism: With the right set of national energy policies, the United States could be "completely energy independent by the end of the decade. We can be the Saudi Arabia of oil and natural gas in the 21st century."

    "President Obama is riding the wrong horse on energy," he adds. We can't come anywhere near the scale of energy production to achieve energy independence by pouring tax dollars into "green energy" sources like wind and solar, he argues. It has to come from oil and gas.

    You'd expect an oilman to make the "drill, baby, drill" pitch. But since 2005 America truly has been in the midst of a revolution in oil and natural gas, which is the nation's fastest-growing manufacturing sector. No one is more responsible for that resurgence than Mr. Hamm. He was the original discoverer of the gigantic and prolific Bakken oil fields of Montana and North Dakota that have already helped move the U.S. into third place among world oil producers.

    How much oil does Bakken have? The official estimate of the U.S. Geological Survey a few years ago was between four and five billion barrels. Mr. Hamm disagrees: "No way. We estimate that the entire field, fully developed, in Bakken is 24 billion barrels."

    If he's right, that'll double America's proven oil reserves. "Bakken is almost twice as big as the oil reserve in Prudhoe Bay, Alaska," he continues. According to Department of Energy data, North Dakota is on pace to surpass California in oil production in the next few years. Mr. Hamm explains over lunch in Washington, D.C., that the more his company drills, the more oil it finds. Continental Resources has seen its "proved reserves" of oil and natural gas (mostly in North Dakota) skyrocket to 421 million barrels this summer from 118 million barrels in 2006.

    "We expect our reserves and production to triple over the next five years." And for those who think this oil find is only making Mr. Hamm rich, he notes that today in America "there are 10 million royalty owners across the country" who receive payments for the oil drilled on their land. "The wealth is being widely shared."

    One reason for the renaissance has been OPEC's erosion of market power. "For nearly 50 years in this country nobody looked for oil here and drilling was in steady decline. Every time the domestic industry picked itself up, the Saudis would open the taps and drown us with cheap oil," he recalls. "They had unlimited production capacity, and company after company would go bust."

    Today OPEC's market share is falling and no longer dictates the world price. This is huge, Mr. Hamm says. "Finally we have an opportunity to go out and explore for oil and drill without fear of price collapse." When OPEC was at its peak in the 1990s, the U.S. imported about two-thirds of its oil. Now we import less than half of it, and about 40% of what we do import comes from Mexico and Canada. That's why Mr. Hamm thinks North America can achieve oil independence.

    The other reason for America's abundant supply of oil and natural gas has been the development of new drilling techniques. "Horizontal drilling" allows rigs to reach two miles into the ground and then spread horizontally by thousands of feet. Mr. Hamm was one of the pioneers of this method in the 1990s, and it has done for the oil industry what hydraulic fracturing has done for natural gas drilling in places like the Marcellus Shale in the Northeast. Both innovations have unlocked decades worth of new sources of domestic fossil fuels that previously couldn't be extracted at affordable cost.

    Mr. Hamm's rags to riches success is the quintessential "only in America" story. He was the last of 13 kids, growing up in rural Oklahoma "the son of sharecroppers who never owned land." He didn't have money to go to college, so as a teenager he went to work in the oil fields and developed a passion. "I always wanted to find oil. It was always an irresistible calling."

    He became a wildcat driller and his success rate became legendary in the industry. "People started to say I have ESP," he remarks. "I was fortunate, I guess. Next year it will be 45 years in the business."

    Mr. Hamm ranks 33rd on the Forbes wealth list for America, but given the massive amount of oil that he owns, much still in the ground, and the dizzying growth of Continental's output and profits (up 34% last year alone), his wealth could rise above $20 billion and he could soon be rubbing elbows with the likes of Warren Buffett.
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    Oct 02, 2011 9:55 AM GMT
    People should come before profits. There are reasons beyond the environment for renewable energy. But Big Oil wants to continue their enslavement of humanity. If put into use, Americans could have free energy directly into their home. This would reduce electric bills or eliminate them. With electric cars with solar panel roofs, the car could be constantly re-fueled by the Sun. All this is not very profitable for an energy industry which thrives on people being dependent on them by giving them billions of dollars in profits. The energy companies could still charge people for using energy derived from solar power/wind power grids, but they would not be able to justify charging as much.
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    Oct 02, 2011 11:23 AM GMT
    Don't buy this hype. Look into what's happening with fracking in the U.S., particularly in, TX, CO, PA and NY State. Drilling for oil and natural gas in North America? Yeah, let's put profits before people ... again. icon_rolleyes.gif
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    Oct 02, 2011 12:33 PM GMT
    Stan904 saidPeople should come before profits. There are reasons beyond the environment for renewable energy. But Big Oil wants to continue their enslavement of humanity. If put into use, Americans could have free energy directly into their home. This would reduce electric bills or eliminate them. With electric cars with solar panel roofs, the car could be constantly re-fueled by the Sun. All this is not very profitable for an energy industry which thrives on people being dependent on them by giving them billions of dollars in profits. The energy companies could still charge people for using energy derived from solar power/wind power grids, but they would not be able to justify charging as much.


    People should come before profits... so the question you have to ask is that if you actually believe in that position how can you justify *not* drilling and depending on countries like Saudi Arabia who barely give rights to women, execute gays and forbid those of other religions other than Islam from worshiping openly?

    Either solar or nuclear are the endgame - or at least that's what's likely but they're not commercially viable yet - so no matter what you're going to have the incentives to buy oil and gas. Gas is by far cleaner burning which is why I don't really understand the objections to fracking. Nevertheless... we're still going to have to have a transitional fuel source.
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    Oct 02, 2011 12:56 PM GMT
    Check out:

    http://www.gaslandthemovie.com/

    and you begin to think, government regulation is needed.
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    Oct 02, 2011 1:17 PM GMT
    The oil and gas industry are already highly regulated. You can easily find a number of postings (yes, some from industry) that point out the inconsistencies and blatant lies in Gasland:
    http://www.energyindepth.org/2010/06/debunking-gasland/

    I think though the more compelling argument is the alternative is far worse - especially if we're talking about people:

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    Oct 02, 2011 1:34 PM GMT
    riddler78 said
    Stan904 saidPeople should come before profits. There are reasons beyond the environment for renewable energy. But Big Oil wants to continue their enslavement of humanity. If put into use, Americans could have free energy directly into their home. This would reduce electric bills or eliminate them. With electric cars with solar panel roofs, the car could be constantly re-fueled by the Sun. All this is not very profitable for an energy industry which thrives on people being dependent on them by giving them billions of dollars in profits. The energy companies could still charge people for using energy derived from solar power/wind power grids, but they would not be able to justify charging as much.


    People should come before profits... so the question you have to ask is that if you actually believe in that position how can you justify *not* drilling and depending on countries like Saudi Arabia who barely give rights to women, execute gays and forbid those of other religions other than Islam from worshiping openly?

    Either solar or nuclear are the endgame - or at least that's what's likely but they're not commercially viable yet - so no matter what you're going to have the incentives to buy oil and gas. Gas is by far cleaner burning which is why I don't really understand the objections to fracking. Nevertheless... we're still going to have to have a transitional fuel source.


    I have been saying this for a long time, ever since 9/11 that we should have been taking steps to end our purchases of Middle Eastern oil. We have financed our own doom with the terrorism that is directed against us. Yes, I think green energy is the wave of the future, but we have to continue to use our transition energy, oil and gas, in the meantime. By the way gas in my neighborhood here in Dallas was $2.99/gal yesterday. Hope it lasts and continues to go down.
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    Oct 02, 2011 3:28 PM GMT
    Stan904 saidPeople should come before profits. There are reasons beyond the environment for renewable energy. But Big Oil wants to continue their enslavement of humanity. If put into use, Americans could have free energy directly into their home. This would reduce electric bills or eliminate them. With electric cars with solar panel roofs, the car could be constantly re-fueled by the Sun. All this is not very profitable for an energy industry which thrives on people being dependent on them by giving them billions of dollars in profits. The energy companies could still charge people for using energy derived from solar power/wind power grids, but they would not be able to justify charging as much.


    "With electric cars with solar panel roofs, the car could be constantly re-fueled by the Sun"

    So that means we couldn't drive for about 250 days of the year in the midwest.
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    Oct 02, 2011 3:32 PM GMT
    Hey riddler78, oil and gas are also subsidized by you and me, which we need to more towards solar and wind and geo.

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    Oct 02, 2011 3:40 PM GMT
    pecfan saidHey riddler78, oil and gas are also subsidized by you and me, which we need to more towards solar and wind and geo.


    Not sure that I buy that argument - given that there are far more taxes after the fact in the consumption of the end products. I'd be interested to know how it's weighted simply because by sheer virtue of the fact that the taxes are on the refined product it would likely be greater.

    That being said, I do believe an argument can be made that much of the US military subsidizes the world's oil and you could tax more. I'm marginally for a pigovian tax - raising taxes broadly on oil for this reason.

    Wind, solar and geo are uncommercial at the moment unless you're in a remote location not readily accessible by a grid. But that's my point - the incentives already exist for development to happen and make them viable but that will take time (and for the record I think that time is close). In the meantime we still need to consume some type of transitional fuel. Digging up lies as Gasland did - in an attempt to make the mockumentary watchable was not helpful to the realities that the real alternative now is coming from places like Saudi Arabia.
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    Oct 02, 2011 3:43 PM GMT
    Germany is pushing solar and raised rates to subsidize the panels on the roofs. Everyone in Europe is looking to THEM to bail out Europe so raising the rates will not kill the economy.

    What people need to know and say is oil and gas and coal are finite, we need to move now to solar and wind and power.
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    Oct 02, 2011 3:47 PM GMT
    pecfan saidGermany is pushing solar and raised rates to subsidize the panels on the roofs. Everyone in Europe is looking to THEM to bail out Europe so raising the rates will not kill the economy.

    What people need to know and say is oil and gas and coal are finite, we need to move now to solar and wind and power.


    But you also have to understand why Germany is pushing alternatives. It's the threat that Russia will cut off Europe from gas supplies. The reality is that it hasn't been working:

    http://www.thedailybeast.com/newsweek/2009/10/23/the-dark-side-of-green.html

    Everyone in Europe is looking to Germany to bail out Europe but this has nothing to do with their green initiatives which are more like geopolitical realities. People do know and say that oil and gas and coal are finite - which is why alternatives continue to be developed - and it's easy to see how they will quite soon be economical... in the meantime wasting society resources in subsidies for sometimes unreliable but almost universally expensive technologies at the expense of other priorities is not the answer.

    Post-edit: I should note that Germany has been slashing subsidies as well -
    http://www.businessgreen.com/bg/news/1806219/german-parliament-slashes-solar-subsidies and that the discovery of natural gas deposits in Poland may in fact change the geopolitical landscape.
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    Oct 02, 2011 3:52 PM GMT
    LONG LIVE BIG OAWL!!!

    sarc
  • nanidesukedo

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    Oct 02, 2011 3:59 PM GMT
    So...for anyone who wants there to be drilling in the United States....I have to ask - where do you live?
  • mustangd

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    Oct 02, 2011 4:05 PM GMT
    i'm not against using fossil fuels until we can build an infra-structure that supplies adequate supplies of renewable energy. i do not support pursuit of fossil fuels as an indefinte source of energy, in fact we should be in a manhattan project mode of developing renewable energies, to accelerate bringing them online as ssson as possible. fossil fuels pollute, take fracking for example, look what it does to ground water supplies. water is the ultimate necessary resource, yet fracking uses harmful chemicals in its method of obtaining natural gas, and you now see states like pennsylvania okaying the use of "partially" treated waste water as a fracking tool, so, we are going to use partially treated waste water to bust through shale to obtain natural gas? of course, its a profitable venture for both the state and the fracking company, the state spends less money on treating waste water, and the fracking company gets a tool at less cost, but, is shooting partially treated waste water into areas that contain acquifers a good idea in the long term?
    pursuit of oil and natural gas are short term fixes for a long term problem, they are enormously profitable right now, so for those americans who believe in short term fixes, and those who reap the rewards of these profits, there is no reason to change.....
    there are plenty of alternatives, they will recquire large sums of investment before a level of sustained profitability, which is why its not happening in a big way like it should be. one day we will be forced to make these moves, once we have polluted the ground water, then we will have to deal with that as well, no wonder water rights are being quietly bought up.
    right now, we should be building cars and trucks that use an onboard generator, a turbine to produce electricity, yes, the generator will consume fuel but, it will be much more efficient in its use. at the same time, we should build an infra-structure that converts cellulosic ethanol, and bio fuels, while pursuing thorium reactors and cold fusion to produce electricity. not forgetting solar, a new generation of solar cells that can be incorporated into roofing shingles, plastics as a means of supplementing energy use is within our reach, if only we can turn away from the emphasis on profits and bonuses for the shrot term, and think long term...
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    Oct 02, 2011 4:18 PM GMT
    OAWL ROCKS!!!

    Oilshale.jpg
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    Oct 02, 2011 4:30 PM GMT
    freedomisntfree said
    "With electric cars with solar panel roofs, the car could be constantly re-fueled by the Sun"


    So that means we couldn't drive for about 250 days of the year in the midwest.


    Even in the brightest sunniest days of summer, the amount of photovoltaic energy that could be captured in the area of a car's roof could only meet a fraction of a car's energy needs.
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    Oct 02, 2011 6:35 PM GMT
    paradox said
    freedomisntfree said
    "With electric cars with solar panel roofs, the car could be constantly re-fueled by the Sun"


    So that means we couldn't drive for about 250 days of the year in the midwest.


    Even in the brightest sunniest days of summer, the amount of photovoltaic energy that could be captured in the area of a car's roof could only meet a fraction of a car's energy needs.


    It's be enough to run the HVAC fan to keep the interior a bit cooler but that's about it
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    Oct 03, 2011 10:51 AM GMT
    riddler78 saidThe oil and gas industry are already highly regulated. You can easily find a number of postings (yes, some from industry) that point out the inconsistencies and blatant lies in Gasland:
    http://www.energyindepth.org/2010/06/debunking-gasland/

    I think though the more compelling argument is the alternative is far worse - especially if we're talking about people


    The oil and gas industry is one of the least regulated in the nation.

    There are NO blatant lies in Gasland. Josh Fox's team posted a brilliant rebuttal to the oil and gas industry claims.

    http://1trickpony.cachefly.net/gas/pdf/Affirming_Gasland_Sept_2010.pdf

    He's wrapping up on Gasland 2. It's in this film that you'll see what the oil and gas industry is really up to in America.

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    Oct 03, 2011 11:07 AM GMT
    Stan904 saidPeople should come before profits. There are reasons beyond the environment for renewable energy. But Big Oil wants to continue their enslavement of humanity. If put into use, Americans could have free energy directly into their home. This would reduce electric bills or eliminate them. With electric cars with solar panel roofs, the car could be constantly re-fueled by the Sun. All this is not very profitable for an energy industry which thrives on people being dependent on them by giving them billions of dollars in profits. The energy companies could still charge people for using energy derived from solar power/wind power grids, but they would not be able to justify charging as much.


    Profits and people are not separate entities. Don't indulge in a false choice.

    For example, President Obama recently said, "The bottom line is, do we continue to give tax breaks to oil companies, or hire more teachers?"

    No, Mr. President, that is not the "bottom line." That is a completely false choice. The two things are not mutually exclusive.

    (And yes, I realize that he may have been engaging in hyperbole.)

    Either he is ignorant, or he is deliberately exploiting people's ignorance - he's supposed to be intelligent, so you'd think he'd know that he was using a completely bogus comparison. It may be that he truly believes this Luddite nonsense.

    See also his ridiculous statement about ATMs and automation being "structural issues with our economy" which cause unemployment. (interview with dimwit of note Ann Curry on the Today Show).

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    Oct 03, 2011 8:15 PM GMT
    JackNWNJ said
    Stan904 saidPeople should come before profits. There are reasons beyond the environment for renewable energy. But Big Oil wants to continue their enslavement of humanity. If put into use, Americans could have free energy directly into their home. This would reduce electric bills or eliminate them. With electric cars with solar panel roofs, the car could be constantly re-fueled by the Sun. All this is not very profitable for an energy industry which thrives on people being dependent on them by giving them billions of dollars in profits. The energy companies could still charge people for using energy derived from solar power/wind power grids, but they would not be able to justify charging as much.


    Profits and people are not separate entities. Don't indulge in a false choice.

    For example, President Obama recently said, "The bottom line is, do we continue to give tax breaks to oil companies, or hire more teachers?"

    No, Mr. President, that is not the "bottom line." That is a completely false choice. The two things are not mutually exclusive.

    (And yes, I realize that he may have been engaging in hyperbole.)

    Either he is ignorant, or he is deliberately exploiting people's ignorance - he's supposed to be intelligent, so you'd think he'd know that he was using a completely bogus comparison. It may be that he truly believes this Luddite nonsense.

    See also his ridiculous statement about ATMs and automation being "structural issues with our economy" which cause unemployment. (interview with dimwit of note Ann Curry on the Today Show).



    If you haven't already and I suspect you have, read Saul Alinsky's "Rules for Radicals" and you'll understand Obama's playbook much better.
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    Oct 03, 2011 8:29 PM GMT
    That might sound like a lot especially if you go even with the highest number at 25 billion barrels. Except when you consider the United States alone uses 20-21 million barrels of oil a day. The world I think is up to 87 million barrels a day. Would someone please do the math?

    Also when you calculate that we have been discovering less oil on average each year since 1968. I think we are up to discovering 1 barrel of new oil for every 5 barrels used. So in the long run we have a problem. I also highly doubt the United States will be able to turn its production around that has been going down since the 1970's.
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    Oct 03, 2011 8:43 PM GMT
    chris2787 saidThat might sound like a lot especially if you go even with the highest number at 25 billion barrels. Except when you consider the United States alone uses 20-21 million barrels of oil a day. The world I think is up to 87 million barrels a day. Would someone please do the math?

    Also when you calculate that we have been discovering less oil on average each year since 1968. I think we are up to discovering 1 barrel of new oil for every 5 barrels used. So in the long run we have a problem. I also highly doubt the United States will be able to turn its production around that has been going down since the 1970's.


    I didn't look this up because I'm on a conference call, but I think our daily consumption is down to 19.5 million barrel per day.
  • dancedancekj

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    Oct 03, 2011 8:54 PM GMT
    Even if we have to use some oil for our daily lives, wouldn't it make more sense to wean ourselves off it? Yes, solar and geo and wind energy may not be the end all of our power needs, but why can we not utilize those as much as possible and then use oil and coal for the remainder?

    I had the idea one time to make people who want to lose weight enroll in a mandatory pedicab service. Fat people get skinny, and it's technically a sustainable source of energy [/snark]
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    Oct 03, 2011 9:08 PM GMT
    riddler78 saidhttp://online.wsj.com/article/SB10001424052970204226204576602524023932438.html?mod=WSJ_Opinion_LEADTop

    Harold Hamm, the Oklahoma-based founder and CEO of Continental Resources, the 14th-largest oil company in America, is a man who thinks big. He came to Washington last month to spread a needed message of economic optimism: With the right set of national energy policies, the United States could be "completely energy independent by the end of the decade. We can be the Saudi Arabia of oil and natural gas in the 21st century."

    "President Obama is riding the wrong horse on energy," he adds. We can't come anywhere near the scale of energy production to achieve energy independence by pouring tax dollars into "green energy" sources like wind and solar, he argues. It has to come from oil and gas.

    You'd expect an oilman to make the "drill, baby, drill" pitch. But since 2005 America truly has been in the midst of a revolution in oil and natural gas, which is the nation's fastest-growing manufacturing sector. No one is more responsible for that resurgence than Mr. Hamm. He was the original discoverer of the gigantic and prolific Bakken oil fields of Montana and North Dakota that have already helped move the U.S. into third place among world oil producers.

    How much oil does Bakken have? The official estimate of the U.S. Geological Survey a few years ago was between four and five billion barrels. Mr. Hamm disagrees: "No way. We estimate that the entire field, fully developed, in Bakken is 24 billion barrels."

    If he's right, that'll double America's proven oil reserves. "Bakken is almost twice as big as the oil reserve in Prudhoe Bay, Alaska," he continues. According to Department of Energy data, North Dakota is on pace to surpass California in oil production in the next few years. Mr. Hamm explains over lunch in Washington, D.C., that the more his company drills, the more oil it finds. Continental Resources has seen its "proved reserves" of oil and natural gas (mostly in North Dakota) skyrocket to 421 million barrels this summer from 118 million barrels in 2006.

    "We expect our reserves and production to triple over the next five years." And for those who think this oil find is only making Mr. Hamm rich, he notes that today in America "there are 10 million royalty owners across the country" who receive payments for the oil drilled on their land. "The wealth is being widely shared."

    One reason for the renaissance has been OPEC's erosion of market power. "For nearly 50 years in this country nobody looked for oil here and drilling was in steady decline. Every time the domestic industry picked itself up, the Saudis would open the taps and drown us with cheap oil," he recalls. "They had unlimited production capacity, and company after company would go bust."

    Today OPEC's market share is falling and no longer dictates the world price. This is huge, Mr. Hamm says. "Finally we have an opportunity to go out and explore for oil and drill without fear of price collapse." When OPEC was at its peak in the 1990s, the U.S. imported about two-thirds of its oil. Now we import less than half of it, and about 40% of what we do import comes from Mexico and Canada. That's why Mr. Hamm thinks North America can achieve oil independence.

    The other reason for America's abundant supply of oil and natural gas has been the development of new drilling techniques. "Horizontal drilling" allows rigs to reach two miles into the ground and then spread horizontally by thousands of feet. Mr. Hamm was one of the pioneers of this method in the 1990s, and it has done for the oil industry what hydraulic fracturing has done for natural gas drilling in places like the Marcellus Shale in the Northeast. Both innovations have unlocked decades worth of new sources of domestic fossil fuels that previously couldn't be extracted at affordable cost.

    Mr. Hamm's rags to riches success is the quintessential "only in America" story. He was the last of 13 kids, growing up in rural Oklahoma "the son of sharecroppers who never owned land." He didn't have money to go to college, so as a teenager he went to work in the oil fields and developed a passion. "I always wanted to find oil. It was always an irresistible calling."

    He became a wildcat driller and his success rate became legendary in the industry. "People started to say I have ESP," he remarks. "I was fortunate, I guess. Next year it will be 45 years in the business."

    Mr. Hamm ranks 33rd on the Forbes wealth list for America, but given the massive amount of oil that he owns, much still in the ground, and the dizzying growth of Continental's output and profits (up 34% last year alone), his wealth could rise above $20 billion and he could soon be rubbing elbows with the likes of Warren Buffett.
    The hype is bolded/colored.

    Without credentials, I'm skeptical of his 'claims'......... otherwise he's just another CEO (note 'executive')