Yergin talks oil reserves past, present and future
Daniel Yergin has made a career out of making sense of the big trends sweeping through the dynamic universe of international oil and natural gas development.
The winner of the Pulitzer Prize for his seminal book about the energy sector, The Prize, Yergin is also vice-chairman of IHS Markit, as well as a prominent energy commentator and economic thinker.
In 2005, he told Postmedia the Canadian oilsands were on the verge of becoming a significant source of supply for world energy markets, “almost a major new oil-exporting country coming into the system.”
Since then, production has eclipsed 2.5 million barrels a day and more than $226 billion of capital investment has streamed into northern Alberta.
With the oilsands marking 50 years of commercial production, Postmedia columnist Chris Varcoe chatted with Yergin this month about the resource’s development and his outlook for its future. The following interview has been edited and condensed for space.
Varcoe: Commercial oilsands production began 50 years ago with Sun Oil’s Great Canadian Oilsands Project. What has been the legacy from the oilsands?
Yergin: It demonstrates how long it takes to move from a kind of an initial concept to really innovating and getting the engineering and technology to work, to get into a kind of liftoff stage. But there was a lot of (effort) that went into that original launch in 1967, and I think probably at the time, they didn’t know how challenging it would be to get to where it would be at the beginning of this century.
Q Many skeptics doubted the oilsands would ever be commercially viable and the early projects spent years losing money and encountering technical problems. In your opinion, what were the keys to overcoming those barriers?
A One was the advance in the mining process, modernizing it and making it bigger and making it more flexible. I think a second was, of course, the development of in-situ (oil). And thirdly, I think Canada suffered for a long time from a very negative energy policy toward oil and gas and I think that was a hindrance, too. As I understand, the tax reform at the end of the 1990s was a crucial thing to also help build up momentum.
What always, of course, kept people focused was a sense of virtual inexhaustibility — one of the fundamentals was oilsands has very high capital costs to get it going, but once it’s going you don’t worry about depletion.
Q The first 25 years were the infancy of the oilsands and proving its technology. How do you view the last 25 years in its evolution?
A It’s certainly continuing to innovate, but it crossed the divide from being fringe to being a baseload (supply) and it changed the logistical dynamics of North America. It’s a major addition to North American and really global energy security.
Q What is the future of the oilsands and its ability to grow?
A Three factors really come to the fore. One is the rise of U.S. shale (oil), the second is the price collapse and the third is kind of environmental opposition.
It seems to me the period of the demonization of the oilsands has somewhat passed.
Of particular importance today is pipelines and the ability to move oil. If you look at it, you can see two kinds of pipelines are under pressure. One is the development of physical pipelines and the second is financial pipelines, a pipeline of finance.
But with that said, we see the era of big, new capital commitments is behind us and it seems to us now the growth will come from greater efficiency and sort of extensions of existing projects.
Q Can the oilsands remain competitive in attracting investment against the shale oil revolution in the United States?
A Well, the shale oil revolution is still in its early phases, I have to say. But I think we see, in terms of the type of (oilsands) projects we describe — either extensions or greater efficiencies — with extensions, prices approaching $50 (a barrel) are doable. So the notion that the oilsands are going to be put out of business by (low) prices are just not correct. Once the investment is made, the oil will be produced.
Q You have made your career in telling stories, finding narratives and making sense of the bigger energy picture. What are the stories coming out of the oilsands that have captured your imagination?
A How hard it was to get to the takeoff. It took, what would we say, almost three decades to get there. It took a lot of perseverance and sort of an irrational belief to do it. So that’s one thing.
Another thing that appealed to me when I think about it is, how big this has become in almost a low-profile way, how important it’s become and not well recognized (for) the significance and scale of it. And just the admiration to increase production almost fivefold in 18 years, this is truly a world-class resource and a resource that is going to last a very long time.