Pulitzer Prize winner Daniel Yergin on BC’s future in global energy

The global energy sector is a constantly evolving, fast-paced industry, and British Columbia has the potential to leverage some profitable relationships if it capitalizes on its resources.

Pulitzer prize winner and leading energy scholar and expert Dr. Daniel Yergin delivered this message at a special lunchtime dialogue at the Beedie School of Business’ downtown campus on September 29.

Yergin – who has served as an advisor and analyst on energy related topics including energy security, unconventional oil and gas development – won the Pulitzer Prize for General Non-Fiction in 1992 for his book, The Prize: The Epic Quest for Oil, Money, and Power.

At the dialogue he presented research from his latest book, The Quest: Energy, Security, and the Remaking of the Modern World, focusing on the great struggles over energy and oil, energy markets, and climate change.

While researching his latest book, Yergin noted that the global energy sector had changed entirely since the publication of The Prize. At the time of the book’s publication, the Soviet Union was a major economic power, and climate was not an issue in the energy sector. As well, clean technology had not been invented, shale gas was unheard of, and the price of oil was predicted to remain at $20 per barrel indefinitely.

In light of these major economic shifts, Yergin sought to focus his latest book on the whole range of energy sources, and not solely oil and renewables. In doing so, he structured his research around three major issues.

The first issue centred on the problem of abundance versus shortage. In the last 24 years, the world’s GDP has doubled – were it to double again in a similar period of time, where would energy supplies come from? As well, the growth will come from emerging markets, particularly in Asia. The question for BC is therefore whether it will participate in Asia’s demand for energy.

The second issue revolved around energy security. This has traditionally been defined as disruption, for example, the physical disruption of the flow of oil. Now, however, there are three new dimensions to this: the physical security of amenities; cyber vulnerability; and integrative energy shocks such as those that occur in the wake of natural disasters such as Hurricane Katrina and Hurricane Sandy.

The final question Yergin’s research concerned was that of environment, and in particular, how to manage the risks and costs of energy’s impact on climate. Citing China’s pollution issue in major cities as a prime example of this, Yergin noted that this has potential to affect BC, as China explores natural gas as a major avenue to fixing the problem.

Eager to begin a dialogue with the assembled audience, Yergin opened the floor to questions, the first of which concerned the recent deal between Russia and China for the Russians to supply energy to the Chinese.

“That deal was actually in negotiations for ten years prior to being signed, with only one detail to be agreed: price,” said Yergin. “Putin needed a big deal with the Chinese to indicate that Russia is going to look east in their energy contracts in the future, which gave the Chinese a strong negotiating hand. From a Canadian viewpoint, this tells you that the gas markets are going to be competitive, and someone will need to fill the demand.”

Following this, Yergin noted that Europe is currently examining its reliance on Russian gas. “The EU is set to put a lot of focus on energy efficiency, and this has raised the question about whether Russia is a reliable supplier,” he explained.

Perhaps surprisingly, Yergin noted that coal is set to remain a major factor in the energy sector for some time to come. “In 1881, Lord Kelvin informed the British Science Association that the supplies of coal would run out in their lifetimes, and advocated a switch to wind energy reliance,” he explained. “Of course this hasn’t happened, and although we can see countries such as the USA closing coal plants, others are increasing use of it. Germany is now importing coal from the USA, and its environmental footprint is increasing as a result.”

In closing the engaging dialogue, Yergin was asked about Canada’s forthcoming resources, and whether it should explore other markets rather than rely on the US as their sole buyer. He replied that as a US citizen, he could say that the US sometimes takes Canada for granted, and that it often doesn’t recognize the level of foreign investment in the oil sands.

“Canada would do well not to deal with just one market,” he said. “The opportunity to have liquid natural gas exports is new for Canada, and having routes to global markets is a good idea. Although that touches upon provincial issues – such as pipelines and railroads – from a national interest it makes sense.”