Petroleum’s Great Revival – by Peter Foster (National Post – December 13, 2012)

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Daniel Yergin says rebalanced oil industry must reach new markets

Trends or events attached to the word “Great” are more often to be feared than embraced. Nobody wants any more Great Wars, or another Great Depression. The “Great Moderation” celebrated just a few years ago by consecutive Federal Reserve chairmen Alan Greenspan and Ben Bernanke was followed by — indeed arguably spawned — a “Great Recession.”

Now however, there is a new “Great” in the making, and it appears to be all good news: “The Great Revival” of the North American petroleum industry. This concept was invoked on Wednesday by leading global energy analyst Daniel Yergin at a presentation on the final day of the annual investment meeting of the Canadian Association of Petroleum Producers, which was this year held in Toronto.

Time magazine has written that: “If there is one man whose opinion matters more than any other in global energy markets, it’s Daniel Yergin.” Let’s hope so, for Dr. Yergin is not merely highly knowledgeable about Canadian energy, he is also a fan, and a leading consultant to CAPP.

Dr. Yergin also outlined a “rebalancing” of the entire global energy industry, significantly related to that Great Revival. He did not dwell on the irony that this revival should have taken place under perhaps the most anti-oil president in U.S. history, but then diplomacy is needed when you have the ear of the White House, which in Dr. Yergin’s case is good news for Canada.

The rebalancing to which Dr. Yergin — whose books include the Pulitzer-winning The Prize and, more recently The Quest: Energy, Security, and the Remaking of the Modern World — refers is hemispheric. The growth in the Canadian oil sands, the U.S. boom in tight oil, and the revolution in shale gas on both sides of the border, all mean that what had become a joke — North American energy independence — is now a possibility.

Meanwhile east-west global oil trade will become more north-south within the Americas. Independence will not come about because of any grand energy strategy or presidential commitment (Dr. Yergin noted that presidents have been promising energy independence since Richard Nixon, even as domestic oil production has gone down), but because of ever-advancing technology, which has again and again produced wonderfully productive surprises, often from unexpected directions.

Dr. Yergin noted that the boom is significantly due to the vision of one man, George P. Mitchell, who was convinced that it should be possible to access the vast natural gas resources trapped in certain “tight” shale rock formations. Big oil companies disregarded the idea as “something that independents do.” They saw North American gas supplies running out, and believed the solution was importing liquefied natural gas.

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