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Daniel Yergin talks oilsands past, present and future

Daniel Yergin talks oilsands past, present and future thumbnail

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. A few years ago, I remember asking the head of a large environmental organization, ‘Why are you picking on the oilsands?’ And the reply was basically you have to start somewhere and you could do a lot with the visual images …

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.

But I don’t think at this point, you do not see another period of really intense large investment.

Q: In the last year, we’ve seen a retreat by some of the major international oil companies that have sold off some of their oilsands assets. We’ve also seen the acquisition of those assets by Canadian-based companies. What do you think Canadians should read into this — and what do global energy markets read into this trend?

A: Well, I think it’s various companies reshaping their portfolios for various reasons and deciding the oilsands don’t fit into what they’re doing. They need to reduce their footprint, deal with debt and so forth and maintain their dividends.

I think the oilsands, you see companies redeploying … into shale and short-cycle oil. So I think this is a big rebalancing of portfolios. But, whoever the owner is, the oil will continue to flow.

It (also) means you have managements that are totally focused on this. It means the Canadians oilsands have lost an important voice in the United States and so I think the Canadian oil companies need to really be focused on their dialogue with the United States and make sure it’s a strong and consistent dialogue.

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 five fold in 18 years, this is truly a world-class resource and a resource that is going to last a very long time.

Calgary Herald

13 Comments on "Daniel Yergin talks oilsands past, present and future"

  1. Shortend on Tue, 26th Sep 2017 7:41 am 

    Its ALL GOOD….I mean too…the black and sticky kind.
    Odd, he didn’t mention AGW….that’s in the next interview piece..right Rock?

  2. paulo1 on Tue, 26th Sep 2017 7:58 am 

    I think the Olisands will be around long after the ‘Shale Revolution’ ends.

  3. dave thompson on Tue, 26th Sep 2017 9:28 am 

    Past; environmentally destructive and not profitable. Present: the same as the past. Future: same as the past.

  4. rockman on Tue, 26th Sep 2017 10:40 am 

    short stuff – “…he didn’t mention AGW….that’s in the next interview piece..right Rock?” Dealing with AGW is the responsibility of those DIRECTLY producing the vast majority of GHG…the fossil fuel consumers. So, as a representative of the group causing climate, what are y’all doing to abate your destructive activities to a meaningful degree?

  5. deadlykillerbeaz on Tue, 26th Sep 2017 11:37 am 

    The oil companies are merely suppliers of a fungible commodity that is in demand. Users of oil demand the supply, the oil companies gladly ship it to supply depots, gas stations, so the millions of automobile owners can drive 30 miles round trip for the 12 pack of Sierra Nevada Pale Ale they are going to drink before they hit the sack.

    The culpable guilty are the consumers, if nobody wanted any oil and refined oil products, the oil companies would not exist.

    As it is, oil from anywhere is going to be bought so everybody can go to the grocery store and back home with more bacon. You can fry your jalapeno poppers filled with cheeses and onion wrapped with the bacon.

    Oil from the oil sands up in the Athabasca tar sands will be piped to your front door.

    Without some good ol’ Oklahoma crude, it is bad news for everybody.

    When you drive your car, you are directly responsible for the exhaust and emissions from that ICE engine that hauls your worthless hide to the lake on weekends.

    Ain’t nobody else making it that way, just you.


  6. Davy on Tue, 26th Sep 2017 11:49 am 

    “The culpable guilty are the consumers, if nobody wanted any oil and refined oil products, the oil companies would not exist.”

    There is no guilt and guilt is for everyone. We are physically limited to what we can and can’t do. We are economically limited to what we can do and can’t do. The scale of what is best to do is too large to make any kind of meaningful transition possible in time to avoid great pain and suffering. It is best to accept oil for what it is and that is an available energy source that is currently foundational and cannot be substituted in the short term or maybe ever. Then if you want to make a difference get to work on educating the masses to demand management and population control. Let them know while you are at it the solutions are draconian. If they balk then let them have as much oil as they like because it does not make a difference what we do. Without behavioral changes there are no solutions.

  7. Anonymouse1 on Tue, 26th Sep 2017 12:57 pm 

    “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.”

    Actually, Danny Yerkin made a career out of shilling for uS oil corporations.

  8. Davy on Tue, 26th Sep 2017 1:09 pm 

    At least he knows to call them Canadian and not American tar sands. That makes him smarter than you by a long shot.

  9. Anonymouse1 on Tue, 26th Sep 2017 1:32 pm 

    LOL, nice try dumbass. Now back to your goats.

  10. Jean Paul Getty on Tue, 26th Sep 2017 3:40 pm 

    Is that Hannibal Lecter pictured or just Daniel Yergin?


  11. Mick on Tue, 26th Sep 2017 6:13 pm 

    I bet yetrgin drinks a glass of oil for breakfast with his cereal

  12. Shortend on Tue, 26th Sep 2017 6:16 pm 

    Dear Rocks for Brains….does that mean there isn’t a second interview?
    Just asking..

  13. Anonymous on Tue, 26th Sep 2017 11:41 pm 

    Oil sands are a huge slab of supply that can come on if prices ever get too high. The Keystone really held things up (costs about $15 more to move railbit than dilbit). But even with the pipeline blocks, oil sands can intervene if prices get back into the 100+ range and stop it from going higher.

    Also, they are very large deposits. Hubbert even declined to include them in his 1956 paper. Not sure if it was because he didn’t think they would ever get used or if he just thought it would make the world peak look too high and far away if he counted all those tar sands barrels. If I’m kind to him, I assume it was the former. But regardless, they have been a significant source of supply. And Hubbert should have included them instead of excluded them. 2.5 MM bpd is nothing to sneeze at.

    P.s. Yergin is an important narrator. I know you all don’t like his slant, but at least you should read The Prize. Not for the arguments, even, but just for a narrative history of the industry.

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