Hydrocarbon Historian
It is not often Guyana welcomes (albeit virtually) a Pulitzer Prize winning author. Dr Daniel Yergin who is scheduled to speak on Day One of the International Energy Conference and Expo Guyana 2022 is considered the historian of hydrocarbon without peer.
His 1991 book “The Prize, the Epic Quest for Oil, Money and Power” is described as the “history of the world from the point of view of oil” and chronicles how the discovery of what is the lifeblood of the global economy catapulted mankind into modernity and how the pursuit of oil has shaped geopolitics and at times created conflict.
The book has plenty of that but also reads like a novel with a cast of out-sized characters who each played a part in the industry’s 170-year development. Take for example a struggling chemistry professor Benjamin Silliman whose 1854 report on how “rock oil” that was abundant in the streams of Western Pennsylvania, could be distilled into a fuel for lamp illumination. It would kick off the first big exploration boom. Rural backwaters became towns overnight with a parcel of land in Pithole Pennsylvania selling for $2M in 1856. However, only a year later the oil suddenly ran out, the boom became a bust and the same parcel would sell for $4.37 in 1878.
Then there was John D Rockefeller, the original oil tycoon who ruthlessly controlled its transportation via his Standard Oil, wore his suits until they shined and in his lifetime would give away some $550M to charitable causes. In 1911 amidst political pressures over its quasi-monopoly of the industry, the Supreme Court would order the breaking up of Standard Oil into seven entities. With shares in all of them, Rockefeller ended up increasing his personal wealth to $9B in today’s money.
Meanwhile oil’s influence on European politics would be significant. A young Joseph Stalin fomented unrest in the prolific Baku fields in the early days of the Russian revolution driving out the Rothschilds. Later as Soviet Leader he would defend them at massive human cost from Hitler’s army. Winston Churchill’s 1911 decision to switch British naval vessels to oil from coal meant securing reserves in what was then Persia, starting a tense relationship between Iran and the West that perseveres to this day.
American self-sufficiency in oil (six out of every seven barrels of oil used by the Allies during World War II came from the United States) would be a decisive factor in the outcome of World War II as Japan lost access to fields in the East Indies. And finally the rise of OPEC and the emergence of petro-states that became massively wealthy has also resulted in conflict in the Middle East including two Gulf Wars.
What also runs through this book is the enormous uncertainty and huge risks involved in the industry which persist, despite far advanced technology. Sticking a pipe in the ground is still an educated guess, an act of faith. Stories abound of dry wells and fortunes squandered or of wells discovered when gangs were packing up to leave and investors out of pocket. Seven years of futile exploration in Persia almost bankrupted a British syndicate only for a massive strike at Masjid-i-Suleiman in 1908. In 2015 offshore Guyana, there was much debate over whether to drill Liza 1 or Skipjack a well that would turn out to be dry. Had it been the latter, the consortium might well have abandoned the basin and missed out on the biggest discovery of the 21st Century.
Oil is a unique business in that companies don’t so much as directly compete against each other as try to overcome the common challenges of geology, financing and politics. It is not a game of tennis so much as golf where you play against the course. It explains why so many of the big oil companies collaborate on projects.
Dr Yergin in his most recent book “The New Map: Energy, Climate, and the Clash of Nations” has turned his attention to the future energy transition and energy security, warning that climate change and the opening up of a transit route between Europe and Asia through the Arctic Ocean will likely make Russia a pivotal power able to produce and supply gas along what is being called the Polar Silk Road.
What he has to say on Guyana’s future as a significant oil producer and the political consequences that might arise should be of great interest.