NEAL CONAN, HOST:
Last month, Iraq passed an historic milestone - more oil exports than any month since Saddam Hussein invaded Kuwait in 1990. Now, a country so long ravaged by war and international sanctions has re-established itself as a major player with a new export facility off Basra, in the Persian Gulf. While challenges remain, Iraq's new oil boom raises hopes for economic development and prosperity, but it's also part of an historic shift in petroleum production as new technologies and new discoveries could put the Americas on a par with the Middle East.
Oil historian Daniel Yergin describes this new world in "The Quest: Energy, Security and the Remaking of the Modern World." If you have questions formed about these changes, our phone number is 800-989-8255. Email us: talk@npr.org. And Daniel Yergin joins us here in Studio 3A. Nice to have you back on the program.
DANIEL YERGIN: I'm delighted. Thank you.
CONAN: And how promising are these numbers about Iraq?
YERGIN: Well, it's been a long time coming. What it means is Iraq is back to where it was in 2001 so - but it's certainly an improvement. It's coming at a time when sanctions are going in place on Iran, and there's a premium on supplies coming from other countries, and Iraq is one of those countries.
CONAN: Iraq always said to have enormous reserves that could make it, well, almost on a par with Saudi Arabia.
YERGIN: Yeah. Well, that will take a very, very long time. There are very optimistic numbers out there from the Iraqi oil minister and others that would get it on a par, but it's a very big job to even get it to, say, maybe a little more than half of what Saudi Arabia is. It's going to take a lot of investment and time. But, as you said, those resources have been there for a very long time, and the reason they haven't been developed is what's happening aboveground.
CONAN: And that's the politics, and it's certainly not solved by any stretch of the imagination. It continues to be violent but a great deal less.
YERGIN: Yeah. That's right. There's less violence, I mean, is a key thing. And one of the things I really - I talk about in "The Quest" was that it turned out that the oil situation in Iraq after the war began was much worse. It was worse not because of the aged fields - and these were very aged fields. There were control rooms and refineries that have been built by the Americans in the 1950s but because of the sabotage, the destruction, the rampant looting and all of those things sent the Iraqi production way down, and it's been rebuilding now. Foreign companies are coming in and bringing capital and technology to get these fields up. And so that's why we're seeing this boost.
CONAN: Foreign companies, you mentioned, not very many American companies.
YERGIN: No. If you remember, there's all the talk about American companies being there. There are very few there. I think the American companies looked at the economic terms, and many of them just decided this is very tough, that we can't make money doing this. So you have - it's really like a sort of mini United Nations. You have Chinese. You have Indian. You have Russian. You have a couple of American, a lot of European companies there. And they're all working because they want to get a foothold in what might be, you know, this major new oil production opportunity.
CONAN: And much of this new production - and we mentioned the production - the loading platform off of Basra - is in the southern fields and the Shia areas in the south. There's also contentious politics involving the northern fields in Kurdistan.
YERGIN: Absolutely. Kurdistan - the Kurdistan oil minister was here recently. It's the autonomous region. And he holds out a vision that Kurdistan itself could become a major source of oil. It was an area that under the Saddam time was really ignored for exploration because Saddam didn't want to put money and resources into the Kurdish area. And the Kurdish minister, Dr. Ashti, told this story when he was here the other week, about how, when they were negotiating Baghdad for 2006 for who would have the oil fields, the Iraqis in the south said, oh, there's no oil there. And so he said just give me those mountains.
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CONAN: So as Iraq re-emerges as a major player, as you mentioned, the sanctions on Iran had made it difficult and reduced Iranian exports. But in your book, "The Quest," you talk about the competition between Iran and Iraq as a major limiting factor, eventually, on Iraqi production.
YERGIN: I think that's the case. It's a historic - really tell the story of the historic struggle over who will dominate the Gulf. And, of course, now it is a Shia-Iranian more friendly regime in Iraq. And as soon as Iraq raised its estimates of its reserves, like the next week Iran said, well, our reserves are larger and the Iranians are not going to particularly welcome a big increase in Iraqi production, and I think is, you know, things have calmed down. On May 23rd, the U.S. and the Iranians are going to meet in a neutral city, Baghdad, to discuss nuclear sanctions and the nuclear program, but the Iranians have a lot of influence over what happens in Iraq.
CONAN: In the meantime, the diversity of oil around the world, it would seem that the Middle East had a chokehold with its, what, 25 percent of proven world reserves. That has been reduced.
YERGIN: It is. You know, I'd say, you know, there always a surprises that's happened in world energy and world oil, and I think the biggest surprise right now is what's happening in the United States. I was looking just before the show, and I think you can expect that as large as the increase in Iraqi production will be this year, that will have about the same size increase in the United States. And if you'd said that four, five years ago, that would have seemed fantasy.
CONAN: And this largely due to the fracking process and oil shale?
YERGIN: Yeah. Yeah. Yes. Well, yes.
CONAN: Shale oil, excuse me.
YERGIN: Well, it's very confusing, oil shale, shale oil. Tidal oil seems to be the term people are using, but this is what has turned North Dakota into the third largest oil-producing state in the country. And, you know, you don't think of North Dakota as the oil patch before.
CONAN: In the meantime, we also have Venezuela. Its reserves growing as discoveries increase there. And Brazil, emerging offshore as one of the great oil producers in the world.
YERGIN: Yeah. That's one of the things I really focused in on the quest because, you know, people don't think about Brazil. They think about it in terms of ethanol, but the growth of Brazilian production has been a big deal. Just about a month ago, the president of Brazil was here in Washington and was telling the story that people in the '70s and '80s said, we have to develop ethanol because we have no oil. It turns out Brazil now has a lot of oil, and that offshore oil in what's called the pre-salt, which is - was challenging - it was a frontier to get through it, now holds the prospect that Brazil could be producing twice as much oil as Venezuela in a decade or so if things go on track. And we never kind of thought of Brazil as energy power before.
CONAN: And through all of these developments, the arguments over the environments continue, how much degradation is caused by the fracking process. That's a particular controversy in this country involving natural gas, as well oil production. And the greater argument over how much burning all of these combustibles - oil, gas, everything else - is contributing to global warming.
YERGIN: Well, I think we have to divide it into two parts. I mean, we have, you know, maybe the most important climate policy we have in the country. One of the most important is the fuel efficiency standards for cars. So it's a question, where is that oil going to come from? Do we want it to come from Venezuela, or do we want it come from Canada, even though we - our peak demand has gone down. And on the environment, in terms - I was under the committee that reported for President Obama last year on the environmental aspects of shale gas. And I think the conclusion of the administration is that these are all manageable, and there're pragmatic solutions to something that is really changing the energy position of the United States.
CONAN: Our guest is Daniel Yergin, chairman of IHS CERA and author of "The Quest: Energy, Security, and the Remaking of the Modern World." And let's see. We got some callers in on the conversation. 800-989-8255. Ken is on the line, calling from San Rafael in California.
KEN: Hi. My questions is this. You know, we have increased our supply of natural gas and oil through fracking. How much natural gas - and I think that's probably a bigger issue now because we convert everything to natural gas if we chose - to - is coming from non-fracking, because we're seeing that the side effects of fracking may be untold at this point. And how much of our natural gas is offshore on the East Coast because in the 1950s, there was a study done that said we have enough natural gas off the East Coast alone to supply the United States under full production for at least 100 years.
YERGIN: Well, I think off the East Coast of the United States there's really been no modern exploration because activities ceased several decades ago. And natural gas, about 37 percent of our total production now is shale gas. And a decade ago, it was about 2 percent. So it's really grown quite phenomenally. And the other thing, supplies have grown so rapidly that the price of natural gas has really collapsed. So people know how much they're paying more for gasoline, but if they'll look at their natural gas bills at home, they'll see that those bills have gone down.
CONAN: There was a - and thanks very much for the call, Ken. There was an interesting story in the paper the other day, an import terminal that had been built in Maryland to bring in natural gas that people are saying, this needs to be redeveloped so we can export natural gas to places like Japan where it's - you can get a good price for natural gas.
YERGIN: Yeah. Well, exactly, the Japanese because they - basically, every single - all 54 nuclear power plants in Japan are now shut down. They are scouring the world for natural gas supplies in form of liquefied natural gas. And what it shows in the development here is that because of these technological breakthroughs, we were - five years ago, we were going to be a big importer. We were going to spend $100 billion a year importing natural gas, liquefied natural gas. Now, we have so much and prices have collapsed so much that, indeed, there are these projects and proposals to actually - we would join the queue of LNG exporters.
CONAN: And at the moment, there's no place to put all the natural gas.
YERGIN: Well, right. We're very close to actually running out of storage room.
CONAN: Let's see if we got another caller in. Randy is with us from Elkhart, Indiana.
RANDY: Hi. If we had started 30 or 40 years ago aggressively to drill oil, we would have the same problem that we're having with natural gases right now, I think. Do you think we're better off for having waited and kept all that oil in the ground all this time?
YERGIN: Well, I think it was a question of people knew the oil was sort of there, but it was just - it was not thought to be economically possible to do it. So I think what's happened is that the technology, how to evolve, how to develop, and it was about 25-year period, looking at decades you're talking to, for this technology to mature where it is today. And it really has only taken off in the last three, four, five years.
RANDY: But do you think we're better off for having it in the ground, we've been better off lowering oil prices then, or...
YERGIN: Oh. Well, I think, you know, history is what it is. I think that we've been done - I mean, what we do have the opportunity now is to have more of our production domestically. And I think what's become clear - and I think this has been very important to the Obama administration as well to the Republicans - is recognizing that it's not just we're not importing oil, it's not just energy security, but it turned out that there's a big economic development job component. President Obama mentioned 600,000 jobs from shale gas in his State of Union address. And I think it's part of this kind of changing discourse we're having about energy in our country.
CONAN: Randy, thanks very much.
RANDY: Thank you.
CONAN: We're talking with Daniel Yergin. And CERA, isn't that used to be Cambridge Energy...
YERGIN: Research Associates, and that's compressed.
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CONAN: Oh, that's compressed, like everything else. You're listening to TALK OF THE NATION from NPR News. Ralph is with us. Ralph from Raleigh in North Carolina.
RALPH: Hi. I got a quick question. You just mentioned Brazil. I'm wondering about how the whole BRIC thing works out, Brazil, Russia, Indian, China pact. And who are the biggest consumers of Brazilian gas?
YERGIN: Well, it's really Brazilian oil. I mean, Brazil's an exporter of oil. It's actually run short of ethanol. It's now importing ethanol from the United States. But it is interesting. You take those four countries, you - they really symbolize the change in the global economy that's occurred, the change of where income growth is and so forth. And you've seen - so you see this growing trade between Brazil and China.
When the president of Brazil was here, she remarked that in the '70s, China used to export oil to Brazil. Now, Brazil exports oil to China, along with a lot of other raw materials. But the big market, the one that created what I called in "The Quest," the demand shock is, of course, China, which has grown so fast, and its oil consumption now is about half of the United States. They sell more new cars every year in China than in the United States, and that kind of - it's a sign post to the future.
CONAN: Ralph, thank...
RALPH: Paul Krugman had talked about that before. I guess, you know, with the oil production, I'm wondering, geopolitically, you know, that's something that the United States needs to look at, you know, that relationship alone, not just China but with Russia and India as well.
YERGIN: Well, I think that geopolitics are always part of energy and, you know, Russia is a big exporter of natural gas to Europe. It's critical to its budget. And, you know, there's - oil is one of the issues in the U.S.-China relationship, energy in general, and I think it's something that we have to kind of pay attention to and manage it so it kind of stays a commercial issue and doesn't become a strategic, competitive issue, because that won't be good for anybody.
CONAN: Ralph, thanks very much.
RALPH: All right.
CONAN: And, Daniel Yergin, I wanted to ask you the disaster at the nuclear power plant in Japan. As a result, there is a sea change in public opinion there, and all of the nuclear power plants in Japan, as you mentioned, have shut down. In this country, Deepwater Horizon, disaster in the Gulf of Mexico, all of these platforms are now up and producing again. New licenses are being offered. We're talking about drilling in - off the coast of -northern coast of Alaska and the Bering Sea.
YERGIN: Yeah. Well, I think they're two different kinds of accidents. And, you know, just the consequences of Fukushima. I mean, there was Japan saying that we're going to get 50 percent of our electricity from nuclear power, and now these plants were shut down for normal maintenance, and they just can't - public opinion won't allow them to open it again. So Japan is going to incredible soul searching.
It's true. I think one of the things is that the regulatory system or regime was changed, and the kind of promotion side of offshore development was separated from the safety side. And I think, you know, and kind of, you know, it's not back to where it was, but it is a new system. And also, you know, this was an accident that supposedly couldn't happen. It did happen, and they didn't have the technology to deal with an accident like that. Now, their two companies have forced under pressure of the events to develop the technology to do it. And I think that was one of the requirements for the administration agreeing to reopen and begin new licensing in the Gulf of Mexico.
CONAN: But if we talk about - and in Alaska, in the Bering Sea, that's shallow waters. It's not as deep as...
YERGIN: Yeah.
CONAN: ...as with that platform in the Gulf of Mexico, but disaster there - how are you going to get resources to that remote part of the world?
YERGIN: Well, I think that's all going to be built in to the whole process. I don't think it's going to go forward with the sense that, oh, well, we can improvise. It's got to be built into the basic plan, and I think it will be. And this is a project that's really been under development for 20 years now.
CONAN: All these projects take decades to come to fruition.
YERGIN: Long lead times, yes.
CONAN: Daniel Yergin, thank you so much.
YERGIN: Thank you.
CONAN: I appreciate it. Daniel Yergin, a Pulitzer Prize winner for "The Prize." His most recent book, "The Quest: Energy, Security, and the Remaking of the Modern World." He was kind enough to join us here today in Studio 3A. Tomorrow, Command Sergeant Major Chris Farris and his wife, Lisa, talk about lessons from a military marriage. Join us for that. It's the TALK OF THE NATION from NPR News. I'm Neal Conan in Washington. Transcript provided by NPR, Copyright NPR.