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‘The boundaries are coming down’—an interview with Daniel Yergin

Editor's note: Daniel Yergin, president of Cambridge Energy Research Associates (CERA), is an internationally respected authority on politics, economics, and energy and especially on how these three hugely important areas interact. Yergin is perhaps best known for his book The Prize: The Epic Quest for Oil, Money and Power, which won the 1992 Pulitzer Prize for nonfiction and was subsequently made into an eight-hour television series seen by 20 million people in the United States alone. Yergin's most recent book (1997, coauthored with Joseph Stanislaw) is The Commanding Heights: The Battle Between Government and the Marketplace that Is Remaking the Modern World. CERA is an international consulting firm with 200-plus employees and offices in many major political and oil centers. Yergin was interviewed by Mike Bahorich and Craig Jarchow of Apache Corporation on behalf of TLE.

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Jarchow: When any of us thinks about the future of the petroleum business, we are struck by the ascendance of the supermajors and superservice companies. How will they change the oil industry of the future? Will other companies be able to compete against them? Will we see further change in the industry in addition to these megamergers?

Yergin: Not just in the oil business, but across industry after industry, we see today this focus on scale among a certain group of companies with the aim of being competitive anywhere in the world. With information technology, you can manage across a much broader span than you could even a decade ago. So we are seeing mergers in all sorts of industries that one might not have expected would have been possible five or six years ago. In the oil industry, it certainly is driven by the sorts of opportunities that are available to companies of that size, particularly in undertaking a series of very large, multibillion-dollar 10- or 20-year projects. They will be particularly well equipped to absorb this risk. Second, they will be able to take a strong role in the emerging gas and power business where companies will work across borders and tie together remote and semiremote gas markets that might be a thousand or two thousand miles away. But this is truly a case where one size does not fit all. There is another tier of companies, still very large, that will not have as broad a portfolio, that will have to have more focus but will play very significant roles. The creation of these companies is also creating opportunities for small- and medium-sized companies because the supermajors are of such a scale that things that are not material to them will be very material to other companies. . . . [Full Text of this Article]