Daniel Yergin believes new set of challenges awaits energy industry

A lot has changed about U.S. energy production in the two decades since Daniel Yergin wrote The Prize: the Epic Quest for Oil Money and Power, his Pulitzer Prize-winning history of the oil industry that was published in 1991. By the time the 771-page book hit the shelves, former Iraqi dictator Saddam Hussein had just invaded the small, petroleum-rich country of Kuwait, and Yergin, the co-founder and chairman of the consulting firm Cambridge Energy Research Associates, predicted that "ours was still going to remain the age of oil," he said Tuesday at a breakfast briefing sponsored by the World Trade Center of New Orleans.

Since then, the Soviet Union collapsed; China became an oil importer instead of an exporter; climate change emerged as a hot-button political issue, and natural gas production boomed in the U.S. with the advent of new drilling methods allowing companies to tap large reservoirs of resources trapped in shale formations.

All that led Yergin to his latest book, which focuses on developing sustainable energy supplies. The Quest: Energy, Security, and the Remaking of the Modern World, was published last year.

Now, Yergin believes a new set of challenges await the energy industry, particularly in Louisiana, as the pace of issuing permits for new offshore wells lags behind pre-oil spill levels, and the number of drilling rigs has declined as the price of natural gas has fallen to its lowest level in more than a decade, helped in large part by the Haynesville Shale play.

"I think we're above what we thought would be the slow recovery scenario, but it's still taken a very long time," Yergin said about the pace of permitting in the Gulf of Mexico. "The time has come down. It's understandable. What was created was a new regulatory system, and that doesn't happen overnight, but I think the goal is that it has to be more efficient."

Yergin estimated that it could take three to four years until offshore production catches up to pre-oil spill levels.

"Things certainly are better than they looked a year, a year-and-a-half ago," he said, "but it's not back to the right level of activity, and that is a drag on the economy."

Noting that President Obama cited projections that developing natural gas could support more than 600,000 jobs by the end of the decade in his third State of the Union address earlier this year, Yergin expects that domestic energy production will be a major campaign talking point leading up to the presidential election this fall, especially if gasoline prices remain high.

"They're thinking about it in terms of jobs, and people two or three years ago, from the policy point of view, did not think about energy in terms of jobs," he said.