Re: Laissez les Mal Temps Roulette

Glenn Morton wote:

I have added a new page to my oil crisis page.

http://home.entouch.net/dmd/oil2004.htm

Another good summary of the oil situation that represents something of a
concensus viewpoint in the oil crisis circles can be found at:

 
http://www.currentconcerns.ch/archive/2004/01/20040118.php

Below is a copy of that article: (Some formatting lost.)

Iraq and the Problem of Peak Oil
by F. William Engdahl

Today, much of the world is convinced the Bush Administration did not
wage
war against Iraq and Saddam Hussein because of threat from weapons of
mass
destruction, nor from terror dangers. Still a puzzle, however, is why
Washington would risk so much in terms of relations with its allies and
the
entire world, to occupy Iraq. There is compelling evidence that oil and
geopolitics lie at the heart of the still-hidden reasons for the
military
action in Iraq.
It is increasingly clear that the US occupation of Iraq is about control
of
global oil resources. Control, however, in a situation where world oil
supplies are far more limited than most of the world has been led to
believe. If the following is accurate, the Iraq war is but the first in
a
major battle over global energy resources, a battle which will be more
intense than any oil war to date. The stakes are highest. It is about
fixing
who will get how much oil for their economy at what price and who not.
Never
has such a choke-hold on the world economy been in the hands of one
power.
After occupation of Iraq it appears it is.
The era of cheap, abundant oil, which has supported world economic
growth
for more than three quarters of a century, is most probably at or past
its
absolute peak, according to leading independent oil geologists. If this
analysis is accurate, the economic and social consequences will be
staggering. This reality is being hidden from general discussion by the
oil
multinationals and major government agencies, above all by the United
States
government. Oil companies have a vested interest in hiding the truth in
order to keep the price of getting new oil as low as possible. The US
government has a strategic interest in keeping the rest of the world
from
realising how critical the problem has become.
According to the best estimates of a number of respected international
geologists, including the French Petroleum Institute, Colorado School of
Mines, Uppsala University and Petroconsultants in Geneva, the world will
likely feel the impact of the peaking of most of the present large oil
fields and the dramatic fall in supply by the end of this decade, 2010,
or
possibly even several years sooner. At that point, the world economy
will
face shocks which will make the oil price rises of the 1970's pale by
contrast. In other words, we face a major global energy shortage for the
prime fuel of our entire economy within about seven years.
Peak oil
The problem in oil production is not how much reserves are underground.
There the numbers are more encouraging. The problem comes when large
oilfields such as Prudhoe Bay Alaska or the fields of the North Sea pass
their peak output. Much like a bell curve, oil fields rise to a maximum
output or peak. The peak is the point when half the oil has been
extracted.
In terms of reserves remaining it may seem there is still ample oil. But
it
is not as rosy as it seems. The oil production may hold at the peak
output
for a number of years before beginning a slow decline. Once the peak is
past
however, the decline can become very rapid. Past the peak, there is
still
oil, but each barrel becomes more difficult to exploit, and more costly,
as
internal well pressures decline or other problems make recovery more
expensive for each barrel. The oil is there but not at all easy to
extract.
The cost of each barrel past peak is increasingly higher as artificial
means
are employed to extract it. After a certain point it becomes
uneconomical to
continue to try to extract this peak oil.
Because most oil companies and agencies such as the US Department of
Energy
speak not of peak oil, but of total reserves, the world has a false
sense of
energy supply security. The truth is anything but secure.
Case studies
Some recent cases make the point. In 1991 the largest discovery in the
Western Hemisphere since the 1970's, was found at Cruz Beana in
Columbia.
But its production went from 500,000 barrels a day to 200,000 barrels in
2002. In the mid-1980's the Forty Field in North Sea produced 500,000
barrels a day. Today it yields 50,000 barrels. One of the largest
discoveries of the past 40 years, Prudhoe Bay, produced some 1.5 million
barrels a day for almost 12 years. In 1989 it peaked, and today gives
only
350,000 barrels daily. The giant Russian Samotlor field produced a peak
of
3,500,000 barrels a day. It has now dropped to 325,000 a day. In each of
these fields, production has been kept up by spending more and more to
inject gas or water to maintain field pressures, or other means to pump
the
quantity of oil. The world's largest oil field, Ghawar in Saudi Arabia,
produces near 60% of all Saudi oil, some 4.5 million barrels per day. To
achieve this, geologists report that the Saudis must inject 7 million
barrels a day of salt water to keep up oil well pressure, an alarming
signal
of near collapse of output in the world's largest oil kingdom.
The growing problem of peak oil has been known among oil industry
insiders
since the mid-1990's. In 1995, the leading oil consulting firm,
Petroconsultants in Geneva, published a global study, 'The World Oil
Supply.' The report cost $35,000, written for the oil industry. Its
author
was petroleum geologist, Dr. Colin Campbell. In 1999 Campbell testified
to
the British House of Commons, 'Discovery of (new oil reserves) peaked in
the
1960's. We now find one barrel for every four we consume ...'
No new giant discoveries
After OPEC raised oil prices in the 1970's, non-OPEC oil projects began
to
be profitable in the North Sea, Alaska, Venezuela and other places. Oil
production increased markedly. At the same time, in response to the
higher
oil price, many industrial countries like France, Germany USA, Japan
dramatically increased the energy from nuclear power plants. The
combination
gave the illusion that the oil problem had vanished. It has not, far
from
it.
If in fact many of today's major sources of oil have peaked, and are
about
to fall off drastically, and at the same time, if world energy demand
continues to grow, and not enough oil is found even to replace existing
depletion, the global economy faces a crisis of staggering dimension.
This
would also begin to explain the shift of US foreign policy in the
direction
of a crude neo-imperial military presence globally, from Kosovo to
Afghanistan, from West Africa to Baghdad and beyond.
Obviously, the easiest, most economical solution is to find new giant or
super giant oilfields where large volumes of oil can be extracted and
brought to world markets at low cost. That is just what is not the case
today. According to a recent report from the Colorado School of Mines,
'The
World's Giant Oilfields,' the world's '120 largest oilfields produce
close
to 33 million barrels a day, almost 50% of the world's crude oil supply.
The
fourteen largest account for over 20%. The average age of these 14
largest
fields is 43.5 years.' 1
The above study concludes that 'most of the world's true giants were
found
decades ago.' Over the past 20 years despite investment of hundreds of
billions dollars by major oil companies, results have been alarmingly
disappointing.
The world's major oil companies - Exxon-Mobil, Shell, ChevronTexaco, BP,
ElfTotal and others - have invested hundreds of billions of dollars in
finding enough oil to replace the existing oil supply sources. Between
1996
and 1999, some 145 companies spent $410 billion to find enough oil only
to
keep their daily production stable at 30 million barrels a day. From
1999 to
2002, the five largest companies spent another $150 billion and their
production grew only from 16 million barrels a day to 16.6 million
barrels,
a tiny increase. With the collapse of the Soviet Union in the early
1990's,
western oil companies placed high hopes on the oil potentials of the
Caspian
Sea in Central Asia.
Disappointing Caspian results
In December 2002, just after US troops took Afghanistan, BP, a major oil
company announced disappointing Caspian drilling results which suggested
that the 'oil find of the century' was little more than a drop in the
ocean.
Instead of earlier predictions of oil reserves above 200 billion
barrels, a
new Saudi Arabia outside the Middle East, the US State Department
announced,
'Caspian oil represents 4% of world reserves. It will never dominate the
world's markets.' PetroStrategies published a study estimating that the
Caspian Basin contained a mere 39 billion barrels of oil, and of a poor
quality. Soon after this news, BP and other western oil companies began
reducing investment plans in the region.
Interest in West Africa
One of the most active areas of new exploration is in the offshore
region of
West Africa from Nigeria to Angola. President Bush made a high profile
trip
to the region earlier in the year, and the US Pentagon has signed
military
basing agreements with two small strategic islands, Principe and San
Tome,
insuring a military presence should anything threaten the flow of oil
across
the Atlantic. Yet, while the volume of oil is important, it also is
hardly a
new Saudi Arabia. Geologist Campbell estimates that if all deepwater
oil,
perhaps 85 billion barrels, were produced from fields off Brazil, Angola
and
Nigeria, it would meet global demand for 3-4 years.
Growing energy demand
Against the prospect that many of the largest oil fields today are in a
marked decline in output, world demand for oil is rising ruthlessly,
marked
by the growing economies of China, India and Asia. Even at today's weak
GDP
growth rates, economists estimate that world demand for oil at today's
prices will rise by some 2% per year.
Ten years ago, China was not a factor in world import of oil. It
produced
most of its limited needs domestically. Beginning 1993 however, China
began
to import oil to meet its economic needs. By end 2003 China has
surpassed
Japan to be the second largest oil importer next to the USA. China now
consumes 20% of total OECD industrial country energy. China oil imports
are
rising now by 9% a year and this is predicted to rise significantly in
the
coming decade, as China emerges as the world's largest industrial
nation.
China currently is growing at 7-8% a year. India has recently emerged as
a
rapidly growing economy as well. Combined they account for some 2.5
billion
of the world population. Little wonder that China vehemently opposed the
US
unilateral war against Iraq in the UN Security Council. The China
National
Petroleum Company had long sought to secure major oil supply from Iraq.
What Cheney knew in 1999
In a speech to the International Petroleum Institute in London in
late1999,
Dick Cheney, then chairman of the world's largest oil services company,
Halliburton, presented the picture of world oil supply and demand to
industry insiders. 'By some estimates,' Cheney stated, 'there will be an
average of two percent annual growth in global oil demand over the years
ahead, along with, conservatively, a three percent natural decline in
production from existing reserves.' Cheney ended on an alarming note:
'That
means by 2010 we will need on the order of an additional fifty million
barrels a day.' This is equivalent to more than six Saudi Arabia's of
today's size.
Perhaps it was no coincidence that Cheney, as Vice President, was given
as
his first major assignment the head of a Presidential Task Force on
Energy.
He knew the dimension of the energy problem facing not only the United
States, but the rest of the world.
Cheney is also well identified as the leading Iraq warhawk in the Bush
Administration, together with Defense Secretary Rumsfeld. Repeatedly it
was
Cheney pushing for military action against Iraq, regardless of which
allies
support it.
When we examine what is known about global oil reserves, and where they
are,
in light of the above 'peak oil' analysis of much of today's existing
oil
production, it becomes clearer why Cheney would be willing to risk so
much
in terms of America's standing among allies and others, to occupy the
oilfields of Iraq. Cheney knows exactly what the global oil reserve
situation is as former CEO of Halliburton Corporation, the world's
largest
oil services company.
The Achilles heel of the US?
The burning question is where will we get such a huge increase of oil?
In
the decade from 1990 to 2000, a total of 42 billion barrels of new oil
reserves were discovered worldwide. In the same period, the world
consumed
250 billion barrels. In the past two decades only three giant fields
with
more than one billion barrels each have been discovered. One in Norway,
in
Columbia and Brazil. None of these produce more than 200,000 barrels a
day.
This is far from 50 million barrels a day which the world will need.
Is the era of cheap, abundant oil to fuel the world economy about to
end?
One most important issue in the entire debate over why Washington went
to
war in Iraq is the question of how much oil remains to be found in the
world
at today's prices. The debate has been remarkably little over an
economic
issue of enormous consequences.
According to the estimates of Colin Campbell and K. Aleklett of Uppsala
University, five countries hold the overwhelming bulk of the world's
remaining oil and could potentially make up the difference as other
areas
pass their peak. 'The five major producers of the Middle East, namely
Abu
Dhabi, Iraq, Iran, Kuwait and Saudi Arabia (including the Neutral Zone),
with about half the world's remaining oil, are treated as swing
producers
making up the difference between world demand and what other countries
can
produce...'2.
These five countries - Iraq, Iran, Saudi Arabia, Kuwait and the UAE -
through circumstances of geology, contain the oil and gas reserves vital
to
the future economic growth of the world. In an article in the January 7,
2002 issue of Oil and Gas Journal by A. S. Bakhtiari of the National
Iranian
Oil Company, noted, 'The Middle East (is) simultaneously the most
geostrategic area on the globe and the ultimate energy prize: Two-thirds
of
global crude oil reserves are concentrated in five countries bordering
the
Persian Gulf.'3
In a paper published in November 2001, eminent Princeton geologist,
Kenneth
Deffeyes wrote, 'The biggest single question is the year when world oil
production reaches a Hubbert peak and then declines forever. Both the
graphical and the computer fits identify 2004 as the probable year. The
largest single uncertainty is the enormous reserves of Saudi Arabia.'4
If the peak oil analysis is accurate, it suggests why Washington may be
willing to risk so much to control Iraq and through its bases there, the
five oil-rich countries. It suggests Washington is acting from a
fundamental
strategic weakness, not from absolute strength as is often thought. A
full
and open debate on the problem of peak energy is urgently needed.

Footnotes:
1 'The World`s Giant Oilfields', Matthew R. Simmons, M. King Hubbert
Center
for Petroleum Supply Studies, Colorado School of Mines, January 2002.
2 Aleklett, K. and Campbell, C.J., 'The Peak and Decline of World Oil
and
Gas Production,' published by the Association for the Study of Peak Oil
and
Gas, www.asponews.org .
3 Bakhtiari, A.M. Samsam, '2002 to see birth of New World Energy Order,'
Oil
and Gas Journal, January 7, 2002.
4 Deffeyes, Kenneth S, 'Peak of world oil production,' Paper no.
83-0,Geological Society of America Annual Meeting, November 2001.
gsa.confex.com.
Received on Wed Feb 11 11:00:01 2004