The Third Oil War: geology and geopolitics

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Tushar K Sarkar,

Member, Petroleum Exploration Society of Great Britain (PESGB) &

Amicus trade union (Manufacturing, Science & Finance workers section -MSF), UK.

Written in a personal capacity.

Circulated with permission from Second World Conference of Oil, Gas & Refinery workers, held in Kolkata, India, 8^th-10thMarch, 2003, to which the paper was submitted.

Dr Colin J Campbell, an Associate of Petroconsultants, which is a reputable international hydrocarbon consultancy, in his ‘Special Lecture’ to the PESGB membership in May 1999, said:

“The United States’ own oil production has been in decline for 25 years in an irreversible terminal trend, and it is accordingly forced to import on a rising trend almost 8.5 Mb/d (million barrels per day), which is more than half of its needs. Western Europe imports slightly less at 7.8 Mb/d, which is now almost half of its requirement. Imports are set to rise radically as North Sea production peaks around 2000, and declines at a high depletion rate, typical of offshore extraction. But Japan and neighbouring countries import the most at almost 11 Mb/d, having negligible indigenous production. It seems obvious that these three heavy consumers of oil will be on a collision course for the control of oil reserves as prices rise and shortages appear. Their attention will be focused on the Middle East. The United States and Britain have already positioned a colossal military force in the area, having alienated and vilified three important suppliers: Iraq, Iran and Libya. The Gulf War, despite its immediate justification, could as well be termed the First Oil War. At the time of writing a second appears to have been only narrowly averted.

There is surely every good reason to study the issue of oil depletion better and above all secure better data on reserves so that governments are not tempted to apply military solutions to what in reality are the immutable physics of the reservoir holding a finite commodity formed long ago in the geological past.” (1)

In fact, the Second Oil War did take place, in Afghanistan in 2002, though the real nature of this war may not be as obvious as that of the Gulf War. Extending the logic of these last two ‘oil wars’ to the impending invasion of Iraq, the Third Oil War is glaring. All these wars are interconnected and this interconnection exposes their real nature, understanding of which requires considerations of relevant geology and geopolitics. The following short text is aimed at throwing some light on the principal aspects of the issues involved.

Hydrocarbon geology and reserve depletion.

Oil and gas are known to have been formed within about 5000 metres of the Earth’s crust, beginning in the Cambrian period, about 550 million years ago. According to one study (2) approximately 80% of known reserves come from 8 widespread source rocks; those belonging to Jurassic Kimmeridgian age alone, some 150 million years ago, account for about 43% of the world’s reserves.

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(1). The Future of Oil, PESGB, UK, May 1999

(2).Glenn R. Morton, http://www.glenn.morton.btinternet.co.uk/Future_oil_supply.htm

With the progressive burial of source rocks under younger sedimentary strata, the necessary critical temperatures are reached and the kerogen therein is converted to oil. Understandably, therefore, there is less and less conversion to take place.

It can now be appreciated that the fields, which are large and relatively easier to prospect, are

likely to be discovered first. Indeed, explorationists believe that most of these fields have already been tapped, leaving only the smaller and more difficult ones behind.

Since 65% of our current energy supply comes from oil, we are unavoidably faced with the task of calculating and predicting future hydrocarbon production. In 1956, M.K.Hubbert (3) introduced a technique of prediction for oil and gas production, known as the ‘Hubbert Curve’. Using the Hubbert Curve, Duncan and Youngquist (4) published in 1999 their calculations (completed in 1997). Adding Hubbert Curves for production, individually derived for each of 42 countries, they concluded that the peak in world oil production would be in 2006/7, at 30 billion barrels per year. By 2020 the production will have dropped to 24.6 billions per year and by 2040 production will be about half of today’s consumption!

There are several depletion models available. According to one such model by Campbell (1), taking estimates of the ‘Ultimate’ and considering when the midpoint of depletion (half the Ultimate) will be reached, the world’s producing countries are divided into three groups: (a) where production continues to decline (post-midpoint), (b) where production has still scope to rise (pre-midpoint) and (c) ‘swing’ countries, a subgroup of (b), which have large amounts of yet-to-produce and low depletion rates: Abu Dhabi, Iran, Iraq, Kuwait, Saudi Arabia together own about half the ‘yet-to-produce’. Based on world demand and the critical threshold of ‘swing share’ sufficient for swing countries to exercise control, Campbell (1) has proposed three likely scenarios - High case, Low case and Base case - and accordingly suggested a depletion model, shown below:

DEPLETION SCENARIOS

System of units used: G=10⁹, M=10⁶, k=10³

b/d – barrels per day

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(3) M K Hubbert, Techniques of Prediction as applied to the Production of Oil and Gas,

National Bureau of Standards Special Publication 631, 16-141

(4) Richard C Duncan and Walter Youngquist, Encircling the Peak of World Oil Production,

National Resources Research, V8(1999), 3, 219-232

It is to be borne in mind that in 1971 the reserves of the average oil field declined at a rate of about 18% per year, today the decline is at 50%, thanks to ever advancing technology. While production dwindles, consumption is however ever increasing: it has been estimated that half of the world’s resources have already been used up by ‘Hydrocarbon Man’ since the advent of automobiles in the 1880’s. The current world consumption of oil is about 70 Mb/d. According to the International Energy Agency, global demand for oil is set to rise by at least a third by 2010, to between 92Mb/d and 97Mb/d. Total natural gas consumption is currently around 78 trillion cubic feet a year.

Geopolitics and oil wars.

As the oil reserves deplete, the world map of ‘spheres of political influence’, controlled by military might, is to be re-drawn, once again, this time based on oil. The map in Fig 2 shows

an integral view of the extent of oil fields in Central Asia and northern part of the Middle East.

Fig 2. Map of Central Asia and northern part of the Middle East oil fields.(5)

The five permanent members of the United Nations Security Council, i.e. United States, United Kingdom, France, Russia and China are all competing amongst themselves for control of oil. Of the five companies that dominate the global oil industry today, i.e. ExxonMobil, Royal Dutch Shell, British Petroleum-Amoco, Chevron-Texaco and TotalElfFina, in order of size, the first four have their headquarters in the USA and UK, the fifth one being based in France. Russia’s Luke Oil is a newcomer in the field and China’s national oil company has begun to go beyond its national territory.

The US with 21 billion barrels is included in the table of ‘Top Oil Reserves’ (Table 1), though at its bottom. For the UK, which is not in the list, the North Sea field contains only about 16 billion barrels. As mentioned at the beginning of this article the US imports more

5) A Caspian gamble, The Economist. February, 1999

than 50% of its requirements, from the Middle East, Mexico, Venezuela and Canada. It is believed by many that the US, which keeps 600 million barrels of oil in its ‘Strategic Petroleum Reserve’, intentionally does not explore much of its domestic deposits because imported oil is lot cheaper!

Country	Oil Reserves (billions of barrels)	Country	Oil Reserves (billions of barrels)
Saudi Arabia	261.5	Russia	48.6
Iraq	112.5	Mexico	47.8
United Arab Emirates	97.8	Libya	29.5
Kuwait	96.5	China	24.0
Iran	89.7	Nigeria	22.5
Venezuela	72.6	United States	21.0

Table 1: Top Oil Reserves

The Middle East: The First Oil War

The proven reserves of hydrocarbons in the Persian Gulf are estimated at more than 600 billion barrels of oil and 1,600 trillion cubic feet of natural gas.

The cornerstone of the US political involvement in the Middle East is controlling its oil access, which has 64% of the world’s known reserves. However, it needs to be understood that the strategy for control of oil is not immediately based on the quantity of oil that can be squeezed out of any foreign country; it is fundamentally a geopolitical issue. The Gulf War demonstrated the heavy US commitment to protecting Kuwait and other Gulf states, though only about 10% of its oil requirements are imported from the region while its competitors in Europe import 30% and Japan about 80% of their requirements from here. The most important factor in the geopolitical strategy for oil is that there must not be any ‘trouble maker’ in the region to ensure its present steady flow as well as enough reserve for any future need, as in Saudi Arabia and Iraq! The Gulf States are central to broader geopolitical objectives i.e. maintenance of military and naval installations in Kuwait, Oman, Saudi Arabia and Bahrain, in order to achieve ‘dual containment’ of the black sheeps, i.e. Iran and Iraq. Iran and Saudi Arabia were once the two legs of the US strategy in the Middle East until the

overthrow of the Shah and recent wavering of the Saudis. Against these experiences, the commitment to Israel establishes an unwavering outpost in the region as well as serving the domestic Jewish political lobby.

Central Asia: The Second Oil War

In May 2000, an oil field containing 20 to 50 billion barrels of oil was discovered in East Kashagan, in the Caspian Sea off the Kazakhstan coast, with even the lowest estimate exceeding the reserves of the US or UK. Doubtless, this is the biggest hitherto untapped reserve in the world. According to one estimate the reserves of hydrocarbon in the Caspian Basin is 28 billion barrels of oil and 243 trillion cubic feet of gas. Most of the oil is in Kazakhstan and most of the gas is in Turkmenistan. Doubtless, the reserves are far smaller than those of the Middle East; nevertheless these are bigger than those of Europe having its 50 billion barrels of hydrocarbon. And this is the only beginning of major exploration activities here. Early seismic studies indicate geological structures holding a vast resource of hydrocarbons, with potential estimates ranging between 70 and 200 billion barrels of oil or even more.

As expected, Central Asia has become the new hotbed for geopoliticians. The US national security experts are advising American oil companies. The geopolitical strategy here is at present pivoted on the problem that the Caspian Sea is landlocked. Oil and gas have to be transported by pipeline to a terminal on the open sea. One of the relatively shorter routes (see map, route no 9) runs through Iran, which of course is not acceptable to the US. Russia offered to build a line connecting Kazakh to the Black Sea, but that does not satisfy neighbouring Turkmenistan’s difficult relationship with Russia. A sensible alternative is the Unocal’s plan of extending Turkmenistan’s existing route through Afghanistan and Pakistan on to the Arabian Sea, the route no 11. This takes us to the Second Oil War!

A Central Asia expert, A Rashid (6) has given an account of the background to the Afghanistan war. In order to ensure the safety of the Unocal pipeline project, the US with help from Pakistan decided in 1994 to install a stable and pro-US regime in Afghanistan, using the then emerging Taliban fighting against the Northern Alliance, who are ethnically Tajik. By 1999, the USA was funding the entire Taliban government apparatus. However, soon the Frankenstein they created broke loose, establishing an alliance with Bin Laden and

getting into the production of 50% of the world’s opium. Bill Clinton’s 1998 cruise missile attack on Afghanistan was a brief intervention in bringing the Taliban back to the fold. Finally, the events of September 11 led to the Afghanistan war against Taliban and Bin Laden, reversing the previous adverse relationship with the Northern Alliance and installing another puppet regime.

Return to the Middle East: The Third Oil War.

While the US helped or rather used Iraq against latter’s war against Iran, Iraq’s adventure in Kuwait and continued military preparations for defence frustrated all American hopes of containing Iraq. Now there seems to be no alternative left for the US other than installing a puppet regime in Iraq, eventually enlisting it in the Gulf Cooperation Council states and also controlling its oil reserve directly.

Iraq possesses the world’s second largest oil reserve with its 112.5 billion barrels, about 11% of the total world reserve. There are still considerable unexplored fields there (and in Iran), which could double its total hydrocarbon production. It has been said that it is “a boom waiting to happen” Before the nationalisation of the Iraq Petroleum Company in 1972, the UK and US companies had a three-quarter share in Iraq’s oil production.

Under the title, “Carve-up of oil riches begins”, Peter Beaumont and Faisal Islam wrote in the UK’s Sunday paper, ‘The Observer’, on November3, 2002:

“The leader of the London-based Iraqi National Congress, Ahmed Chalabi, has met executives of three US oil multinationals to negotiate the carve-up of Iraq’s massive oil reserves post-Saddam”.

The article goes on to say,

“ Although Russia, France and China have existing deals with Iraq, Chalabi has made clear that he would reward the US for removing Saddam with lucrative oil contracts, telling the Washington Post recently: ‘American companies will have a big shot at Iraqi oil.’ Indeed, the issue of who gets their hands on the world’s second largest oil reserves has been a major factor driving splits in the Security Council over a new resolution on Iraq…..As of last month, Iraq had reportedly signed several multi-billion dollar deals with foreign oil companies, mainly from China, France and Russia.”

The article adds that Russia has a

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(6) A Rashid, Taliban: Mlitant Islam, Oil and Fundamentalism in Central Asia,

2000,Yale University Press.

“23-year deal to rehabilitate oilfields, particularly the 11-15 billion barrel West Qurna field…” and “….TotalFinaElf has been in negotiations with Iraq on development of the Nahr Umar field.”

The paper goes further to expose that

“……Those hawks have long argued that US control of Iraq’s oil would help deliver a second objective. That is the destruction of Opec, the oil producers’ cartel, which they argue is ‘evil’ – that is, incompatible with American interests.”

‘Petroleum Economist’, the international energy journal, in its December 2002 issue, confirms the carve-up and presents a broader US geopolitical strategy:

“..The US state department is reported to be holding a meeting this month with Iraqi opposition members on the future of the country’s oil and gas sector once Saddam is gone. A working group – said to include some officials who have defected from the Iraqi oil ministry – is expected to make recommendations to any transitional government on how to rehabilitate the energy sector.”

The article goes on to say:

“Oil seems to be a core reason for the US’ desire to get rid of Saddam but it is not the only factor.”

It quotes Colin Rowat, an economist at the University of Birmingham, saying:

“it may help reduce [the US’] dependence on Saudi Arabia, but don’t forget Iran in this as well – having a US friendly government in Baghdad would definitely be advantageous for a regional ‘divide and conquer strategy’.” (7)

It is feared that the repercussions of this war in the region would be of far reaching significance.

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‘Hydrocarbon Man’ seems to be approaching a turning point in his short life during the Oil Age. Inevitable failure of exploration scientists to find further deposits will only drive the vested interests towards more and more destructive wars in this planet. What started with the Gulf War and has continued through two more episodes will stop at nothing unless vehemently opposed on the streets of the world.

(7). David Townsend, Feud for oil, pp3-6.

London,

27^th February, 2003