Emerging Global Energy Crisis - Security Of Supply Rises To Top Of Agenda

"Sir David Manning, short, greying hair, open-neck shirt, comes in and searches for a briefing paper in the corner. He is Blair's foreign policy adviser and one of the most powerful people in the Prime Minister's entourage."
'You can't talk... you've got to go and beat them'
Observer, 14 October 2001

"Condoleeza Rice, a key member of the Bush war cabinet, is in regular contact with Sir David Manning, Blair's National Security Adviser.... It is Manning, Campbell and Blair's chief of staff, Jonathan Powell, who are seen as the Prime Minister's real war cabinet."
It's Bush's War - But Blair Is The Brains
Mail On Sunday, 14 October 2001

"On [Blair's post Sept 11 overseas war coalition building] trips his constant companions have been Alastair Campbell, Anji Hunter - Blair's friend from his teenage years who was head of government relations before announcing she was leaving No 10 to join BP - and his chief foreign policy adviser, Sir David Manning. The fact that they, rather than the Foreign Secretary, have accompanied Blair on his diplomatic whistle stops has given ammunition to those like Mo Mowlam who claim that the Prime Minister has been sidelining his Cabinet in war..."
How the war was run
Observer, 18 November 2001

"Downing Street has two foreign affairs advisers, Stephen Wall and David Manning, who people say are more influential than [Foreign Secretary] Straw himself."
Duty bound but loth to keep taking the tablets
Guardian, 28 January 2002

"The perfect civil servant has one big drawback as a candidate who will protect the Prime Minister: he is not planning to quit politics. At 54, Sir David Manning has a career ahead of him, and a reputation to protect. Sir David has been one of the unsung heroes of the Blair operation. Since joining two years ago, he has been the real foreign secretary - it is his advice that the Prime Minister will take over all others. Appointed as the next UK ambassador to the US, his Washington job is arguably the most important in the Foreign Office. But he has been retained by No10 for so long because he is so highly-regarded. A quiet, straight-talking and charming official, he joined the Foreign Office in 1972, serving in Paris and Moscow, and took part in negotiations to bring peace to Bosnia. He was appointed ambassador to Israel in 1995, served as Britain's representative to NATO in 2000 and was personally recalled by Mr Blair to Downing Street a year later. As he replaces Sir Christopher Meyer in Washington, Sir David will want a quick and faultless exit. He is unlikely to have had a hand in anything untoward. But his importance as a witness at the Hutton inquiry is what he knows, not what he did."
The powerful advisors who will be exposed by Hutton
The Scotsman, 16 August 2003

What Is Sir Daving Manning Saying Today
As The War Campaigns In Central Asia And The Persian Gulf Face The Increasing Prospect Of Mission Failure?

"The British government, the European Union, the US Administration, and the multilateral institutions are all faced with a common problem. How can the international community secure reliable, affordable, sustainable and, perhaps above all, safe sources of energy?..... The scarcity of energy supplies and the energy imbalance between nations is a threat to our prosperity and national security. As resources contract, oil-hungry economies will compete for dwindling supplies of hydrocarbons. Competition for fossil fuels will increase.... Energy resources have long been a major strategic concern: access to secure sources, control over supply lines: these are issues of national security.... The energy challenge is now more pressing than ever.... Global oil production is apparently nearing its peak. Although there is intense debate about exactly when this will happen - something Daniel Yergin discusses in the Foreign Affairs article I referred to earlier - current estimates seem to be converging on some point between 2010 and 2020.... [there] are five factors which are changing the energy landscape: rising demand; dwindling supply; greater concentration of resource in the hands of a few; limited spare capacity; and the environmental impacts of energy use.....energy is central to our foreign policy because it is central to national security. Wherever we look, problems are energy driven. The imperative to collaborate may now be as strong as that which forced us to build collective security structures during the Cold War. A final thought. This is not a problem that can wait ten years."
Sir David Manning, British Ambassador To The United States Of America
Speech at Standford University, 13 March 2006

"His Excellency Sir David Manning, British Ambassador to the United States, delivered the 2006 Frank E. and Arthur W. Payne Distinguished Lecture: 'Energy: A Burning Issue for Foreign Policy,' on Monday, March 13, 2006 at 4:30 p.m. in the Bechtel Conference Center at Encina Hall. has been Her Majesty's Ambassador to the United States of America since September 2, 2003."
His Excellency Sir David Manning delivers 2006 Frank E. and Arthur W. Payne Distinguished Lecture
Freeman Spogli Institute For International Studies, Stanford University, 16 March 2003

http://www.britainusa.com/sections/articles_show_nt1.asp?i=60031&L1=60031&L2=60031&a=41435&D=3

British Ambassador Sir David Manning Discusses Energy: A Burning Issue for Foreign Policy at Stanford University

British Embassy, Washington D.C., 17 March 2006

Speech:Energy: A Burning Issue for Foreign Policy
Event:UK Ambassador to the United States Sir David Manning addresses the 2006 Frank E. and Arthur W. Payne Distinguished Lecture
Location: Stanford University

Speech Excerpts
[Full Speech, Click Here]

"..... In 1911, Winston Churchill faced a difficult decision. Recently appointed First Lord of the Admiralty, Churchill’s task was to ensure that the Royal Navy, symbol of Britain’s imperial power, was ready if there were a war with Germany. The question he faced was whether to convert the Navy from coal, its traditional source of fuel, to oil. The attraction of oil was clear: more efficient use of manpower, less use of cargo space for the fuel, and greater speed. On the other hand, why abandon reliance on safe, secure Welsh coal, in favor of distant and insecure oil supplies from Persia? For Churchill, the balance of risk was clear: he ordered that Britain should base its naval supremacy on oil. Famously, he wrote: 'Mastery itself was the prize of the venture.'

Nearly a century later, the challenge of energy is more than ever at the forefront of foreign policy.In the first few months of this year most of the issues at the top of the agenda have included energy. Relations with Iran, Iraq, China, Venezuela and Russia have energy as a central component. So does terrorism; so, by definition, does counter-proliferation. The British government, the European Union, the US Administration, and the multilateral institutions are all faced with a common problem. How can the international community secure reliable, affordable, sustainable and, perhaps above all, safe sources of energy?.....

The scarcity of energy supplies and the energy imbalance between nations is a threat to our prosperity and national security. As resources contract, oil-hungry economies will compete for dwindling supplies of hydrocarbons. Competition for fossil fuels will increase. As Sen. Dick Lugar, chairman of the US Senate Foreign Relations Committee recently said 'Our critical international security goals, including countering nuclear weapons proliferation, supporting new democracies, and promoting sustainable development are at risk because of over-dependence on fossil fuels.' ....

Energy resources have long been a major strategic concern: access to secure sources, control over supply lines: these are issues of national security....

Fifty years ago the Suez crisis arose because the Suez Canal was the route by which Gulf oil reached Europe.... The canal was Europe’s jugular. Hence the warning that Prime Minister Eden gave to the Soviet leaders Bulganin and Khrushchev during their visit to London in the April of 1956. He said: “I must be absolutely blunt about the oil” … “We could not live without oil and… we have no intention of being strangled to death."....

In 1990, in the first Gulf War, the West faced the threat of a dictator who was prepared to seize Kuwait. Had he held on to it, Saddam Hussein would have controlled 20% of OPEC production and 20% of world oil reserves. He would have been in a position to intimidate neighboring countries, to be the dominant power in the Gulf....

....... The energy challenge is now more pressing than ever. Despite the warnings down the decades, our societies have become more, not less, vulnerable to the politics of energy. Oil and gas prices are near record highs. The question we now need to frame is not so much what do we do about energy security, but energy insecurity....

But the scale of future demand will be driven not so much by the US and Western Europe, but by the major emerging economies. China and India have 40% of the world’s population between them – as much as the populations of the next twenty largest countries combined. Billions of people living in developing countries whose economies are twice as oil intensive as ours need to fuel their development. Just one-eighth of the world’s people own cars; many more want one and will soon acquire one.

The World Bank estimates car ownership in China is currently at only seven vehicles per 1,000 people, compared to more than 480 per 1,000 in the United States. By 2030 it is forecast to rise towards Western levels. The pace of economic change is break-neck. China’s economy has averaged 9.5% growth rate over the last twenty years. In 2005, China used 26% of the world’s crude steel, 37% of the cotton and 47% of the cement. By 2005 China had over 350 million mobile phone subscribers, up from just 7 million in 1996, and double the number in the United States.

This revolution needs energy. India’s consumption of oil has doubled since 1992. China’s thirst for oil grew by more than 15% in 2004, has doubled since 1994 and will double again between 2003 and 2010. That is why we have seen China seeking oil partners across the globe, from Sudan to Saudi Arabia. It was no surprise that King Abdullah of Saudi Arabia’s first visit as monarch this January included a stop in China. Asia and the Far East now account for over 50% of Saudi oil exports. It is why we saw the Chinese bid in the summer of 2005 for US-owned Unocal. Competing with these emerging giants for energy strains international relations: global competition for energy sources threatens stability.

Second, the supplies of oil on which we depend are finite. Global oil production is apparently nearing its peak. Although there is intense debate about exactly when this will happen - something Daniel Yergin discusses in the Foreign Affairs article I referred to earlier - current estimates seem to be converging on some point between 2010 and 2020. Oil itself will never run out – as the saying goes, 'the stone age did not end because of a lack of stones.' But the unavoidable fact is that the economics of pumping it in future are uncertain. One of the most intriguing things about this debate is that it is happening at all. It is extraordinary that a century into the age of oil, with the global economy dependent on $3 trillion worth of this black liquid each year, we don’t even know how much is left.

The International Energy Agency predicts that, if we do nothing, global oil demand will reach 121 million barrels per day by 2030, up from 85 million barrels today. That will require increasing production by 37 million barrels per day over the next 25 years, of which 25 million barrels per day has yet to be discovered. That is, we’ll have to find four petroleum systems that are each the size of the North Sea.

Is this realistic? Production from existing fields is dropping at about 5% per year. Only one barrel of oil is now being discovered for every four consumed. Globally, the discovery rate of untapped oil peaked in the late 1960s. Over the past decade, oil production has been falling in 33 of the world’s 48 largest oil producing countries, including six of the 11 members of OPEC. How then will we meet the soaring demand that the growing global economy will require?

The third driver of energy insecurity is the growing geographic concentration of energy reserves. Oil and gas supplies are becoming more concentrated and less secure. 80% of oil and gas trade is in three regions: Russia, West Africa and the Gulf. By 2025, 25 million barrels per day (one of three in production) will come from Saudi Arabia, Iran and Iraq. Over 80% of global reserves are in the hands of governments and national oil companies. We are seeing a convergence of geological difficulty with geopolitical uncertainty.

The top eight non-Gulf suppliers are: Angola, Azerbaijan, Colombia, Kazhakstan, Mexico, Nigeria, Russia and Venezuela. The US depends more than ever on the supplies from countries where there are political uncertainties and who may not subscribe to Western values, and with whom relations can be volatile. In some cases the West is paying large sums for oil and gas to countries that are at best equivocal in tackling terrorism, at worst supporting it.

One result of this geographical concentration is that oil and gas flows through a handful of vulnerable transit routes. These choke points may become increasingly vulnerable to attack: the Straits of Hormuz and Bab El-Mandab, the Straits of Malacca and the Bosphorus. Already, nearly 20% of global oil supply flows through one narrow waterway: the Straits of Hormuz.

And when it comes to concentration, the Gulf alone has approximately 65% of declared global reserves. Saudi Arabia, the world’s sole “swing producer” holds one-fourth of global reserves and in spring 2004 controlled 80-85% of spare output capacity. Al Qa’eda calls oil the “umbilical cord and lifeline of the crusader community” and in April 2004 specifically incited attacks on key Gulf installations. Two thirds of Saudi oil goes through one processing plant and two terminals; a half of current Saudi capacity comes from one oilfield....

Here then are five factors which are changing the energy landscape: rising demand; dwindling supply; greater concentration of resource in the hands of a few; limited spare capacity; and the environmental impacts of energy use.....

I end where I began: energy is central to our foreign policy because it is central to national security. Wherever we look, problems are energy driven. The imperative to collaborate may now be as strong as that which forced us to build collective security structures during the Cold War.

A final thought. This is not a problem that can wait ten years.

"It was the wartime petroleum shortage of 1917 and 1918 that really drove home the necessity of oil to British interests and pushed Mesopotamia [Iraq] back to center stage. Prospects for oil development within the empire were bleak, which made supplies from the Middle East of paramount importance. Sir Maurice Hankey, the extremely powerful secretary of the War Cabinet, wrote to Foreign Secretary Arthur Balfour that, 'oil in the next war will occupy the place of coal in the present war, or at least a parallel place to coal. The only big potential supply that we can get under British Control is the Persian [Iranian] and Mesopotamian [Iraqi] supply.' Therefore, Hankey said, 'control over these oil supplies becomes a first-class British war aim.' But the newly born 'public diplomacy' had to be considered..... Foreign Secretary Balflour worried that explicitly pronouncing Mesopotamia a war aim would seem too old-fashionably imperialistic. Instead, in August 1918, he told the Prime Ministers of the Dominions that Britain must be the 'guiding spirit' in Mesopotamia, as it would provide the one natural resource the British empire lacked. 'I do not care under what system we keep the oil,' he said, 'but I am quite clear it is all-important for us that this oil should be available.' To help make sure this would happen, British forces, already elsewhere in Mesopotamia, captured Mosul after the armistice was signed with Turkey."
Daniel Yergin - The Prize, 1991
First published in Great Britain by Simon and Schuster Ltd, 1991

Winston Churchill's Quest For Oil And The Seizing Of Mesopotamia (Iraq) - Click Here

"Fifty years ago this week, the CIA and the British SIS orchestrated a coup d'etat that toppled the democratically elected government of Mohammad Mossadegh [in Iran]. The prime minister and his nationalist supporters in parliament roused Britain's ire when they nationalised the oil industry in 1951, which had previously been exclusively controlled by the Anglo-Iranian Oil Company [later renamed as BP]. Mossadegh argued that Iran should begin profiting from its vast oil reserves. The British government tried to enlist the Americans in planning a coup... The crushing of Iran's first democratic government ushered in more than two decades of dictatorship under the Shah... The author of All the Shah's Men, New York Times reporter Stephen Kinzer, argues that the coup planted the seeds of resentment against the US in the Middle East, ultimately leading to the events of September 11.... The coup and the culture of covert interference it created forever changed how the world viewed the US, especially in poor, oppressive countries. For many Iranians, the coup was a tragedy from which their country has never recovered. Perhaps because Mossadegh represents a future denied, his memory has approached myth."
The spectre of Operation Ajax
Guardian, 20 August 2003

"The National Security Archive at George Washington University today published on the Web a series of declassified U.S. documents detailing the U.S. embrace of Saddam Hussein in the early 1980's, including the renewal of diplomatic relations that had been suspended since 1967. The documents show that during this period of renewed U.S. support for Saddam, he had invaded his neighbor (Iran), had long-range nuclear aspirations that would 'probably' include 'an eventual nuclear weapon capability,' harbored known terrorists in Baghdad, abused the human rights of his citizens, and possessed and used chemical weapons on Iranians and his own people. The U.S. response was to renew ties, to provide intelligence and aid to ensure Iraq would not be defeated by Iran, and to send a high-level presidential envoy named Donald Rumsfeld to shake hands with Saddam (20 December 1983). The declassified documents posted today include the briefing materials and diplomatic reporting on two Rumsfeld trips to Baghdad, reports on Iraqi chemical weapons use concurrent with the Reagan administration's decision to support Iraq, and decision directives signed by President Reagan that reveal the specific U.S. priorities for the region [which included] preserving access to oil...."
U.S. DOCUMENTS SHOW EMBRACE OF SADDAM HUSSEIN IN EARLY 1980s
DESPITE CHEMICAL WEAPONS, EXTERNAL AGGRESSION, HUMAN RIGHTS ABUSES
US National Security Archive, George Washington University, Press Release 25 February 2003

"An investigation of US corporate sales to Iraq, headed by Republican Congressman Donald Riegle and published in May 1994, listed some of the biological agents exported by US corporations with George Bush's approval as head of the CIA and later as vice-president under Ronald Reagan. The Iraqis are reported to have acquired stocks of anthrax, brucellosis, gas gangrene, E. coli and salmonella bacteria from US companies."
Who Armed Iraq?
Janes Defence News, 17 March 2003

"For just so long Kuwait, a small country at the head of the Persian Gulf, had been set free and independent from its long-time British protector. And during that time Kuwait had developed its oil fields and become immensely rich. Saddam Hussein claimed that Kuwait was part of Iraq. To have and to hold it would put him on the way to achieving something that the Soviets had yearned for right after the Second War and been denied by the intervention of the United Nations, which was to be sovereign of the Gulf - and so, as Churchill foresaw and warned about, soon to be able to conquer Europe without a war by possessing 60% of the oil Western Europe lived by and so be able to dictate to countries like Britain, France, Germany, that they should abandon their precious democratic ways and get themselves governments friendly to Iraq.....[Following Saddam's invasion of Kuwait] President Bush - the first that is - called a dawn meeting of the National Security Council at which the likely commander of any military action, one General Schwarzkopf, expressed the general feeling that the United States might fight for Saudi Arabia but hardly for Kuwait. President Bush told the press there was no thought of American intervention. The United Nations anyway had voted to impose a total embargo on Iraq. Two days after the invasion President Bush took a half day out to keep a promise to the British prime minister who was addressing a conference in Aspen, Colorado, a resort town in the Rockies. He found Mrs Thatcher in finer fighting fettle than all but one of his own advisers. She stressed that fighting for Kuwait now might be a necessary step to saving Saudi Arabia from invasion later on. ..... What so swiftly transformed the views and policy of the United States and the onlooking allies-to-be was the recognition, first pressed on President Bush by Mrs Thatcher and then rather late in the day realised by the King of Saudi Arabia, that once he held Kuwait there was nothing to stop Saddam from seizing the Saudi oil fields."
Alistair Cooke's Letter From America
BBC Online, 24 June 2002

"We're there because the fact of the matter is that part of the world controls the world supply of oil, and whoever controls the supply of oil, especially if it were a man like Saddam Hussein, with a large army and sophisticated weapons, would have a stranglehold on the American economy and on — indeed on the world economy."
Dick Cheney, US Secretary of Defense 1990
New York Times, 24 February 2006

"Donald Rumsfeld, the US defense secretary, and his deputy Paul Wolfowitz wrote to President Bill Clinton in 1998 urging war against Iraq and the removal of Saddam Hussein because he is a 'hazard' to 'a significant portion of the world's supply of oil'. In the letter, Rumsfeld also calls for America to go to war alone, attacks the United Nations and says the US should not be 'crippled by a misguided insistence on unanimity in the UN Security Council'. Those who signed the letter, dated January 26, 1998, include Bush's current Pentagon adviser, Richard Perle; Richard Armitage, the number two at the State Department; John Bolton and Paula Dobriansky, under-secretaries of state; Elliott Abrams, the presidential adviser for the Middle East and a member of the National Security Council; and Peter W Rodman, assistant secretary of defense for international security affairs. It reads: ' We urge you to seize [the] opportunity and to enunciate a new strategy that would secure the interests of the US and our friends and allies around the world. 'That strategy should aim, above all, at the removal of Saddam Hussein's regime from power..... If Saddam does acquire the capability to deliver weapons of mass destruction, as he is almost certain to do if we continue along the present course, the safety of American troops in the region, of our friends and allies like Israel and the moderate Arab states, and a significant portion of the world's supply of oil, will all be put at hazard."
Rumsfeld Urged Clinton to Attack Iraq
Sunday Herald, 16 March 2006

"Those people and others have been telling the various US administrations, especially the current one, that if you want to control the world you need to control the oil. Therefore the destruction of Iraq is a pre-requisite to controlling oil. That means the destruction of the Iraqi national identity, since the Iraqis are committed to their principles and rights according to international law and the UN charter. It seems that this argument has appealed to some US administrations especially the current one that if they control the oil in the Middle East, they would be able to control the world. They could dictate to China the size of its economic growth and interfere in its education system and could do the same to Germany and France and perhaps to Russia and Japan. They might even tell the same to Britain if its oil doesn't satisfy its domestic consumption. It seems to me that this hostility is a trademark of the current US administration and is based on its wish to control the world and spread its hegemony."
Saddam Hussein - Interview with Tony Benn
Guardian, 5 February 2003

"Optimists about world oil reserves, such as the Department of Energy, are getting increasingly lonely. The International Energy Agency now says that world production outside the Middle Eastern Organization of Petroleum Exporting Countries (opec) will peak in 1999 and world production overall will peak between 2010 and 2020. This projection is supported by influential recent articles in Science and Scientific American. Some knowledgeable academic and industry voices put the date that world production will peak even sooner—within the next five or six years. The optimists who project large reserve quantities of over one trillion barrels tend to base their numbers on one of three things: inclusion of heavy oil and tar sands, the exploitation of which will entail huge economic and environmental costs; puffery by opec nations lobbying for higher production quotas within the cartel; or assumptions about new drilling technologies that may accelerate production but are unlikely to expand reserves. Once production peaks, even though exhaustion of world reserves will still be many years away, prices will begin to rise sharply. This trend will be exacerbated by increased demand in the developing world..... The recent report by the President's Committee of Advisers on Science and Technology... concluded 'A plausible argument can be made that the security of the United States is at least as likely to be imperiled in the first half of the next century by the consequences of inadequacies in the energy options available to the world as by inadequacies in the capabilities of U.S. weapons systems. It is striking that the Federal government spends about 20 times more R&D money on the latter problem than on the former.'... The nearly $70 billion spent annually for imported oil represents about 40 percent of the current U.S. trade deficit.... Research is essential to produce the innovations and technical improvements that will lower the production costs of ethanol and other renewable fuels and let them compete directly with gasoline. At present, the United States is not funding a vigorous program in renewable technologies.... The United States cannot afford to wait for the next energy crisis to marshal its intellectual and industrial resources....Our growing dependence on increasingly scarce Middle Eastern oil is a fool's game—there is no way for the rest of the world to win. Our losses may come suddenly through war, steadily through price increases, agonizingly through developing-nation poverty, relentlessly through climate change—or through all of the above."
Richard G. Lugar and R. James Woolsey (Former Director of the CIA)
The New Petroleum - Foreign Affairs January/February 1999

"For the world as a whole, oil companies are expected to keep finding and developing enough oil to offset our seventy one million plus barrel a day of oil depletion, but also to meet new demand. By some estimates there will be an average of two per cent annual growth in global oil demand over the years ahead along with conservatively a three per cent natural decline in production from existing reserves. That means by 2010 we will need on the order of an additional fifty million barrels a day. So where is the oil going to come from? Governments and the national oil companies are obviously in control of about ninety per cent of the assets. Oil remains fundamentally a government business. While many regions of the world offer great oil opportunities, the Middle East with two thirds of the world's oil and the lowest cost, is still where the prize ultimately lies, even though companies are anxious for greater access there, progress continues to be slow."
Dick Cheney, Chief Executive of Halliburton, now Vice President of the United States
Speech at London Institute of Petroleum, Autumn Lunch 1999

"....For the most part, U.S. oil policy has relied on maintenance of free access to Middle East Gulf oil and free access for Gulf exports to world markets, relying heavily on military preparedness. The U.S. has forged a special relationship with certain key Middle East exporters that had an expressed interest in stable oil prices and, we assumed, would adjust their oil output to keep prices at levels that would neither discourage global economic growth nor fuel inflation. Taking this dependence a step further, the U.S. government has operated under the assumption that the national oil companies of these countries would make the investments needed to maintain enough surplus capacity to form a cushion against disruptions. But recently, things have changed. These Gulf allies are finding their domestic and foreign policy interests increasingly at odds with America’s strategic considerations. They have become less inclined to lower oil prices in exchange for security of markets, and evidence suggests that adequate investment is not being made in a timely enough manner to increase production capacity in line with growing global needs. The opening of new media outlets in the Middle East has also increased the likelihood that a linkage will emerge in the minds of citizens there between the U.S. alliance with Israel and cooperation on oil prices. Moreover, a trend toward anti-Americanism could affect regional leaders’ abilities to cooperate with the U.S. in the energy area. The resulting tight markets have increased U.S. and global vulnerability to disruption and provided adversaries undue potential influence over the price of oil. Iraq has become a key 'swing' producer, posing a difficult situation for the U.S. government."
STRATEGIC ENERGY POLICY: CHALLENGES FOR THE 21ST CENTURY
JAMES A. BAKER III INSTITUTE FOR PUBLIC POLICY AND THE COUNCIL FOR FOREIGN RELATIONS, APRIL 2001

“Fuel is our economic lifeblood. The price of oil can be the difference between recession and recovery. The western world is import dependent. We base our policy on diversity of supply. You in the US import from 50 different countries, no one of which supplies more than 15 per cent of total imports. The EU pursues roughly the same policy. So: who develops oil and gas, what the new potential sources of supply are, is a vital strategic question. We have the best energy companies in the world. Yet I don't believe that collectively, we have a sufficient strategy for ensuring that the political and corporate world co-operate together in ensuring the diversity of supply continues or in our policy towards energy. The Middle East, we focus on naturally. But the Caspian, Russia and Angola will be vital sources of supply in the future.”
Tony Blair, Speech at George Bush Snr Library
10 Downing St, 7 April 2002

"The foreign secretary, Jack Straw, yesterday pinpointed for the first time security of energy sources as a key priority of British foreign policy. Mr Straw listed energy as one of seven foreign policy priorities when he addressed a meeting of 150 British ambassadors in London. The US and British governments officially deny that oil is a factor in the looming war with Iraq, but some ministers and officials in Whitehall say privately that oil is more important in the calculation than weapons of mass destruction.... Mr Straw told ambassadors that, following a review he ordered last year, the Foreign Office drew up a list of seven medium to long-term strategic priorities, including 'to bolster the security of British and global energy supplies'."
Straw admits oil is key priority
Guardian, 7 January 2003

"Britain has been given its first alarming glimpse into a future when the North Sea's oil begins to dry up. In September, oil imports exceeded exports for the first time since August 1991. The turnabout from a £400 million surplus to a £63 million deficit helped to widen the trade gap to a record £3.9 billion.... the UK Offshore Operators Association predicts a bleak trend for oil production in the UK. North Sea oil output peaked at 2.9 million bpd in 1999, but is expected to be just 1.6 million bpd in four years' time."
UK dips toe in nightmare future of disappearing oil
London Times, 12 November 2003

"The super-giant fields of southeastern Iraq are the largest concentration of super-giants to be found anywhere in the world....unlike neighbor Saudi Arabia, Iraq has been unable to deploy the latest technology, such as 3-D seismic, to find its reserves. Present reserve estimates of Iraq's oil are based on 2-D seismic technology from the 1980s. Still, the estimated success rate in Iraq ranges from one in two in the Mesopotamian Basin to one in four in the western and northwestern stable platform, with the overall success rate exceeding 72 percent - perhaps the highest success rate achievable anywhere in the world. Oil exploration costs are among the cheapest globally, with the current cost estimated at around 50 cents per barrel....To date, petroleum geologists have delineated and mapped over 526 prospects - drilling 131 prospects to discover 73 major fields. They have identified some 239 as having a high degree of certainty, but those prospects remain undrilled. Thirty fields have been partially developed and only 12 fields are actually onstream. Undrilled structures and undeveloped fields could represent the largest untapped hydrocarbon resource anywhere in the world.....Clearly, large parts of Iraq are still virgin - its large hydrocarbon reserves are still waiting to be developed to their full potential, while most other Middle East countries are fully exploiting their reserves. The main challenges facing the new Iraqi authority are to establish law and order as well as security. Once these issues are resolved, Iraq will perhaps be the most exciting place on Earth with regard to oil development and exploration....International oil companies are looking forward with great anticipation to the opening of Iraq, as they have been waiting for the past 40 years. Hopefully, Iraq will soon be able to offer them acreage, thereby allowing proper development of its huge potential. Open and fair competition will enable oil companies to apply the latest technologies in the search for, and development of, the country's hydrocarbon resources - thus helping Iraq realize its full hydrocarbon potential."
Assessing Iraq’s Oil Potential
Geotimes, October 2003

"The global market will need increasing volumes of oil from members of the Organisation of Petroleum Exporting Countries after non-OPEC production reaches a maximum of about 50 million b/d between 2007 and 2011... A question crucial to future oil supply, therefore is: Can OPEC's old fields deliver.... The oil fields of Iraq are the least depleted and least developed of any of the Persian Gulf oil producing countries, and Iraq has the potential to rapidly increase oil output.... Only Iraq has undeveloped supergiant oil fields (West Qurna, Majnoon, and East Baghdad) and the potential to rapidly increase production to 8-10 million b/d...... .As the different components of supply reach their maximum production rate, a series of crises in oil supply is likely over the coming decades. The first, related to the peak and decline of non-OPEC production, is practically upon us and underpins the currently high oil prices. Other factors are burgeoning world oil demand, driven primarily by China and the USA, and restricted output from Iraq. The imminent inability of non-OPEC production to meet incremental demand and its decline after 2010 precipitates the second crisis as OPEC’s diminishing spare capacity (even with Iraq’s production back to preinvasion levels) becomes less and less able to accommodate short-term fluctuations. The timing and depth of the crisis depend on world oil demand and OPEC investment in new capacity. While OPEC countries will have every incentive to make the necessary investments, the pace of past decision-making is not encouraging, and enough spare capacity may not be available in time. The third crisis, due to OPEC’s incremental supply being unable to meet incremental demand, follows in the first half of the next decade. This assumes that OPEC’s reserves are as published. If OPEC’s reserves are higher than published, this crisis may not occur until the latter half of the next decade and may be muted, particularly if demand moderates. These crises will have global economic and geopolitical significance: The oil price will be high and volatile, and demand growth will have to be curtailed..."
Oil Supply Challenges - 2: What Can OPEC Deliver?
Oil and Gas Journal, 7 March 2005

"The world faces the real threat of a new conflict over oil as China competes with existing world powers for scarce resources to feed its growing economy, according to a report published today. The State of the World 2006, released by the Worldwatch Institute, says that last year China became the second- largest importer of oil, after the US... While environmentalists are concerned about the impact on the world's climate and the drain on its resources, strategists fear that the competition for energy, particularly oil, could destabilise the planet. According to the report, China was nearly self-sufficient in oil in the mid-1990s. But over the past decade its consumption has doubled and it has now overtaken Japan as the second-largest importer of oil, with 3.2 million barrels a day in 2004. It predicts that if the economies of China and India continue to grow at their current rate, the world will not be able to produce enough oil to meet demand by 2050, when consumption will have grown from the current 85 million barrels a day to 200 million barrels. 'Few geologists believe that output will reach even half those levels before beginning to decline,' the report says. As a result China is already looking for new oil suppliers from Siberia to Sudan, often dealing with notorious regimes, such as the junta in Burma. Of even greater concern is the possibility that open conflict could break out between nations competing for resources or trying to protect their supply lines, such as key trade routes, currently patrolled by the US Navy."
'Find a couple of spare planets or face global oil war'
London Times, 12 January 2006

"You'll likely hear howls of protests from consumers, but current record oil prices are a new reality, delegates at a Calgary energy conference heard yesterday. 'We're still working on a base case where we see prices averaging close to $70 (US a barrel) this year assuming the geopolitical element didn't get too hot,' said Dr. Paul Horsnell, managing director and head of commodities research at Barclays Capital, the investment banking division of Barclays Bank. 'Clearly if the geopolitics came on a bit quicker, especially the concern in Iran, then all bets are off and we're going to get higher averages,' he said. Horsnell was a panelist at a Canadian Energy Research Institute conference looking at the short- and long-term outlook for oil prices....Horsnell said current prices have nothing to do with speculators or what many analysts refer to as the 'fear factor.' 'If demand does continue to rise and there's no extra relief from supplies than it's pretty clear that high oil prices are here to stay,' said Neil Atkinson, a senior consultant for Petroleum Economics Ltd. "
Oil prices 'realistic'
Calgary Sun, 25 April 2006

"Barclays Capital analysts predict U.S. oil prices will average more than $70 a barrel by the end of 2006 on strong global demand and supply uncertainties from major oil exporters. U.S. crude prices are unlikely to fall below $60 this year, they said.... 'The coincidence of minimal spare capacity - brought on by several years in which demand has exceeded capacity increases, with enhanced geopolitical risk - has produced a market that is prone to upward spikes,' they said."
Oil over $70 seen as average by year's end
Reuters, 11 April 2006

"According to Katherine Spector, head of energy research for JP Morgan Securities, market fundamentals point to petrol prices reverting to a higher mean in coming years. 'The world is running out of easy barrels of crude production,' she said, adding that marginal costs of production were rising. Other delegates told the forum that global oil market fundamentals pointed to the possibility of higher prices given that demand is robust and tends to grow every year, especially from China and India. Edward Morse, executive adviser with Hess Energy Trading, said that between 1965 and 2004, total Asian oil demand had risen 620 per cent while world oil demand was up by only 158 per cent. On the supply side, spare capacity was gone, traditional areas of oil production were mature and areas with growth were geopolitically or demographically challenged, Mr Murti said. 'We believe oil markets are in the early stages of what we are calling a multi-year 'super-spike' period."
World running out of easy oil
Reuters, 30 May 2006

"Skyrocketing operating costs are stopping oil and gas producers from developing new projects to meet growing demand, Woodside Petroleum boss Don Voelte said.Mr Voelte said at a Gold Coast conference yesterday global demand for oil was rising but costs of steel, oil rigs and staffing was doubling. 'We as an industry are struggling to meet demand. We just contracted a rig for $500,000 per day and we've got between five to 10 rigs (operating) at a time.'"
Oil costs on fire
Daily Telegraph (Australia), 13 May 2006

"Pressuring oil companies to invest more has become a popular refrain among activists and lawmakers seeking to ease the burden of rising energy prices. But oil economists and regulators this week expressed doubt over the wisdom of throwing more money at the problem, warning it may only drive costs even higher, not relieve prices at the pump... Oil companies say it will take years before any investments they decide to make now come online in the form of new production or refining capacity. "
Boost in oil spending not seen as magic wand
Reuters, 26 May 2006

"U.S. Energy Secretary Sam Bodman said on Tuesday that soaring energy prices could damage economic growth but there was little the Organization of Petroleum Exporting Countries could do to help bring them down. U.S. crude prices have hovered around $70 a barrel in recent weeks after striking a record over $75 last month, raising concerns that high energy costs may push inflation higher and curb consumer activity. But Bodman said the economy of the United States, the world's biggest oil consumer, was holding up well so far under the strain.' Am I concerned about the impact of high oil prices on the economy? Sure,' Bodman told the Reuters Global Energy Summit in New York.... Asked if oil cartel OPEC, scheduled to meet next week in Caracas to decide on production policy, can do nothing to bring down prices, Bodman said, 'Not in my judgment.' Only top exporter Saudi Arabia has spare oil capacity to bring on to ease prices or counter supply disruptions, and that crude is too heavy to be useful to refiners, he added. 'The Saudis say they have an extra 1 million barrels (per day) but I take that with a kind of a grain of salt. I know they have the capacity (but) my sense is it is heavy oil and that's not easily refined by most refineries,' the U.S. official said... In addition, the United States has permanently lost some 10 percent of Gulf Coast oil production and 5 percent of natural gas output due to hurricane damage last year, Bodman said. 'I don't expect it to come back,' the energy secretary said. 'The hurricanes have inflicted a lot of damage already.'"
Oil price may hit economic growth: Bodman
Reuters, 23 May 2006

"Canadian Oil Sands Trust (COS_u.TO: Quote) on Friday forecast annual Syncrude production of 90 to 100 million barrels and said it would take up to two months to restart production at a facility where it halted work earlier this month....The trust said it had lowered its forecast for second-quarter Syncrude production to approximately 22 million barrels from 24 million barrels because of the problems, which centered on 'odorous emissions' that prompted residents' complaints and forced the shutdown of a new expansion.... The shutdown came just 10 days after an C$8.4 billion expansion to the oil sands project began operation. Residents had complained of odors from the site, where a refinery converts the tar-like bitumen into synthetic crude oil."
Canadian Oilsands cuts output forecast after shutdown
Reuters, 26 May 2006

No Further Light Crude Capacity Available
Saudi Arabia Turns To Heavy Crude Processing

"Saudi Aramco and French oil firm Total signed an agreement on Sunday to build a 400,000 barrel per day (bpd), export-oriented refinery in the kingdom at a cost of around $6 billion. The full-conversion refinery in Jubail on the Gulf coast is designed to process Arabian heavy crude oil and is scheduled to start up in 2011, state oil firm Aramco said in a statement... Saudi Arabia holds the bulk of OPEC's spare output capacity. But most of Riyadh's unused capacity consists of heavy sour crude that refiners find difficult to process into transport fuels."
Saudi, Total sign $6 bln Jubail refinery deal
Reuters, 21 May 2006

"It’s well known that U.S. oil production has been declining for many years. And, in Alaska, oil production is well past its peak. But has worldwide oil production peaked? And what impact might worldwide oil production capacity have on already soaring oil prices? On May 1 Petroleum News discussed these topics with Alaska oil industry consultant Roger Herrera. 'I really have to believe that the world is very close to, if not past, peak oil,' Herrera said. Coming from a background as an oil geologist in the days when there might be a one in 20 chance of striking oil with a wildcat well, Herrera was trained to be an optimist about finding oil. So, anticipating declining production really goes against the grain with him. 'Yet here I am,' Herrera said. 'I find myself a very strong proponent of the problems associated with world peak oil, which in most people’s minds is a negative position to take.' Herrera sees the statistics of oil field discovery and production as providing the pointers towards peak production. 'If you look at the sizes of the oil fields that are added every year, they are smaller and smaller and we’re not replacing the oil that we’re using,' he said. And Herrera sees the dwindling likelihood of finding more giant oil fields as a key parameter in the production equation. 'The giants which are the real feeders to world supply are simply a thing of the past,' Herrera said. 'So just on the basis of statistics you have to be very, very concerned.'.... Another issue is that it is not generally possible to recognize a production peak straight away. 'I believe from just looking at history and peaking oil in individual countries that you inevitably don’t recognize the peak until after it’s happened,' Herrera said. So, if world oil has peaked it may take a couple of years for data to indicate the production summit. Herrera also thinks that the production of unconventional oil, such as heavy oil, is complicating the picture — rising oil prices have enabled an increase in unconventional oil production. 'Unconventional oil is already playing a relatively major role,' Herrera said. However, Herrera doesn’t see unconventional oil dramatically changing the situation; it just makes forecasting oil production more difficult."
Has oil production peaked?
Petroleum News, 7 May 2006

"Enbridge Inc. on Tuesday sounded shippers for support to build a $920-million pipeline from the U.S. Midwest to Canada's oil sands region to import diluent used to leaven tar-like oil sands bitumen. The proposed Southern Lights pipeline will have a capacity of 180,000 barrels per day, and will involve a combination of new construction, reversals and expansions of Enbridge's existing crude oil pipeline system. It will also make use of existing facilities, the company said. The line will run from Chicago to the refining center in Edmonton, Alberta. Southern Lights will carry diluent, an ultra-light form of oil or natural gas liquids that's blended into bitumen so the extra-heavy crude can be shipped on pipelines. As production from the oil sands expands, diluent is in short supply in Western Canada."
Enbridge garners support for $920-mln pipeline
Reuters, 30 May 2006

"Japan is considering a five-day increase in its national oil reserves to 95 days, the trade minister said Friday, moving to boost the resistance of the world's second-largest economy to wide swings in energy supplies....The report recommended an increase in national reserves to match increases in other countries."
Japan May Increase National Oil Reserves
Associated Press, 19 May 2006

"The head of the International Energy Agency (IEA) says the price of oil could rise above $US100 a barrel from just over $US70 now. Claude Mandil, who is about to visit Australia for a major oil conference, told The Australian Financial Review factors now pushing prices to near record levels were unlikely to change in the near future. The fossil fuel markets were in a 'vicious cycle', the IEA executive director said. Higher prices and stretched capacity were encouraging 'nationalistic' governments and groups with political gains from actions that threatened to further increase prices. 'This is alarming,' said Mr Mandil, whose key agency oversees energy markets. The best chance of easing pressure on the oil price, he said, was for the rapid adoption by government, industry and consumers of efficiency measures to slow the rise in demand for oil. "
Oil price could reach $US100
Daily Telegraph (Australia), 8 May 2008

"The IEA's latest monthly Oil Market Report attracted wider attention than usual because it made a sharp cut in its forecast for the growth in world oil demand for the year from 1.47 million barrels per day to 1.25 million barrels per day, saying that high prices are at last cutting into global energy demand, including in the U.S. The agency, which advises 26 industrialized countries, is now forecasting that the world will consume 84.83 million barrels per day this year--200,000 barrels per day less than previously forecast. That would reduce this year's annual consumption growth to 1.5%, less than the forecast growth of the global economy..... Remember, though, that the world is just using more oil less rapidly. It is not using less oil. As the world economy continues to grow, the demand-supply balance for oil remains tight, with little spare capacity. The swing supplier to world markets, the members of the Organization of Petroleum Exporting Countries, have been pumping more oil."
Oil: It's All About Supply
Forbes, 12 May 2006

"OPEC, the international oil cartel which is based in Vienna, trimmed its forecast Wednesday for this year`s growth in world demand for crude oil. The Organization of Petroleum Exporting Countries pegged global oil demand growth at 1.4 million barrels per day or 1.7 percent to total 84.6 million barrels per day.That`s a 60,000-barrel-per-day reduction from OPEC`s last worldwide growth forecast. 'High oil prices have contributed to a slowing of incremental demand mainly in the developed countries, especially for those countries where product subsidies have been reduced,' OPEC said in a statement."
OPEC, like IEA, cuts oil demand outlook
United Press International, 17 May 2006

"Rising fuel prices in Thailand have led to increased numbers of people in this northern province to change their diets, as the public switch to eating vegetarian fare, instead of more expensive meat and seafood.... The rising preference for vegetarian food in Phichit may not be indicative of the entire country, but rising oil prices is having a wider impact on society. Where is the energy-crisis taking the country?"
Rising oil prices raises vegetarian profile in Phichit
TNA News (Thailand), 13 May 2006

"J Sainsbury tried to calm fears that it would be forced to pass on escalating energy costs to shoppers, after its chairman suggested the company could not absorb all of its hefty fuel bills. Finance director Darren Shapland said: 'We know that if we lower prices, sales go up. If we increased prices we'd lose momentum and traction and we're not going to do that.' The supermarket was warning that its energy bill had tripled, increasing £75m, as a four-year, fixed-price contract came to an end. Mr Shapland's comments came just moments after the chairman Philip Hampton warned that rising energy bills were a serious threat. Mr Hampton said: 'It's hitting all businesses. The question is, do businesses contract or do they get it passed on as inflation? And when you look at supermarkets, you're looking at businesses with very thin margins.' Sainsbury's operating profit margin edged up last year from 2.07pc to 2.24pc.The company later tried to smooth out any contradictions between the two positions, but Mr Hampton made it clear that if higher costs weren't passed on, 'retail profit margins will be hit'. The soaring utility bill overshadowed the company's return to pre-tax profit. In the year to March, pre-tax profits were £104m, compared with 2005's huge loss of £238m after restructuring costs."
Sainsbury's energy bill rises £75m
Daily Telegraph, 18 May 2006