'This Is A Turning Point In History'
Urgent Action Is Needed
To Avert The Looming Oil Wars
www.btinternet.com/~nlpwessex/Documents/EnergyOct2006.htm
As Total Predicts Ceiling
For Peak Oil Production Circa 100M BPD

'Energy Update', October 2006

"The answer to America's oil addiction lies in Canada. Or so goes one line of thinking. As oil supplies got tighter and crude prices soared over the last few years, tens of billions of dollars flowed into an effort to develop the biggest oil reserve outside Saudi Arabia: Alberta's oil sands. Along with the development rush have come rosy predictions on how much this secure, close, proven supply of oil might yield. Four million, 6 million, even 10 million barrels a day, which is nearly half America's total daily consumption and would easily replace all imports from the Middle East. The only thing is, those numbers may be far too high."
Curing oil sands fever
CNN, 7 October 2006

"The world will struggle to raise oil output to levels much greater than 100 million barrels per day, Thierry Desmarest, chief executive of Total, has given warning ... The French oil major has broken ranks with some peers in its scepticism that the industry can continue to both replenish and substantially increase the size of the gobal petrol tank. Rivals, such as ExxonMobil and BP, have preferred to avoid discussions of peak oil....."
Total chief says world will find oil target tough
London Times, 8 September 2006

"With global demand for oil set to exceed supply, 'military tensions' and 'big wars' to grab the remaining oil reserves will increase ..... The stark warning came from Michael Meacher MP, a former environment minister of Tony Blair (1997-2003), writing in the Financial Times on 3 September 2006."
Comment: averting the next oil wars
EurActiv, 4 September 2006

And Not Just In The Middle East

Japan took possession of the disputed Senkaku Islands in February 2005 in an atmosphere of growing tension with China over territorial waters that are potentially important sources of oil and gas. Beijing described Tokyo's formal claim as 'illegal and unacceptable.' The US State Department has said it would back up any Japanese security claim on the Senkakus.	Chinese troops in beach landing training manoeuvres. China's economic success is allowing it to expand its military capability. In August Japanese Foreign Minister Taro Aso pointed to 12 years of rising military expenditure, describing China as "beginning to pose a considerable threat".   In 2004 China overtook Japan as the world's second largest importer of oil.

"Japan needs friends who are rich in natural resources, and Prime Minister Junichiro Koizumi made no bones about what he wanted from Uzbekistan and Kazakhstan when he became the first Japanese premier to visit the two countries last month. The country is hardly alone, however, in looking to parts of the former Soviet Union to meet its energy needs from new sources, and indeed, rivalry among East Asian nations may well intensify as they compete to woo the region....Only days after Koizumi left the region last week, China National Petroleum Corp., China`s largest oil producer, said that together with Korea National Oil Corp., Malaysia`s Petronas, Lukoil of Russia, and local group Uzbekneftegaz, it had obtained a 20-percent stake in a joint oil and gas exploration project in Uzbekistan`s Aral Sea extending about 10,000 square kilometers that potentially has 8 trillion cubic feet of natural gas."
Oil raises China, Japan rivalry
United Press International, 5 September 2006

"China has overtaken the United States as Japan's biggest export market, while Chinese economic growth remains heavily dependent on continued investments by Japanese businesses on its shores. Yet there seems to be no end in the growing rivalry and sometimes outright hostility between the two East Asian countries, a situation that has been aggravated in the race for oil and territorial claims. Earlier last week, the China National Offshore Oil Corp. said that it had begun gas production in the East China Sea, near the boundary that Japan has staked as its own.... China's seemingly insatiable appetite for oil has been cited by many energy analysts as one key factor for driving up petroleum prices in recent years, and that trend is only expected to continue in coming years, even though the country remains heavily dependent on mining its coalfields to meet the bulk of its energy needs. What's more, with virtually no energy resources of its own, Japan remains highly dependent on imported oil and it has already clashed with China on prospects of securing oil from Russia and central Asia."
Analysis: China-Japan oil spat confusion
United Press International, 7 August 2006

"With outgoing prime Minister Junichiro Koizumi due to step down next month, Japan's neighbors are breathing a sigh of relief and focusing their attention on his likely successor, Chief Cabinet Secretary Shinzo Abe ....  local media reported last week that he has plans to revise the country's pacifist constitution to allow Japan's self-defense forces greater participation in allied military operations."
Much Ado About Abe
TIME, 21 August 2006

"We maintain a massive military presence overseas partly to preserve our oil  lifeline. There is no guarantee that even our unrivaled military forces can prevent an energy disaster."
US Senator Richard Lugar
Lugar on Energy: ‘Oil Dependence is Dangerously Unsustainable’
Midwest Business, 31 August 2006

"China has started filling the tanks of a strategic oil reserve meant to insulate the country from disruptions in supplies, an official said Friday. The tanks in Zhenhai, a city in the coastal province of Zhejiang, south of Shanghai, are being filled with domestically produced oil, said Xu Dingming, deputy director of the Cabinet's State Energy Office. Xu didn't say how much oil had been pumped into the tanks or when the process was to be completed. 'All of the construction work (in Zhenhai) has been completed,' Xu told Dow Jones Newswires at an energy conference. 'Since the storage facility has been built, it must be put into operation as soon as possible.' The Zhenhai facility, with 16 massive oil tanks, is one of four planned sites for petroleum reserves. The others are to be built next year and in 2008. Previous reports said Beijing plans to stockpile up to 100 million barrels of petroleum, or the equivalent of almost a month's national consumption. The United States operates a similar reserve. China supplied its own oil for decades from domestic oil fields, but became a net importer in the 1990s."
Official: China starts filling strategic oil reserve
Associated Press, 6 October 2006

Bloomberg
What's Happening With The Oil Price?
Most Analysts Predict Only Temporary Respite

"Oil analysts are raising their price estimates for next year in anticipation of increased demand that may outpace the development of new deposits. Crude oil will average $64 a barrel in New York in 2007, according to the median forecast of 29 analysts surveyed by Bloomberg News last week. That's $2 higher than predicted at the end of the second quarter. Analysts failed to predict the rise in oil throughout a five-year rally during which prices tripled. 'We see a very tight market continuing into next year,' said Kevin Norrish, a director of commodities research for Barclays Capital in London. Barclays expects oil next year to average $76.70 a barrel, the highest forecast in the survey. 'The recent fall in prices is due to short-term factors,'' he said in an interview. 'We're looking for fairly strong global growth, and we don't see capacity expanding by much.' Benchmark oil futures touched a record $78.40 a barrel July 14 on the New York Mercantile Exchange on concern that fighting between Israel and Hezbollah in Lebanon would spread through the Middle East, the source of almost a third of the world's oil. Prices fell after fighting ended in Lebanon and the Gulf of Mexico storm season passed without a repeat of last year's hurricanes, which crippled oil production and refineries. New York crude ended yesterday at $61.03 a barrel. Oil's climb from less than $20 a barrel at the end of 2001 has been driven by the failure of producers to generate new supplies fast enough to keep pace with rising demand, especially in China. Analysts are betting that trend will continue. They forecast that oil would be $58 a barrel at the start of 2006, according to the median in Bloomberg's survey last December. So far, crude oil has averaged $68.26, higher than any prior year. 'We just haven't seen dramatic increases in supply,' said James Rollyson, an analyst at Raymond James Financial Inc. in Houston. Raymond James is predicting $70 oil next year after forecasting $58 at the beginning of this year. Oil consumption worldwide climbed 9 percent to an average 83.8 million barrels a day between 2000 and 2005, led by China and the U.S., according to the U.S. Energy Department. Global oil supply rose 8.6 percent to 84.5 million barrels. Prices surged during the first half as Iran, the fourth- largest oil producer, pushed ahead with nuclear fuel enrichment, heightening tensions with the U.S. Iran has the world's second- biggest proved oil reserves and borders the Strait of Hormuz, a narrow waterway through which nearly a quarter of the world's oil is shipped.... Strategists who forecast a drop in prices next year say a slowing U.S. economy will coincide with increased output."
Oil Analysts Raise 2007 Forecasts as Demand May Outpace Supply
Bloomberg, 3 Ocotber 2006

How Are We Doing Against CIBC's 2005 Projection?

"Over the next five years, crude prices will almost double, averaging close to $77/bbl and reaching as much as $100/bbl by 2010... Tomorrow’s price hikes won’t be triggered by sudden supply disruptions like the Arab oil boycott of 1973 or the Iranian Revolution in 1979. Instead, they will follow from the inevitable collision between surging global crude demand and accelerating depletion of conventional crude supply. By 2010, prices will have to take out nearly 9 million barrels a day from world oil consumption—no mean feat for a world that has never been more thirsty for oil....."
Not Just A Spike
Canadian Imperial Bank of Commerce, 13 April 2005

Not Just A Spike
Canadian Imperial Bank of Commerce, World Markets, 13 April 2005

Beware Any Short Term Respites
Now Is The Time To Plan

Soaring Exploration And Production Costs
As Oil Projects Falter

"The costs of finding additional reserves of oil and gas have soared, an industry study shows, adding to the malaise of international oil companies. 'Reserves replacement costs surged 73 per cent as increased capital spending did not translate into incremental reserve additions,' a study of 200 oil and gas companies found."
Cost of search for energy reserves soars
Financial Times, 21 September 2006

"High costs will likely derail some projects in the oil sands, according to Murray Edwards, the reclusive vice-chairman of Canadian Natural Resources Ltd., one of many firms working in the overheated Fort McMurray region of Alberta.... 'These projects, long term, need prices higher than $50 [U.S. a barrel],' Mr. Edwards told reporters after in a rare public appearance yesterday afternoon at the Alberta Global Business Forum in Banff, an intimate annual gathering of top business and political leaders.... Pressures around Fort McMurray -- competition for labour, construction materials such as steel and the region's overstretched infrastructure -- have already forced one global player to amend its plan. Paris-based Total SA, which bought into the oil sands a year ago, had hoped to see some production in 2010 but in August revealed first production is now set for 2013. 'Given the current challenges we face . . . it is going to be difficult for the Canadian sector to deliver the forecast growth in oil sands volumes over the next 15 years,' Mr. Edwards said in his presentation to the conference. 'Costs are accelerating to the point where you have to start wondering if projects are still economic.'"
Edwards sees threat to oil sands projects
Globe and Mail, 22 September 2006

More On Canada's Oil Sands - Click Here

"The answer to America's oil addiction lies in Canada. Or so goes one line of thinking. As oil supplies got tighter and crude prices soared over the last few years, tens of billions of dollars flowed into an effort to develop the biggest oil reserve outside Saudi Arabia: Alberta's oil sands. Along with the development rush have come rosy predictions on how much this secure, close, proven supply of oil might yield. Four million, 6 million, even 10 million barrels a day, which is nearly half America's total daily consumption and would easily replace all imports from the Middle East. The only thing is, those numbers may be far too high. Making a barrel of clean, light crude from the thick, dirty oil sand uses massive amounts of water, massive amounts of electricity and requires a large pool of labor in an otherwise sparsely populated area. 'People jump to the assumption that we can immediately ramp up to 9 million barrels per day and save the world,' said Peter Tertzakian, chief energy economist at ARC Financial, a Calgary-based private equity firm. 'But it's just not going to happen.'... energy is the first limitation people bring up at the mention of the oil sands. Tertzakian said it takes the equivalent of 0.7 barrels of oil to create one barrel of oil sands product. What's more, most of the energy needed to make the stuff currently comes from natural gas, an energy-rich, clean fossil fuel. 'It's like using caviar to make fake crab meat,' said Marlo Raynolds, executive director of the Pembina Institute, a Canadian environmental group.... Experts say most of the natural gas Canada currently exports to the United States will be eaten up by the oil sands projects. To fuel further expansion, they say, Canada will have to import natural gas from Alaska. Some have even suggested going nuclear, although that idea has gained little traction so far. Another constraint is water. Both extracting methods use huge amounts, up to two barrels for every barrel of oil produced. Even with production running at one million barrels a year, concerns are already being raised over the drawdown from the major rivers that flow through the region. 'At some point it's going to reach a tipping point when people say enough is enough,' said Raynolds.... So how much can they pull from the ground in Alberta? The Canadian government and many of the companies up there put the number somewhere around 4 million barrels per day by 2015, still a significant amount roughly equal to America's total crude production. 'The production levels aren't unrealistic at all, it's just a question of time,' said Sheraz Mian, a senior oil and natural gas analyst at Zacks Investment Research. But others are less sanguine. The U.S. Energy Information Administration, not generally known for issuing bearish reports, puts the number at 2.3 million barrels per day by 2015. Tertzakian estimates maybe 2.5 to 3 million barrels per day and cautions against too much optimism. 'Nobody should feel comfortable that Canada's oil sands are going to single-handedly satisfy the world's energy needs,' he said."
Curing oil sands fever
CNN, 7 October 2006

Alternatively
What Hope Lies In The Gulf Of Mexico?

"The story broke the morning after Labor Day, when the Wall Street Journal ran a front-page piece reporting that Chevron along with two partners had announced the results of a major oil production test in the Gulf of Mexico. The partners Chevron, Statoil, and Devon Energy ran the test on a well known as Jack No. 2 that was drilled last year in the Lower Tertiary zone of the Gulf of Mexico. This zone is about 80 miles wide, 300 miles long and is located about 175 miles off shore. The well was unusual in that it went to a depth of 28,000 feet and the drilling began under 7,000 feet of water. .... As the week wore on however, knowledgeable geologists and petroleum engineers began to question all the euphoria. First they noted that the Jack No. 2 test was not conducted on a single oil field that might contain 15 billion barrels oil. Rather, it was one test of a well in a zone that extends for hundreds of miles under the Gulf of Mexico. Whatever producible oil the zone contains will likely be found in numerous smaller deposits. A number of wells have already been sunk in the Lower Tertiary. Some were dry holes and a few struck oil bearing rock, which may have the potential to produce oil profitably. So far, only a handful of these exploratory wells have struck deposits of light oil, which may be possible to produce. Others have struck thicker oils that may be impossible to extract from extreme depths at acceptable rates. What seems to be turning up in the deeper waters of the Gulf are a series of smaller oil fields — some of which may someday be profitable to produce and some of which probably won’t. Extrapolating this situation to a major new discovery that will delay the onset of peak oil is clearly a reach. To extract oil from 20,000 feet below the surface, where the pressures run to 20,000 pounds per square inch (psi) and the temperature of the oil is in the order of 200 degrees centigrade, is going to be a major technical challenge. Wells drilled to these depths will cost in the range of $100 million each. To drill and set in place the production equipment for one of these fields may cost on the order of $1.5 billion, or more, as the cost of oil production equipment is inflating rapidly. Add to this the problem of what to do with very hot oil and the associated natural gas as it comes flowing to the top of a well 7,000 feet under the Gulf and 175 miles from shore. The decision to attempt production from these ultra-deep fields will not be taken lightly by the oil companies involved.... Assuming that producing oil from the Lower Tertiary turns out to be economically and technically feasible, will new production from the region have anything to do with delaying peak oil? The answer is an emphatic NO. Knowledgeable observers who have commented on the issue agree that even if all goes well, it is unlikely that more than 300-500,000 b/d of production could come into production from all the possible fields in the Lower Tertiary over the next five to seven years. In the meantime, the world will have burned another 150 to 200 billion barrels of oil and US production from existing fields will decline from the current 5 million b/d to somewhere around 4 million b/d. This suggests that it will take some spectacular and unlikely gains from new production to offset the natural decline currently underway in the US. Of still greater concern is production from Mexico’s giant 2 million b/d Cantarell oilfield, most of which is exported to the US. Creditable reports suggest that Cantarell is entering very rapid depletion and may be producing at a fraction of its current level five years from now. It would be virtually impossible for this level of new production from the Lower Tertiary to come online in the next five years. So long as the world continues to consume some 31 billion barrels of oil a year, there is still nothing in sight that can forestall imminent peak oil."
The Peak Oil Crisis: Hyping Jack No. 2
Falls Church News-Press, 14 September 2006

Head Of Total Claims
Peak Oil Production Will Go Little Beyond 100 Million Barrels Per Day

"The world lacks the means to produce enough oil to meet rising projections of demand for fuel over the next decade, according to Christophe de Margerie, head of exploration for Total and heir presumptive to the leadership of the French energy multinational. The world is mistakenly focusing on oil reserves when the problem is capacity to produce oil, M de Margerie said in an interview with The Times. Forecasters, such as the International Energy Agency (IEA), have failed to consider the speed at which new resources can be brought into production, he believes. 'Numbers like 120 million barrels per day will never be reached, never,' he said."
World 'cannot meet oil demand'
London Times, 8 April 2006

'Energy Is Power'
Putin Raises The Energy Stakes

"While BP’s mishandling of public opinion and the political process in the US has badly damaged its reputation in the short term, Shell’s misreading of government relations in Russia threatens to do it more lasting damage. For the economics of its $20 billion Sakhalin-2 gasfield are in doubt. And while Russia’s treatment of Shell may have been arbitrary, highhanded and duplicitous, it has not been surprising. Vladimir Putin views energy assets as his predecessors once regarded nuclear warheads. They are the means of advancing Russia’s strategic ambitions in the world.... Shell is not the only one that will have to deal with this new reality. ExxonMobil has been sent the same message on its Sakhalin investment: scale back costs or sell out. BP may find it comes under pressure to renegotiate terms of the BP-TNK joint venture."
Shell needs to oil its Kremlin diplomacy
London Times, 5 October 2006

"Russian energy giant Gazprom OAO will start building a natural gas pipeline that will connect Russia and China, reported Xinhua news agency yesterday. The western gas pipeline is considered the main gas route connecting the gas reserves in Russia’s West Siberia to West China’s provinces, bypassing the Republic of Altai."
Gazprom starts to build pipelines connecting Russia and China
China Knowledge, 4 October 2006

"Rosneft and Gazprom is in the process of acquiring more oil and gas resources to control not only Russian but also global energy resources. They will control soon more than half of Russian fossil based energy resources. That gives a tremendous power for Putin and Kremlin. India, China and Eastern Europe will be soon dependant on energy from ‘Russian Oil Block’. China is already dependant on it. The Eastern Europe that rebelled out of Soviet Union ultimately realizes that in order sustain and achieve prosperity they need cheap energy resources. For them nuclear is not a viable option. Russian energy is what they to attract Western companies for outsourcing and achieve above average economic growth. If Russian plans are implemented without a glitch, shrewd Putin will soon control more than 50% of the oil and gas reserves in the world."
Rosneft and Gazprom ready to give Putin his ultimate weapon – control of worldwide energy sources
India Daily, 30 September 2006

"The American oil companies Chevron and ConocoPhillips could be shut out of a massive Arctic gas project in a sharp chilling of trade relations between Moscow and Washington. Substantial volumes of liquefied gas from Shtokmanovskoye in the Barents Sea, originally earmarked for export to the United States, could be redirected to Europe, President Putin said. The shift in policy, revealed by Mr Putin after talks with the French President and the German Chancellor at the weekend, will be a blow to efforts by American energy companies to secure access to one of the world’s largest gasfields. The apparent snub to American interests is further evidence of increasing tension between Washington and Moscow over trade and the willingness of the Kremlin to use its energy resources as a political lever."
Russia in threat to turn off gas to US giants
London Times, 26 September 2006

"Speaking at a conference under the rubric 'Summit on Energy Security' at West Lafayette, Indiana, this month, the powerful chairman of the US Senate Foreign Relations Committee, Richard Lugar, characterized Venezuela, Iran and Russia as 'adversarial regimes' that were using energy supplies as 'leverage' in foreign policy. Lugar said: 'We are used to thinking in terms of conventional  warfare between nations, but energy is becoming a weapon of choice for those who possess it.'  Senior Russian figures were quick to dismiss Lugar's admonition as 'groundless Russophobia', but the US administration is already opening new battle fronts against Russia in the energy war. Next week's meeting in Beijing on energy security involving the United States, China, Japan, India and South Korea is a dramatic  manifestation of the new battle plans and war doctrines that Washington is conceptualizing. The conclave in Beijing, significantly, leaves out Western Europe.... Lugar underlined the crucial importance of a formal coordination of the US energy diplomacy with China and India at a juncture when 77% of the world's oil supply was controlled by 'foreign governments'; when the US paid 17% more for its energy in 2005 than the year before; when energy costs accounted for a third of the US trade deficit; and when the US was bracing for a whopping US$320 billion bill for its oil imports in the current year. Beijing was quick to respond to Lugar's kite-flying. Writing in the People's Daily on April 11, an expert from China's Institute of Contemporary International Relations, Su Jingxiang, signaled that if only Washington were savvy enough to 'revalue the tremendous market potential' in China and 'abate unnecessary doubts toward China', closer cooperation between Beijing and Washington on international energy issues could be realized. Su rendered some practical advice to Washington's policymakers in this connection. He questioned the efficacy of past US policies that involved 'seizing resources' through military intervention and expansion aimed at 'safeguarding the oil supply'. He pointed out that gunboat diplomacy was no longer workable either in the Middle East or Latin America as it produced only terrorism and resistance."
Russia sets the pace in energy race
Asia Times, 23 September 2006

"First Russian President Vladimir Putin attacked OAO Yukos Oil Co. Now it's Royal Dutch Shell Plc. This week's threat to shut down Shell's $20 billion Sakhalin Island project, the country's biggest foreign investment, is another maneuver to force companies in Russia to share more profits with the state, analysts said. It's a reminder of the tactics used in Putin's dismantlement of Yukos, whose assets ended up at state-run OAO Gazprom and OAO Rosneft after the government filed $30 billion in tax claims against the company."
Shell Faces Sakhalin Grab; Putin Seeks Energy Control
Bloomberg, 22 September 2006

"Gazprom is setting a sweeping plan for controlling supplies in the Asia-Pacific region, according to a senior official, a strategy that some analysts say would replicate in Asia a strategy that served the Russian energy company well in Europe. The Gazprom deputy director, Aleksandr Ananenkov, described the approach Wednesday, just two days after the Russian government withdrew an environmental permit for a consortium led by Royal Dutch Shell on Sakhalin Island. That action threw the venture's future as a foreign-controlled development into doubt. Gazprom is negotiating to join the consortium; energy analysts say the Russian government appeared to be using the environmental ruling to force Shell to sell a stake to the Russian company or risk expensive delays.... The action in Sakhalin came as Gazprom was maneuvering to control another natural gas field in Siberia owned by BP's joint venture in Russia: TNK-BP's Kovytka field in the Irkutsk region."
Gazprom sets sights on Asian fuel market
New York Times, 21 September 2006

Financial Times
'Urgent Action Is Needed To Avert The Looming Oil Wars'

What Might People At The CIA Think?

"I fear we're going to be at war for decades, not years ..... one major component of that war is oil."
James Woolsey, former Director of The CIA
Report On The Annual Policy Forum Of The American Council On Renewable Energy (ACORE)
Washington, 6-7 December 2004
RenewableEnergyAccess.com, 14 December 2004

"We do have a vital strategic interest in the oil reserves that are in that [Persian Gulf] area. But what I would like to see is a candid discussion of what our interests in the area are, what our equities are, and what the downside of maintaining a presence in the area is. We haven't seen any of that .... It's policy that has created these issues, and the policy should be openly debated in front of the American public, and not just kind of brushed away and disguised as a 'war against terror'."
Philip Giraldi, former CIA counter-terrorism official
The Weekend Interview Show, July 2005

"In the long run, we're not safer because we're still operating on the assumption that we're hated because of our freedoms, when in fact we're hated because of our actions in the Islamic world. There's our military presence in Islamic countries, the perception that we control the Muslim world’s oil production, our support for Israel and for countries that oppress Muslims such as China, Russia, and India, and our own support for Arab tyrannies. The deal we made with Qadaffi in Libya looks like hypocrisy: we'll make peace with a brutal dictator if it gets us oil. President Bush is right when he says all people aspire to freedom but he doesn't recognize that people have different definitions of democracy. Publicly promoting democracy while supporting tyranny may be the most damaging thing we do. From the standpoint of democracy, Saudi Arabia looks much worse than Iran. We use the term 'Islamofascism'—but we're supporting it in Saudi Arabia, with Mubarak in Egypt, and even Jordan is a police state. We don't have a strategy because we don't have a clue about what motivates our enemies.... We need to acknowledge that we are at war, not because of who we are, but because of what we do. We are confronting a jihad that is inspired by the tangible and visible impact of our policies. People are willing to die for that, and we're not going to win by killing them off one by one. We have a dozen years of reliable polling in the Middle East, and it shows overwhelming hostility to our policies—and at the same time it shows majorities that admire the way we live, our ability to feed and clothe our children and find work. We need to tell the truth to set the stage for a discussion of our foreign policy. At the core of the debate is oil.  As long as we and our allies are dependent on Gulf oil, we can't do anything about the perception that we support Arab tyranny—the Saudis, the Kuwaitis, and other regimes in the region. Without the problem of oil, who cares who rules Saudi Arabia? If we solved the oil problem, we could back away from the contradiction of being democracy promoters and tyranny protectors. We should have started on this back in 1973, at the time of the first Arab oil embargo, but we've never moved away from our dependence. As it stands, we are going to have to fight wars if anything endangers the oil supply in the Middle East. What you want with foreign policy is options. Right now we don't have options because our economy and our allies' economies are dependent on Middle East oil."
Michael Scheuer, former chief of the CIA's Bin Laden unit
Six Questions for Michael Scheuer on National Security
Harper's Magazine, 23 August 2006

"Such openness is rare; it set me back on my heels. The question came last Monday as I finished a lecture in Pewaukee, Wisconsin–the first of a handful of talks I gave for 'Great Decisions 2005,' a program of the Institute of World Affairs, University of Wisconsin-Milwaukee. With the 'weapons of mass destruction' of recent memory having evaporated as casus belli for the invasion and occupation of Iraq, I had decided to experiment with a tutorial on what I believe to be the real reasons behind the war—first and foremost, oil. Passing by a phalanx of late-model gas-guzzlers on my way in, I found myself wondering how my observations on the oil factor would be received. In the end, I was more than a little surprised that none of the 250 folks in that very conservative audience seemed to have much of a problem... Canadian writer Linda McQuaig, author of 'It's the Crude, Dude', has noted that decades from now it will all seem a no-brainer. Historians will calmly discuss the war in Iraq and identify oil as one of the key factors in the decision to launch it. They will point to growing US dependence on foreign oil, the competition with China, India, and others for a world oil supply with terminal illness, and the fact that (as Deputy Secretary of Defense Paul Wolfowitz has put it) Iraq 'swims on a sea of oil.' It will all seem so obvious as to provoke little more than a yawn.  But that will be then. Now is now. How best to explain the abrupt transition from early-nineties prudence to the present day recklessness of this administration? How to fathom the continued cynicism that trades throwaway soldiers for the chimera of controlling Middle East oil? ....  Shortly after George W. Bush entered the White House in January 2001, Vice President Cheney's energy task force dragged out the maps of Iraq's oil fields. (We now have some of the relevant documents, courtesy of a bitterly contested Freedom of Information Act lawsuit. But the courts have upheld the White House decision to keep the task force proceedings, and even the names of its members, secret.)  To be fair, taking over Middle East oil fields was not a new idea. In 1975 Henry Kissinger, using a pseudonym, wrote an article for Harpers titled 'Seizing Arab Oil,' outlining plans to do just that, preventing Arab countries from having absolute control over the modern world's most vital commodity. But in those days there was a USSR to put the brakes on such adventurism..... [After my tutorial] Some twenty folks did linger in a small circle that was dominated by a persistent, well dressed man (let's call him Joe), who just would not let go: 'Surely you agree that we need the oil. Then what's your problem? Some 1,450 killed thus far are far fewer than the toll in Vietnam where we lost 58,000; it's a small price to pay... a sustainable rate to bear. What IS your problem?'."
Ray McGovern, former CIA presidential intelligence briefer
We Need the Oil, Right? So What's the Problem?
TruthOut, 14 February 2005

"We have to sit down and get rid of our dependence on fossil fuels. Now. We need a 'Manhattan' project. This thing is fragile in the Middle East.
If this was a part of the world we didn't care about we could fly the aid in and forget about it. This isn't Darfur. It's oil. It's oil. It's oil. It's oil.
We just have to face the facts, whether you're Republican or Democrat..... [but] I don't see Washington coping with it."
Robert Baer, former Middle East CIA officer
Public Talk, Colorado, 12 August 2006

Playing For Time?
ExxonMobil And The USGS Fig Leaf

Exxon's Public Position Boils Down To This

"The world has an abundant supply of oil, and high petrol prices are just the reality of a globally traded commodity, ExxonMobil Australia chairman Mark Nolan said today. Mr Nolan used his speech to the Asia Pacific oil and gas conference in Adelaide today to debunk the theory of peak oil, which suggests oil supplies have peaked and will dwindle over the next 20 years.... 'The fact is that the world has an abundance of oil and there is little question, scientifically, that abundant energy resources exist,' Mr Nolan said. According to the US Geological Survey, the earth currently has more than three trillion barrels of conventional, recoverable oil resources. So far we have produced one trillion.”
Peak oil theories wrong, says ExxonMobil boss
Australian Associated Press, 11 September 2006

But The Three Trillion Figure
Is Based On Controversial Work By The US Geological Survey

"Last spring, the White House publicly embraced plans by Saudi Arabia to increase its oil production capacity significantly. But privately, some officials and others advising the government are skeptical about some of those Saudi forecasts ….. doubts about Saudi Arabia's assurances of how much it can expand capacity - and for how long - have been raised in a secret intelligence report and in a separate analysis by a leading government oil adviser, according to a federal government official and the oil expert. If those skeptical assessments are correct, the administration's hopes of increasing supplies would become still more difficult to fulfill.... a senior intelligence official, who insisted on remaining anonymous because he was not permitted to speak publicly on the issue, said that the Saudi plans to increase production by nearly 14 percent in the next four years were not enough to meet global demand. Even the Energy Information Administration recently scaled back its expectations of how much more oil the Saudis could pump in 20 years.... under pressure from the United States and other consumers, the Saudis promised to pump more oil. Saudi Aramco, the state-owned oil company, was planning to increase capacity to 12.5 million barrels a day by 2009. Before long, Ali al-Naimi, the oil minister, and Saudi oil executives were saying that the country could add 200 billion barrels - from existing fields and yet-to-be-discovered resources - to its reserves, enabling production of 15 million barrels a day for 50 years or perhaps longer. Just before meeting with Prince Abdullah in April, President Bush said he wanted 'a straight answer' about how much extra oil the Saudis could pump. At that session in Texas, the prince reaffirmed the previously announced expansion plans. Saudi Arabia's capacity now stands at about 11 million barrels a day. The Saudis pump about 9.5 million barrels, leaving a cushion of about 1.5 million barrels, mostly of heavier grades not very usable in the West. ......But there are doubts about the Saudi assertions about how much oil they have. Data about reserves is tightly guarded, and the Saudis dismiss skeptics as uninformed. But they do not dismiss Edward O. Price Jr., the former head of exploration for Saudi Aramco and an adviser to the United States government on Persian Gulf oil during both Iraq wars. He questioned future reliance on Saudi capacity in an article in The New York Times last year and wanted to know from his former colleagues how they reached their estimate of more than 150 billion barrels of extra oil. Twenty years ago, a detailed study by geologists from four large American oil companies then in partnership with Aramco found little in the way of undiscovered oil resources, he said. Mr. Saleri, who manages Saudi reservoirs, met with Mr. Price in the United States last year. Saudi Aramco officials declined to respond to questions about the meeting. But Mr. Price said in an interview that Mr. Saleri told him that the basis for the higher oil figures was a global study in 2000 by the United States Geological Survey estimating Saudi Arabia's undiscovered resources at 87 billion barrels. Mr. Price said he responded that the estimates 'by the U.S.G.S. had no credibility and far exceeded the detailed studies by the old Aramco team.' The Aramco study, unlike the survey estimate, involved detailed field work. Questions about Saudi Arabia's long-term estimates were also raised last year in a report by the National Intelligence Council, an advisory panel that produces the government's most authoritative intelligence estimates, according to a government official who insisted on not being identified because the report was classified."
Doubts Raised on Saudi Vow for More Oil
New York Times, 28 October 2005

Not Even Geologists At BP Believe The 3 Trillion Figure
Although CEO Lord Browne Doesn't Talk Publicly About This
('Don't Mention The War' Syndrome)

"BP exploration consultant Francis Harper said he estimated the world's total original usable oil resources - the amount of oil before drilling began - at about 2.4 trillion barrels of oil. This is considerably less than the 3 trillion assumed by bullish commentators such as the US government's Geological Survey. This points to oil production peaking between 2010 and 2020.... His comments are a rare entry by a global oil company into the debate on the life of global oil supplies.... He added that oil companies' public positions on the issue masked debate within them. 'There are people in BP who happen to be economists and so happen to think there's no problem, and there are people in BP who are geologists who are saying it's getting hard to find.'... Seth Kleinman at PFC Energy said oil companies had held back from such statements. 'There's a certain degree of hesitancy for oil companies to go on the record and say, 'we are doing well with oil prices where they are now, but 10 years down the road things actually look pretty dire'."
Oil supply to peak sooner than we think, says BP scientist
The Business, 7 November 2004

"BP CEO Lord Browne made an attempt to calm the world concerning an oil crisis as his company published third-quarter profits had surged by 43 % to almost $ 4 bn, due to record crude prices. Lord Browne confirmed that oil prices will stay very changeable, however he noted, 'It is not helpful for the world to believe that it is running out of oil. We are evidently not.' All oil producers were increasing output and some had increased their spending on exploration and production from $ 62 bn in 2000 to almost $ 100 bn last year. Lord Browne said that if demand returned to historic levels the supply-demand proportion would be back to 'more normal levels' by 2008. He acknowledged that if demand continued to grow at the same exceptional level as it had this year, the world would run out of spare capacity, but he added: 'I think that would be a bit of a stretch, in my view. Oil is not immune from the general vagaries of the world economic situation.' In the medium term, he said, BP expected the oil price to stay above $ 30 a barrel 'underpinned by OPEC discipline and their needs for revenue.'"
BP makes attempt to calm the world concerning oil crisis
Neftegaz, 27 October 2004

"Oil giant BP plans to invest $3 billion to upgrade its refineries to process heavy crude oil from Canada, BP Chief Executive John Browne said Thursday.... He said U.S. retail gasoline prices are high because of expensive crude oil, not a shortage of refining capacity."
BP to upgrade refineries to take Canada heavy oil
Reuters, 15 June 2006

"... last week Browne [CEO of BP] admitted that production fell for the fourth quarter in a row, down 2.5 per cent on a year ago. Questions over where future production would come from began the erosion of confidence in BP in the 1990s. The company is transformed, but, as Browne prepares to step down (he reaches the company retirement age in spring 2008), the questions are beginning to reappear.... as Neil McMahon at Sanford Bernstein wrote recently: 'Russia is simply not enough.' The TNK deal reversed a production decline from 2003, while Thunder Horse in the Mexican Gulf and Kizomba off Angola will keep production up for another five years. But BP production falls from some 4.5 million barrels per day in 2010 back to 4 million barrels per day by 2020. McMahon notes that in the Mexican Gulf , projects are becoming more challenging. He adds that Russian discontent with Western majors poses questions over projects there. By contrast, Shell and Exxon, the largest of the three, peak later, though they see fall-offs by 2020."
Spectres loom for booming BP
Observer, 9 July 2006

"[BP's] Lord Browne's said that most exploration for new supplies had halted [in Iraq] when the Iraqis nationalised their industry.... he believed there was a plenty of oil and gas waiting to be discovered in Iraq and that BP should be in prime position to capitalise [after a war with Iraq] because it had found most of the country's oil before being thrown out in the 1970s.... Lord Browne will be listened to carefully in Downing Street because the BP executive team has such close links with the UK government that it was once dubbed Blair Petroleum."
BP chief fears US will carve up Iraqi oil riches
Guardian, 30 October 2002

Or At Shell?

"..... My view is that 'easy' oil [i.e. conventional oil] has probably passed its peak."
Jeroen van der Veer, CEO of Royal Dutch Shell
Financial Times, 24 January 2006

Or At Chevron?

"International oil companies have advertising campaigns warning that the world is running out of oil and calling on the public to help the industry do something about it....ExxonMobil, the world's largest energy group, said in a recent advertisement: 'The world faces enormous energy challenges. There are no easy answers.' .... Chevron, the US's second-largest energy group, sends a similar message, but goes two steps further. 'One thing is clear: The era of easy oil is over. We call upon scientists and educators, politicians and policy-makers, environmentalists, leaders of industry and each one of you to be part of reshaping the next era of energy. Inaction is not an option,' was the message in a recent advertising campaign. The company has even set up a website, www.willyoujoinus.com, warning of the pressures of high demand and fewer fields and offering a forum of discussion."
Big Oil warns of coming energy crunch
Financial Times, 4 August 2005

And In Reality Behind The Scenes
Exxon Knows The Situation Is 'Challenging'

"Our industry can certainly be proud of its past achievements. Yet the challenges we will face in the coming years will be every bit as great as those encountered in the past, due in part to ever-increasing global energy use. For example, we estimate that world oil and gas production from existing fields is declining at an average rate of about 4 to 6 percent a year. To meet projected demand in 2015, the industry will have to add about 100 million oil-equivalent barrels a day of new production. That's equal to about 80 percent of today's production level. In other words, by 2015, we will need to find, develop and produce a volume of new oil and gas that is equal to eight out of every 10 barrels being produced today."
John Thompson, President of ExxonMobil Exploration
The Lamp (published for ExxonMobil shareholders), 2003, Vol. 85 No.1


Graph from ExxonMobil report 4 February 2004, p4 (2004 marker added for illustration)
'A Report on Energy Trends, Greenhouse Gas Emissions, and Alternative Energy'

And So Does The US Government

"U.S. Energy Secretary Samuel Bodman said Tuesday that oil producers have 'lost control of the market,' which is currently in hands of oil traders. Bodman, speaking in an interview with CNBC, said the producers of oil 'are unable to appropriately respond to the demands that the marketplace is putting on them.' Bodman, who is in Baghdad and was being interviewed via a television link, also said oil demand will exceed supply for the next year or two. 'At least at the present time and for the foreseeable future, I would guess for the next year or two, we're going to see demand exceeding supply,' Bodman said. 'And we're going to be dealing with a very emotional situation in that environment.' Bodman said there is a crisis for American families that haven't budgeted for higher gasoline prices, but he said the U.S. economy is absorbing the shock. 'I believe that we see that the American economy is quite resilient,' Bodman said. 'It is surprisingly quite able to handle high oil and gasoline prices. But, you know, heaven knows...how long that will last.'"
Sec. Bodman: Oil Producers Unable To Respond To Demand
Dow Jones, 18 July 2006

Where This Is All Taking Us
If We Don't Get Our Energy Act Together

"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

"Saudi Arabia, which produces about 9 million bpd of crude and is the world's top oil exporter, was China's largest supplier for the last four years at least, customs data showed.... Saudi Arabia will regain its position as the biggest crude oil supplier to China once Chinese refineries are upgraded, after being overtaken by Angola earlier this year, a senior Saudi Aramco official said. China has ramped up imports of Angolan heavy sweet crude, which suits its plants better, but Saudi Arabia will reclaim its role as the main supplier in the long term, said Ibrahim Mishari, Saudi Aramco's vice-president marketing and supply planning. 'They will import more because of proximity and lower costs,' Mishari told an oil seminar."
Saudi to reclaim top China oil supplier role
Reuters, 6 September 2006

"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 consuming 26 per cent of the world's steel, 32 per cent of rice production,  37 per cent of cotton and 47 per cent of cement. China is set to become the world's largest carmaker in the coming decade. 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

"Nearly two years ago now, I wrote a long article entitled 'The Kirkuk-Haifa pipeline: myth or reality?' published in the Middle East Economic Survey 1 December 2003 and at the same time in Arabic in the Journal of Palestinian Studies. A summary also appeared in Gulf News on 19 February 2004 under the title 'Will Israel get Iraqi oil?' .... The growth in world oil demand will be more pronounced in Asia than any other region in the world. Asia's dependence on Gulf oil will increase sharply in the years to come. Therefore, Iraq and other Gulf countries are likely to expand their Gulf terminals rather than the Mediterranean terminals..... "
Saadalla Al-Fathi, former head of the Energy Studies Department at the OPEC Secretariat
Not with our oil
Al-Ahram Weekly, 29 September 2005

"This comfortable world, as we have known it, is coming to a crucial turning point. And energy, specifically the cost and security of energy supply, lies at the apex of this turning point.... So, while some of the problems, such as Kyoto, have had much attention, others, such as the long-term security of energy supply upon which our prosperity has depended, have been neglected. Now, suddenly, new risks are appearing on the horizon. There are new dangers that could alter our quality of life over the next 20 years. They could put at risk the comfortable social order we have created for ourselves, to which most of the rest of the world has been conditioned to aspire. A key factor in the changing balances of world energy is Russia.... So perhaps we should heed some distant storm warnings. Perhaps we should be concerned when Russia and China seem to be coming to recognise the scale of opportunity that a strategic partnership can offer them in terms of energy security and global influence? And when the US Department of Energy forecasts that, by 2020, the annual shortfall in Opec oil production, against global demand, will exceed the biggest-ever production of Saudi Arabia, the traditional swing producer. And when we expect Canadian gas exports to the US to dwindle and shortly cease because of the need for energy for the processing of tar sands.... What we believe to have been the definitive triumph of the Western democratic way over the sterile misery of the Soviet system may be turning out not to have been the victorious end of the Cold War after all, but just one battle in an unending struggle for global power and influence. The key weapon in the battle lines now being drawn is energy. Even if market forces prevail in setting costs of oil and gas, it seems clear that having so heavily depleted its own relatively low-cost hydrocarbon reserves, the OECD will have no influence over the supply or over the very much higher future costs of that supply."
Energy question may spell end of the good life for the West
London Times, 27 December 2005