Oil Depletion - 'You Can Be Sure Of Peak Oil With Shell'

"I can affirm that the price of a barrel of crude oil rising to $80 in the near future is a weak possibility. But I cannot rule out (the possibility) of oil prices rising to 80 dollars a barrel within the next two years."
Adnan Shehab-Eldin, acting secretary general OPEC
Oil prices can hit $80: OPEC
AFP, 3 March 2005

"The surge in profits that the company reported was not the result of exploration success or profiteering at the petrol pump, but merely a reflection of the increase in the price of oil. Every increase of $1 in the oil price is worth around $400 million to Shell."
Profit is good; big profits are better
London Times, 4 February

"Anecdotal evidence suggests Shell is not alone in struggling to find new sources of oil.... But if others in the industry are better placed it is because they bought reserves when oil was cheap — BP’s relative abundance has as much to do with writing cheques as with drilling wells."
An exercise in futility at Shell
London Times, 3 February 2005

London Times Graphic Suggesting (bottom left) That Shell Needs 'Access To Iraqi Oil'
Print Edition, p44/45, 4 February 2005

Shell Game
"The United States will next week appoint a former head of Shell Oil to run Iraq's oil industry, it was reported today. 'The US Government is setting up Iraq's oil industry to run much like an American corporation, with a chief executive and management team vetted by US officials who would answer to a multinational board of advisers,' the Wall Street Journal Europe reported. The advisory board would be chaired by Philip J Carroll, a former chief executive of Shell Oil, the US unit of the Dutch-British oil giant Royal Dutch/Shell, the newspaper reported.... The chief executive, who would have basically the same role as former oil ministers and would also have a seat on the advisory board, would represent Iraq at the Organisation of Petroleum Exporting Countries. Washington has been the subject of sharp criticism that one of the motivations behind its military campaign in Iraq was to gain control of Iraq's oil reserves, estimated to be the second-biggest in the world after those of Saudi Arabia."
Former Shell chief 'to run Iraqi oil industry'
London Times, 25 April 2003

".....even as fears of shortages grow throughout the world and prices remain high, the cash-rich oil companies are not pouring a large portion of their money into their basic business: drilling for oil. Indeed, oil executives, in their second straight year of rising profits, are finding that too much money is chasing too few oil fields. Instead, they are giving much of their cash back to shareholders. For example, Exxon Mobil, the world's largest publicly traded oil company, earned more than $25 billion last year and spent $9.95 billion to buy back its own stock; Royal Dutch/Shell Group, whose revisions to its oil reserves have left many investors wary, pledged to hand out at least $10 billion as dividends to shareholders this year. And BP, which earned $16.2 billion in 2004, will return as much as $23 billion to its investors this year and next, mostly as dividends. At the same time, it is cutting capital expenditure for the first time in at least four years, to $14.1 billion in 2005 from $14.4 billion last year...... One reason exploration spending is declining is quite simple - there is less oil left to drill for in places that are open for exploration, like North America or the North Sea, while the bulk of the world's known reserves, mainly in the Middle East, are mostly shut off to foreign investors. 'If they had attractive things to invest in, they'd be investing their little heads off,' said Gerald Kepes, a managing director at PFC Energy, a consultancy based in Washington. 'Twenty-five years ago, if prices had risen to $45 a barrel, you would have seen everyone in the United States drop everything, jump in a pickup truck, and drill in their backyards. The fact that you don't see this today says a lot. These kinds of easy opportunities have largely dried up."
Big Oil's Burden of Too Much Cash
New York Times, 12 February 2004

"Gordon Brown is set to urge the world's top finance chiefs to ..... press oil producing countries to open up to Western companies. The Chancellor will set out his agenda at a London conference of the finance ministers and central bankers from the G7 club of the world's major industrialised countries."
Brown sets out agenda to G7 nations"
This Is London, 5 February 2005

"Worried soaring oil prices could hurt the best global prospects in years, finance chiefs from wealthy nations met on Friday to try to work out what lay behind the surge and how to buffer the economic expansion. Group of Seven finance ministers and central bankers met at the tightly guarded U.S. Treasury building over lunch and were to work through the afternoon before a dinner with Chinese counterparts that has currency reform on the menu.....Another G7 official suggested the rise in oil costs was rooted in such fundamental factors as over-estimated supplies and was not solely due to speculation. There is ‘a recognition that oil resources are scarcer than was thought a few years ago,’ the official said. ‘We agree there is a need for more transparency on the potential supply of various areas.’ If scarcity is the chief culprit, the oil price shock may not prove as temporary as hoped, the official said."
WRAPUP 1-G7 finance chiefs mull oil before China meeting
Reuters, 1 October 2004

"The cost of removing hundreds of abandoned oil rigs and platforms will push the Treasury’s North Sea tax accounts into the red within 16 years, says Wood Mackenzie, a leading energy consultancy. The annual windfall from taxing oil and gas producers, which this year should bring £6.5 billion to the Exchequer, will turn into a cash drain over the next two decades as energy companies remove platforms and claim back oil taxes paid in previous years. Estimates of the likely cost of toppling the vast steel and concrete structures littering the UK continental shelf are soaring to more than £15 billion at the same time as forecasters plot the rapid downward trend in the tax take from the North Sea. According to Wood Mackenzie’s forecasts, the Treasury is expected to earn £6.5 billion this year from taxing oil and gas profits but that income will rapidly decline to £1.5 billion in 2015 as the North Sea’s oil reserves run dry. By 2020 the Treasury’s income turns into a deficit of £115 million, the consultants estimate."
Scrapping oil rigs will plunge North Sea tax into red
London Times, 29 March 2004

"By 2020, we will probably be importing three-quarters of our primary energy needs – and we will need to adapt to that.... I will be tasking our Ambassadors and High Commissioners in priority posts overseas to take personal charge of implementing this [International Energy] Strategy and delivering its objectives..... we will be enhancing our [diplomatic] posts' capacity on energy issues...."
Jack Straw, Foreign Secretary
Launch of the UK International Energy Strategy, Foreign Office, 28 October 2004

"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

“Shell's problems come as worries grow about how the world's biggest oil companies will continue to secure reserves. Exploration success has been limited, access to oil-producing countries is a challenge and new competition has emerged from countries such as India and China. The company said last year it had put its problems behind it by cutting reserves 23 per cent and forcing the resignation of its three most senior executives. But Shell said yesterday it would need to cut the total by another 1.4bn barrels. The group also said it had only replaced 15-25 per cent of the depletion in its reserves in 2004.”
Shell's reserves cut further
Financial Times, 4 February 2005

"The revelation yesterday that Shell had replaced only 15 to 25 per cent of the depletion in its reserves last year shows how far it has to go to hit its target of 100 per cent reserve replacement on average over the next five years…. Sanford Bernstein, the analysts, have pointed out that oil companies need a 137 per cent reserve replacement ratio just to ensure modest yearly production of 3 per cent…. [A Shell executive] lauded Shell's reinvigorated exploration drive with the drilling of 15 ‘big cat’ wells last year, aimed at making discoveries of 100m barrels of oil or more. He said it had made five discoveries but none of these had so far proved to be the huge finds that it needs. The oil industry as a whole has struggled for exploration success recently and one former rival exploration executive says: ‘There is no way Shell can 'find' its way out of trouble.’…. [there are] accusations from some analysts that problems at Shell are being masked by high oil prices…. "
Shell needs something in reserve
Financial Times, 4 February 2005

"Shell was last night fighting calls for a windfall tax as it recorded the biggest profits by a British company. The £9.4bn earned in 2004 from oil and gas - £1m an hour and equal to nearly 1% of the Britain's GDP - came after the prices of UK domestic gas, electricity and petrol soared. ....BP, meanwhile, will report nearly £9bn next week and its chief executive, Lord Browne, has described the company's cashflow as 'astonishing'. The enormous earnings of Shell and BP are mainly the result of soaring crude oil prices, which have rocketed to nearly $50 (£27) a barrel. Rival ExxonMobil this week reported annual profits of $25bn (£13bn), the highest corporate profit in history. Thanks to soaring demand from China, global oil use rose 3.3% last year, the fastest growth since 1976.... Shell's chief executive, Jeroen van der Veer, said the performance 'demonstrates our financial and operational resilience' after a turbulent year. An embarrassing oil reserves scandal claimed the scalps of three of the most senior directors."
Record Shell profit spurs windfall tax calls
Guardian, 4 February 2005

"Shell’s stocks [of oil] are nearly one-third smaller than they had appeared at the start of last year."
Shell's Tragic Touch
London Times, 3 February 2005

"Shell has fuelled further concerns over its oil stocks by slicing 10 per cent from its reserves and admitting that it replaced in finds as little as one-sixth of the hydrocarbons it extracted last year.The oil giant announced a 38 per cent rise in profits for 2004, to £9.32 billion ($17.6bn), a record for any British company..... The revision was the fourth since January last year, when Shell revealed reserves misaccounting, an admission which prompted a plunge in its share price, the ousting of its chairman and head of production, fines by American and British financial regulators and a corporate governance shake-up which is ending the group’s Anglo-Dutch splits..... This morning’s statement also revealed that the company replaced in discoveries between 15 and 25 per cent of the oil it extracted last year, once business sell-offs were accounted for. Shell has a target of replacing in reserves at least as much oil as it brings to the market."
Shell cuts oil reserves for fifth time
London Times, 3 February 2005

"Those who had complacently muttered that an Enron could never erupt in Britain cannot now be so sure. For if Shell, a pillar of Europe’s business establishment, can turn out to have been conning investors for years, who can guess what might be going on behind some of the racier corporate façades? "
Waffle about values won't tame the bully boss
London Times, 23 April 2004

"A top executive of Royal Dutch/Shell Group wrote in an e-mail that he was 'sick and tired about lying' about the company's inflated oil and gas reserves estimates, an investigation commissioned by Shell reported Monday. The investigation, whose findings Shell accepted in full, found that some bosses knew for almost two years the company had publicly overstated the size of its reserves..... The company said Monday that it had downgraded a total of 4.85 billion barrels, or about 25 percent of its reserves, from 'proven' to less certain categories....When legal advisers sent van de Vijver a memo a month later saying Shell should disclose the problems, the report said he responded by e-mail: 'This is absolute dynamite, not at all what I expected and needs to be destroyed.'"
Shell Executive Cited Concern Over 'Lying'
Washington Post, 20 April 2004

"Shell needs to do four things to set itself back on course. So far it has gone a long way to settling the reserves issue — although that may be the least important of the four things .... Most importantly of all, Shell has to find oil. If it was finding oil at respectable rates over the past five years, it is probable that the reserving issues would never have emerged. Sadly, however, there is little evidence that Shell has the capacity to find the all-important black stuff."
Big reservations remain at Shell
London Times, 20 April 2004

"According to leaked internal documents, Shell’s management realised as early as 2002 that the company was not finding enough oil to replace production....It is alleged that a decision was made to relax the rules by which the company accounted for proven reserves — a measure used by the SEC to categorise whether oil and gas can be produced with 'reasonable certainty using current technology.... The tidal wave broke in January, when Shell admitted the 20% overstatement of reserves. It had to axe 3.9 billion barrels of oil from its proven reserves, a decision that wiped almost 8% off the share price. The reclassification was blamed in large part on overbooking in developments in Nigeria and at Ormen Lange, a gasfield off the Norwegian coast. At issue now is who knew what, and when. Company documents from late last year, which have been leaked to The New York Times, said Shell had concluded that 1.5 billion barrels, 60% of its Nigerian reserves, did not meet accounting standards for proven reserves. Management advised against changing the figures, however, for fear of damaging Shell’s relationship with the Nigerian government. "
Focus: Ready to blow
London Times, 18 April 2004

"Further accusations against Mr Van de Vijver have arisen in the US with reports yesterday that he told a subordinate to 'destroy' a report prepared by Frank Coopman, the exploration finance officer, who has since been removed from his post. In a December 2 e-mail, Mr Van de Vijver allegedly expresses concern that Mr Coopman’s conclusions were premature. The report, which indicated concerns that up to 3.6 billion barrels of oil might be overstated, was not destroyed. The new accusations contradict claims made this week by Mr Van de Vijver that he 'led the charge' in seeking full disclosure of the reserves problem. In a statement, the Dutchman appeared to put blame on former colleagues, suggesting he made known his concern soon after he was made head of exploration in June 2001."
Shell chiefs meet as new allegations emerge in US
London Times, 17 April 2004

"Shell risked provoking more investor anger yesterday after it announced a second production delay to a key offshore oil project in Nigeria. The news comes a day after The Times revealed that another critical project in Siberia had spiralled more than $2 billion over budget in just two months. The troubled Anglo-Dutch giant said that production at the Bonga installation, potentially the largest oilfield in Nigeria with an estimated output of more than 225,000 barrels of crude a day, would not start until 2005 at the earliest. In February, Shell put back the start-up date for the site by about six months to 'late 2004', citing operational problems at the development,which is located in coastal waters more than 1,000m deep. The company also admitted that it was 'facing cost pressures' on the $10 billion (£5.4 billion) Sakhalin-2 Siberian natural gas project, adding that it was reviewing both the 'cost and execution stages' of the development. The statement follows disclosures in The Times that the total cost of building Russia’s largest energy project was now more than 20 per cent higher than the budgets presented to analysts in February. Bonga was first announced in December 1999, by Sir Philip, when he was running the group’s exploration and production division. The project aims to extract an estimated 600 million barrels of oil that are lying 120 km off the coast of Nigeria. Shell has a 55 per cent stake in the venture, with the balance being held by Exxon Mobil, Eni and Total. The Bonga project was originally set to come on stream in 2003. At that time, Sir Philip said that the project was a 'technological triumph that we are able economically to produce oil and gas from such deep water, and in such a compressed timescale'."
Shell woes mount with new delay
London Times, 3 April 2004

"An argument about a quarter-century-old securities law is threatening the reputations of some of the world’s largest oil groups and raising embarrassing questions for America’s stock market regulator. The row erupted yesterday as BP and Norsk Hydro defended their estimate of reserves at Ormen Lange even though their calculations are now up to four times more optimistic than those by Shell, a partner in the $9.5 billion (£5.2 billion) project to develop the Norwegian offshore gasfield. The discrepancy in treatment of reserves at Ormen Lange will annoy the Securities and Exchange Commission, the US stock market regulator, which is already extending to other oil companies an inquiry into how Shell accounts for its reserves. On Thursday Shell said it would book only 90 million barrels of oil, or the equivalent, from the Ormen Lange field, after previously estimating the site to be good for at least 256 million barrels. Yesterday, BP and Norsk Hydro, both partners in Ormen Lange, insisted that they would stick by their estimates, which are now significantly higher than those of their rival."
Gasfield row threatens oil majors' reputations
London Times, 20 March 2004

"BP insisted yesterday that it was confident in booking 80 per cent of its 11 per cent interest in Ormen Lange gas as proven reserves, despite Shell’s announcement on Thursday that it had changed its mind about the gasfield and intends to book just 20 per cent. Norsk Hydro also defended its decision to book 80 per cent of its Ormen Lange gas. The huge discrepancy forces BP into an embarrassing face-off with the US Securities and Exchange Commission when the oil company makes its annual SEC filing in June. The SEC is pursuing Shell for alleged misreporting of its reserves and cannot afford to be seen as lenient towards one oil company while seeking to enforce its writ against another."
BP risks showdown with SEC over gas reserves
London Times, 20 March 2004

"Why would a leading oil company invest in a 1,200km pipeline across the North Sea if Ormen Lange was a mere Viking legend? Shell yesterday found a problem. Bitten badly by past mismanaged reporting, it is being scrupulous and its initial decision to book most of its entitlement to Ormen Lange gas is being reversed. The problem relates to the use of threedimensional seismic data to define the area of 'proved reserves'. This is not permitted under SEC rules without corroborating evidence, and Shell has backtracked. BP and Norsk Hydro disagree; they have booked most of their Ormen Lange gas. Norsk Hydro says the project is going ahead, the Government has blessed it and drilling contracts have been tendered. Who is right? Shell’s troubles have put the spotlight on a huge dilemma that other oil companies would love to sweep under the carpet. Their pleas will be ignored, not because of the SEC, but because it is the world, not just investors, that wishes to know whether or not the tank is really full. Ormen Lange’s 400 billion cubic metres of gas is key to Norway’s ambition to capture a large share of the UK gas market as North Sea reserves dwindle, but the long snake has caused trouble since its discovery in 1997. The field will now become the focus of an inquiry by the SEC."
Viking raider that has always meant trouble
London Times, 19 March 2004

"Dick Oliver's move from No 2 at BP to chairman of BAE Systems, Britain’s biggest manufacturer, is the latest in a long line of executive catapults from the oil giant. In the past few years a stream of senior directors have used their BP credentials to win top jobs in a range of other industries..... Analysts have questioned whether BP represents either a remarkable training ground for business talent or a group from which top executives want to escape."
Exodus of big-hitters from BP has analysts asking questions
London Times, 15 March 2004

What BP's Chief Executive Lord Browne Is
(UK's best businessman)
"[BP's Lord Browne is] dubbed the UK's best businessman..."
After a vintage year for oil where will Lord Browne take BP next?
London Times, 10 January 2005

If you were regarded as a top flight businessman and you knew a shortage of a key commodity was coming would you:
1) Tell everyone else so that they can compete against you for the remaining stocks?
OR
2) Play it down and buy up as much of those stocks before others realise and the price rises?

What Lord Browne Says
(There's plenty of oil)
"Nothing has actually changed. There is plenty of oil not to be worried about it for the reasons people are worried at the present."
After a vintage year for oil where will Lord Browne take BP next?
London Times, 10 January 2005

What Lord Browne Does
(He has been buying reserves)
"Anecdotal evidence suggests Shell is not alone in struggling to find new sources of oil. Mr Van der Veer said: 'If you expect that the world should be supplied from traditional, on-shore, near-to-the-market oil and gas, then there are not sufficient supplies.' Shell reckons that oil sands and gas-to-liquids technology will fill the gap. But if others in the industry are better placed it is because they bought reserves when oil was cheap — BP’s relative abundance has as much to do with writing cheques as with drilling wells. Shell’s strategic blunder could prove to be much more costly than its quarrel with regulators in Washington."
An exercise in futility at Shell
London Times, 3 February 2005

"Spotting the opportunity of the century, Lord Browne led BP into takeovers of Amoco, Atlantic Richfield and Burmah Castrol, in the process turning Britain's also-ran oil company into the fierce rival of Shell. In 2003 he propelled BP into Russia with the settlement of a feud with the Russian oligarch Mikhail Fridman, creating the joint venture TNK-BP. By streamlining flabby US oil companies, Lord Browne generated quick bucks. But the real benefit over the longer term was probably the purchase of lots of oil and gas. Amoco brought with it a monster gas reserve in Trinidad that is generating huge profits from shipping frozen fuel to the US. Atlantic Richfield's dowry was Tangguh, an Indonesian gasfield that will soon be servicing power stations in China. And TNK delivers low-priced oil from old wells in western Siberia - not hugely profitable but a big boost to BP's output and a snub to Shell, whose production is declining. Shell failed to make similar acquisitions and has paid the price with dwindling reserves and output....."
After a vintage year for oil where will Lord Browne take BP next?
London Times, 10 January 2005

What Lord Browne Thinks
(He's not saying)
"......this is a man who rarely reveals his inner thoughts......"
After a vintage year for oil where will Lord Browne take BP next?
London Times, 10 January 2005

What Lord Browne's Geologists Think
(Oil getting hard to find)
"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

"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, the world's largest oil company
The Lamp (published for ExxonMobil shareholders), 2003, Vol. 85 No.1

exxonprojection3.jpg (50699 bytes)

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

"Exxon Mobil Corporation Senior Vice President Stuart McGill told financial analysts today in New York that ExxonMobil is uniquely positioned to meet the challenge of adding new resources and reserves to address an increasing global energy demand... McGill noted that world demand for oil and gas is expected to increase by 1.7 percent per year, while the world's oil and gas fields on average are declining in production at a rate of 4 to 6 percent per year. This base decline, coupled with the growing demand for oil and gas, means that the amount of new daily production needed in 2020 is nearly equivalent to replacing all of today's daily production."
ExxonMobil Senior Vice President Discusses New Resources and Advanced Technology
ExxonMobil News Release, 11 January 2005

"All foreign operators in Nigeria, not just Royal Dutch/ Shell, consistently exaggerated their reserves estimates during the 1990s to benefit from government incentives to find more oil, the country's oil industry watchdog said this week. Other major oil companies in Nigeria during the 1990s when the country operated the so-called reserves addition bonus were Italy's ENI, France's Total, US-based ChevronTexaco and ExxonMobil. Every year these companies presented the government with evidence of extra proven and probable reserves for which they claimed tax concessions... Shell has cut its proven reserves by 22 percent in a series of shocking announcements this year, much of it in Nigeria. The news has sent the company's stock tumbling and claimed a third senior management scalp on Monday in chief financial officer Judy Boynton. Shell has said 1.3 billion barrels of the total cut of more than 4 billion barrels was in Nigeria, where it is the largest foreign operator. Other major oil companies have said they were confident in their reserves figures."
Shell not alone in false reserves claims
Reuters, 21 April 2004

"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

"The Iraqi government that emerges from Sunday's election may open its oil business to foreign investment, and international petroleum companies are jockeying to curry favor with the war-torn country. Firms from the United States and Europe -- including Royal Dutch/Shell Group and the Bay Area's own ChevronTexaco -- are literally working for free on certain engineering and training projects to get their feet in the door. The companies are forging these arrangements with Iraq's oil ministry to help train Iraqi engineers and study ways to tap more of the country's vast oil reserves, estimated to be either the second- or third-largest in the world.... In the 21 months since Saddam Hussein's ouster, the interim Iraqi government and its American advisers have suggested several times opening up the country's oil industry, which is saddled with ancient equipment and sabotaged by insurgents. But many Iraqis bridled at the notion that the country's oil reserves should be controlled by foreigners. The widespread conviction in the country that the United States invaded to seize their oil hasn't helped. 'There is a strong belief, which should not be underestimated, that the whole purpose of the war was to gain U.S. control over Iraqi oil,' said Walid Khadduri, editor of the Middle East Economic Survey, in a recent speech. 'It is going to take a good deal of persuasion and a great deal of transparency to convince a majority of public opinion that the gradual privatization of the oil industry is for the good of the people and neither a war prize nor a way for carpetbaggers to get rich quickly.... Royal Dutch/Shell Group signed an agreement with the ministry Jan. 14 to study the vast Kirkuk field, which has been producing for decades and is currently estimated to hold 8.7 billion barrels of reserves. Shell also will help draft a master plan for tapping Iraq's natural gas. Shell will do the work for free as a way to strengthen its links with the ministry, said spokesman Simon Buerk in the firm's London headquarters. 'It's our aspiration to build a relationship with the Iraqis,' Buerk said. 'We want to establish ourselves as a credible partner.' BP, formerly known as British Petroleum, signed a contract last week to study the Rumailah oil field near Basra. Exxon Mobil Corp. inked a memorandum of cooperation with the ministry last fall, laying groundwork to provide the ministry with technical assistance and conduct joint studies. An Iraqi-Turkish consortium won a contract in late December to help develop the Khurmala Dome oil field. San Ramon's ChevronTexaco has been flying Iraqi oil engineers to the United States for four-week training courses since early last year. The company also helps those engineers analyze data from the Kirkuk and South Rumailah fields. ChevronTexaco describes the program as a goodwill gesture, one that will not necessarily result in future contracts with the Iraqis. 'We made it clear there will be no quid pro quo,' said company spokesman Don Campbell. For years, Iraq's oil has been a tempting but forbidden prize.... Only 17 of the country's 80 discovered oil fields have been developed, according to the U.S. government's Energy Information Administration. Only 2,300 wells have been drilled in Iraq. Texas has about 1 million.... Global oil companies, faced with declining production in many of their existing fields, want in. 'That's the name of the game today for (integrated oil companies) -- access to new supplies,' said Robert Ebel, director of the energy program at the Center for Strategic and International Studies in Washington.... Antonia Juhasz, a project director at the International Forum on Globalization think tank, said Iraqis may see the proposed law to invite investment as confirmation that the war was, at heart, a struggle over oil. Her organization has criticized both the war and the involvement of American companies in Iraq's reconstruction. 'It seems like the most blatant description of why everyone thought we went to war in Iraq,' Juhasz said."
Seeking Iraq's oil prize
San Francisco Chronicle, 26 January 2005

"The U.S. is playing today roughly the same role with respect to Iraq’s oil riches that Britain did early last century. History has a habit of repeating itself, albeit with different nuances and different actors. In this two-part series, we shall review the intricacies of oil-related events in Iraq .... Discovery of oil in 1908 at Masjid-i Suleiman in Iran – an event that changed the fate of the Middle East – gave impetus to quest for oil in Mesopotamia. Oil pursuits in Mesopotamia were concentrated in Mosul, one of three provinces or 'vilayets' constituting Iraq under the Ottoman rule. Mosul was the northern province, the other two being Baghdad (in the middle) and Basra (in the south) provinces. Foreign geologists visited the area under the disguise of archeologists. For a good part of the last century, interests of national governments were closely linked with the interests of oil companies, so much so that oil companies were de facto extensions of foreign-office establishments of the governments. The latter actively lobbied on behalf of the oil companies owned by their respective nationals. The oil companies, in return, would guarantee oil supply to respective governments – preferably at a substantial discount..... Among the foreign powers the British, seeing Iraq as a gateway to their Indian colony and oil as lifeblood for their Imperial Navy, were most aggressive in their pursuits in Mesopotamia, aspiring to gain physical control of the oil region. Winston Churchill, soon after he became First Lord of the Admiralty in 1911, declared oil to be of paramount importance for the supremacy of the Imperial Navy. Churchill was educated about the virtues of oil by none other than Marcus Samuel, the founder of Shell. During the war, Sir Maurice Hankey, secretary of the War Cabinet, advised Foreign Secretary Arthur Belfour in writing that control of the Persian and Mesopotamian oil was a 'first-class British war aim.' Britain captured the towns of Basra, Baghdad and Mosul, capitals of the provinces bearing the same names, in November 1914, March 1917 and November 1918, respectively. Mosul was captured 15 days after Britain and Turkey signed the Mudros Armistice ending hostilities at the end of the war, an event that drew protests from the Turkish delegation at the Lausanne Peace Conference four years later. In 1913 Churchill sent an expeditionary team to the Persian Gulf headed by Admiral Slade to investigate oil possibilities in the region. More or less coincident with Admiral Slade expedition, Britain signed a secret agreement with the sheikh of Kuwait who, while ostensibly pledging allegiance to the Ottoman Sultan in Istanbul, promised exclusive oil rights to the British. Kuwait became a British protectorate in November 1914. The British were so concerned about the security of their oil supply prior to the war that they wanted to have guaranteed British dominance in any oil company exploiting Mesopotamian oil. The government favored Anglo-Persian Oil Company (APOC, predecessor of BP) over Royal Dutch/Shell (RDS) in TPC. APOC, already holding oil concession in Iran but not one of the original participants in TPC, was 100 percent British while RDS, an original participant, was 40 percent British....World War I augured another fundamental change in the oil scene in Mesopotamia: assertiveness on the part of the American government for an 'open-door policy' on oil concessions. Forcefully advanced by President Wilson, the policy meant equal access for American capital and interests. The policy was in response to reluctance of European oil companies to welcome American companies to the Mesopotamian oil scene....A rising demand for oil, fuel shortages and price increases during the war, and rumors of depleting domestic resources soon after the war rallied the American administration to give active support to American oil companies in search of foreign oil. Mesopotamia would not be a preserve for the European oil interests, Washington decided. The British initially tried to foil the American efforts by stonewalling American requests and by refusing access to American geologists who wanted to survey oil potential in the region. Britain’s tactics drew strong protest from Washington. The American government withheld its recognition of the Draft Mandate for Iraq on the grounds that it sanctioned discrimination against nationals of other countries. The San Remo agreement, in particular, caused consternation in Washington and catapulted the State Department and American oil companies into action. Walter Teagle, the head of Jersey (later Exxon), became the spokesperson for American corporate oil interests.....The Lausanne Peace Conference held in November 1922-February 1923 (1st session) in Switzerland marked the height of political brinkmanship and skullduggery in oil politics. The 'Mosul question,' i.e. whether Mosul belonged to Turkey or whether it would be included within the borders of a newly created Iraq, was taken up by a special Council dealing with territorial issues. The Turkish delegation, headed by Foreign Minister Ismet Pasha, came to the Conference with explicit instructions from Ankara to keep Mosul within Turkey, in accord with the National Pact ('Misak-i Milli') adopted by the last Ottoman parliament in January 1920. The British had a totally different agenda..... Lord Curzon argued that the policy of His Majesty’s Government on Mosul was not in any way related to oil, that instead it was guided by the desire to protect interests of Iraqi people consistent with its mandatory obligations, that he had never spoken to an oil magnate or an oil concessionaire regarding Mosul oil, but that a company called TPC had obtained a concession from the Ottoman government [in June 1914] before the war that his government had concluded was valid, that his government and TPC had no monopolistic designs on Iraqi oil, and that the Iraqis would be the chief beneficiaries of oil exploitation in Iraq. He added that Turkey would benefit as well. Considering British governments past knee-deep involvement in Mesopotamian oil, and TPC’s monopolistic charter (see below) and exclusionary tactics, it was almost surreal that Lord Curzon would make such statements, including the intimation that he was unaware of oil-related developments surrounding Mosul. At the time of the Lausanne Conference the British, Dutch, French and American oil companies were negotiating the future of TPC in London, and Lord Curzon was kept fully informed on the progress of these negotiations. The American observer at the Conference was bemused at Lord Curzon’s high-principled claims. In a vague, convoluted language, he remarked that the character of TPC concession should be evaluated by an impartial tribunal and that his government had not given up on the 'open-door' policy. In a subsequent diplomatic note to Britain, the State Department expressed its discomfort on some of the claims made by Lord Curzon at the Conference. Lord Curzon also misled and appeased a war-weary British public by making similar statements in British press. The British public was longing for peace and did not want a new military conflict for the sake of oil. Similar attempts by the government at the Parliament were less successful. Some members of the Parliament expressed deep skepticism on Britain’s motivations on Mosul, including one MP who complained about the 'vein of hypocrisy' running through Britain’s policy on Mosul. The government repeatedly ignored requests from MPs to produce the so-called oil concession agreement, or state clearly its terms.... in 1921, when Lord Curzon was already the Foreign Minister, Whitehall was forced to admit that the TPC concession was on shaky legal grounds. That did not deter Lord Curzon from making his preposterous claims a year later at Lausanne. With no solution in sight, and after receiving veiled threats from Lord Curzon on renewed hostilities in Iraq (which prompted a worried France to urge Turkey not to turn down the British proposal), Ankara reluctantly agreed in March 1923 to British proposal to refer the Mosul question to the League Nations for arbitration if direct negotiations with Britain failed. These talks, indeed, bore no fruit, and Britain took the Mosul question to the League of Nations. When the Lausanne Conference (2nd session) ended in July 24, 1923, the communiqué issued officially recognized these developments. The British, however, failed in their efforts to have inserted into the treaty a clause indicating Ankara’s acceptance of the so-called TPC concession. In January 1923, Britain, as the mandatory power, pressured Iraq to forego its right to 20 percent participation in TPC, voiding the provision that was included in the 1920 San Remo Agreement signed with France....In March 1925, TPC concluded an oil concession agreement with Iraq. The agreement, to be in effect for 75 years, stipulated that TPC would be and remain a British company registered in Great Britain....Discovery of the Kirkuk field was the second major oil-related event in the Middle East history after Masjid-i Suleiman in Iran. The event marked the fulfillment of a long-hoped dream for the TPC partners and shaped the destiny of Iraq, in fact the Middle East, until our times. The field, with reserves of 16 billion barrels, or 2150 million tons, lived up to expectations as to its immense size. In June 1929 TPC changed its name to Iraq Petroleum Company (IPC)."
Oil in Iraq: The Byzantine Beginnings
Global Policy Forum April 25, 2003

"In April 1932, a British-dominated international consortium, British Oil Development Company (BODC), obtained a 75-year oil concession for territory lying west of Tigris and north of 33rd parallel. The consortium was intended to be a competitor to IPC in Iraq. Ten years later, before it would start production, BODC was bought out by Mosul Petroleum Company (MPC), a fully owned subsidiary of IPC. Likewise, in December 1938, Basra Petroleum Company (BPC), another subsidiary of IPC, obtained a 75-year concession for the rest of Iraq. Thus all of Iraq, with the exception of the 'transferred territory,' came under IPC’s control. Competition was entirely eliminated. IPC was not meant to be a profit-making enterprise. It operated as a production and transport company that delivered oil to its shareholders at export terminals (initially Haifa in Palestine and Tripoli in Lebanon) in proportion to participation interest. The partners were charged a nominal fee for the oil. Real profits were made by the partners which shipped, refined and sold the oil in foreign markets. (Until 1948 some of the crude was refined in Haifa). Until 1940 or so, IPC maintained a strategy to delay production in Iraq. The strategy was aimed at protecting the interests of the British, American and Dutch partners, who had crude production of their own in areas outside Iraq and wanted to shield such production from competition. .... Judging the players, the British played big poker and won. For Britain, oil was an instrument of imperial ambitions, and at times blood was the sacrifice that had to be accepted – e.g., 2500 British lives lost during the internal uprising in Iraq in 1920. The British camouflaged their true intentions on oil through pretexts, e.g., their righteous claim of being the trustees of Iraqi people’s rights on oil. The Americans were more open in their intentions, although their tacit acceptance of the self-denial clause left them cold and dry on charges of hypocrisy. Lacking the colonial over-drive of the British, and having relinquished Mosul to British control in San Remo in return for the German share in TPC, the French were relegated to play second fiddle in the big Anglo-American grab for oil in the Middle East. The French never trusted the British, and later the Americans, but were reconciled to their dominance on matters of oil. As for the Dutch, they were the easiest winners. Thanks to 40 percent British share in RD Shell, the Dutch virtually got a free ride on the back of the British. At the beginning of WWI, RD Shell acquiesced to British control in order to operate freely on the high seas....."
Oil in Iraq: The Byzantine Beginnings
Global Policy Forum, 26 April 2003

"Crude oil surged above $55 a barrel in New York, less than $1 short of a record, and reached a record in London on speculation that increasing consumption will outpace production this year. 'Demand is still growing, particularly in China, and there is only a finite supply of oil out there,' said Tom Bentz, an oil broker at BNP Paribas Commodity Futures Inc. in New York.....Last week funds had their biggest bet on higher oil prices in eight months, according to the Commodity Futures Trading Commission. Speculative long positions in crude oil, or bets that prices will rise, outnumbered short positions by 54,176 contracts, the commission said. Net longs peaked at 82,451 in March 2004. 'The increase in buying by the funds is making the market more volatile,' Bentz said. 'They are looking at the big picture, not the weekly inventory data.... 'The market is underpinned by relatively tight supply- demand fundamentals,' said Jim Steel, director of commodity research at Refco Inc. in New York. 'There are doubts about the ability and desire of OPEC to meet demand later this year and production growth in non-OPEC countries is sluggish.' ''
New York Oil Rises Above $55 on Signs Use Will Outpace Supply
Bloomberg, 3 March 2005

"The changes in the global energy-policies are taking place in a breath-taking speed. Not only in Asia, where there is currently talk about a more Asian sharing of resources, but also the energy-relations between India and Russia, India and Kazakhstan, India and Sudan, India and Iran, China and Russia, China and Canada, China and Venezuela, Iran and Cuba, Iran and Mexico have suddenly intensified, all in search for stakes in the remaining resources. It is as if, quite suddenly over the last months, this search has started to accelerate..."
Update Issue #4, 2005
Alexander's Gas & Oil Connections, 25 February 2005