From: gerald_a_levy (gerald_a_levy@msn.com)
Date: Tue Mar 25 2003 - 07:21:27 EST
http://www.fromthewilderness.com/free/ww3/030703_us_intentions.html > - A Sobering Look at the Oil Numbers Behind the U.S. Panic > to Invade Iraq > > - Bush Knew of Peak Oil Before Taking Office > > - Natural Gas Picture Worsens > > US INTENTIONS > > by Dale Allen Pfeiffer > > (c) Copyright 2003, From The Wilderness Publications, > www.copvcia.com. All Rights Reserved. May be reprinted, > distributed or posted on an Internet web site for > non-profit purposes only. > > Mar. 7, 2003, 1400 PST (FTW) -Journalist Julian Darley has > a very good website, www.globalpublicmedia.com, featuring > video interviews with notables such as Colin Campbell and > Matthew Simmons. Matthew Simmons is the president of > Simmons & Co. International, a company which specializes in > investment banking to the energy industry. The Campbell > interview1 is a very informative chat at the petroleum > geologist's home in County Cork, Ireland. It is well worth > perusal. The Matthew Simmons interview2 was recorded in an > office of his business suite, and is also very > informative-though it is disappointing to see a person so > perceptive standing firmly behind George W. Bush. However, > in his interview, Matthew Simmons made two very big > revelations. > > In the first instance, Mr. Simmons was discussing his email > correspondence with a senior assistant to former secretary > of energy Bill Richardson. The senior assistant informed > Mr. Simmons in 1999 that she was accompanying Secretary > Richardson on a visit to every OPEC country. Mr. Simmons > told her that if he was undertaking such a tour, he would > ask each country what was their spare oil capacity. Upon > returning to the United States, the senior assistant called > Mr. Simmons and told him that she was quite shocked by the > responses to this question. In country after country, she > was told that they were already pumping at or near > capacity. For practical purposes, OPEC has no spare > capacity. > > Several of my associates have suspected as much. But in > this interview, Matthew Simmons verifies the fact that OPEC > is already pumping at or very close to full capacity. This > means that to meet growing demand, oil must be found > somewhere else. And OPEC most probably cannot increase > output to cover a crisis such as the Venezuelan strike, or > the disruption of Iraqi oil production in the event of > another Gulf War. In fact, it was only a year after > Secretary Richardson made his OPEC tour that world oil > production appeared to peak, beginning the cycle of rising > oil prices and tanking economies which we have been in > since. Though Matthew Simmons did not spell it out, this is > the clearest indication to date that we are at peak oil > production. > > The second revelation was more political than technical. > Matthew Simmons states in this interview that he advised > the Bush campaign and the subsequent Bush administration of > the energy situation. This admission makes it very clear > that George W. Bush and his administration knew about the > approaching energy crisis before even stepping into the > White House. Thus, as we have said at FTW, oil depletion > has loomed in the background of every decision made by this > administration and every action undertaken. > > In his recently released book, The Party's Over3, Richard > Heinberg backs up this assertion and goes on to say that > the CIA has monitored the oil business for some time. > Indeed, the CIA subscribes to the yearly report of oil > analysts Petroconsultants, and so must have seen the 1995 > report The World's Oil Supply. This publication, at a cost > of $35,000 per copy, predicted that global oil production > would peak in the first decade after the turn of the > century.4 > > As we have stated before, Bush needed some catastrophe such > as 9-11 to justify an endless war on multiple fronts. He > needed it to provide cover for an oil grab. Of course, a > superpower such as the United States always acts on a nexus > of reasons and in pursuit of multiple goals, but greed for > oil has been a major impetus behind pretty much everything > this administration has done since taking office. Could oil > really lie behind Bush's push to unseat Saddam Hussein? > Perhaps we should rephrase this question: How could oil not > lie behind Bush's push for the conquest of Iraq? > > Iraq > > Even unnamed senior US defense officials are stating that > the plan is to take the oil fields as quickly as possible, > supposedly to protect them from Saddam.5 British troops > will be used to seize the oil fields so as to thwart the > appearance of a US oil grab. However, ExxonMobil is in the > lead position for rehabilitating the Iraqi oil fields. Oil > executives are quoted as saying there is a desperate need > to find another 80 million barrels per day to meet growing > oil demand.6 Might we add that this growing demand cannot > be met elsewhere because of the abovementioned lack of > spare capacity. > > Even after seizing Iraq's oil fields and quelling unrest > throughout the country, the oil majors will find it very > difficult to increase Iraqi oil production in the short > term. They may even have to cut production from its current > level, as Iraq has been using unsound methods to pump the > amount of oil which they are currently generating. Before > the 1991 Gulf War and the decade long Iraq-Iran War, Iraq > was pumping an average of 3.5 million barrels per day > (b/d). 7 In 2001, Iraq averaged 2.45 million b/d, and > experts say their current sustainable production capacity > could go no higher than 2.8-3.0 million b/d.8 > > Most of Iraq's current oil production is centered around > three large fields, the Kirkuk field in the north of Iraq > (10+ billion barrels), the East Baghdad field in the > central part of the country (11+ billion barrels), and the > Rumailah fields in the south of Iraq (10+ billion > barrels).9 There are two other very large fields in > southern Iraq which are basically untapped to date: the > Majnoon field near the Iranian border (20+ billion barrels, > possible as much as 30 billion barrels), and the West Kuma > field closely associated with the Rumailah field (15+ > billion barrels).10 Other notable fields are Nahr bin Umar > (6+ billion barrels), Rattawi (3.1 billion barrels), > Halfaya (2.5-4.6 billion barrels), Zubair (4 billion > barrels), Nassiriya (2-2.6 billion barrels), Suba-Luhais > (2.2 billion barrels), Bai Hassan (2 billion barrels), > Buzurgan (2 billion barrels), Khabboz (2 billion barrels), > Abu Ghirab (1.5 billion barrels), Khormala (1.5 billion > barrels), Tuba (1.5 billion barrels), Gharraf (1.0-1.1 > billion barrels). All told, including a number of smaller > fields not mentioned here, Iraq holds proven assets of 112 > billion barrels of oil. The unexplored regions of the > Western Desert could add as much as another 100 billion > barrels to this total. The area is known to contain > oil-bearing Jurassic, Triassic and Paleozoic formations, > though they are buried much deeper than the eastern > formations and so might provide more natural gas than oil.11 > > Much of Iraq's oil industry was damaged during the 1991 > Gulf War. Completely destroyed were the gathering centers > and compression/degassing stations at Rumailah, storage > facilities, and pumping stations along the Iraqi Strategic > (North-South) Pipeline.12 Many sizable fields were damaged > and have remained unrepaired. Sixty percent of Northern Oil > Company's facilities in northern and central Iraq were > damaged during the Gulf War.13 Iraq's oil export > infrastructure was also severely damaged during both the > Iraq-Iran War and the 1991 Gulf War. Pipelines, ports and > pumping stations have all been affected. And Iraq's two > main Persian Gulf tanker terminals, Mina al-Bakr and Khor > al-Amaya, were heavily damaged during the Gulf War. Damage > to Mina al-Bakr appears to have been largely repaired over > the past decade. Khor al-Amaya, on the other hand, was > severely damaged during the Iraq-Iran War and then > completely destroyed during Operation Desert Storm.14 > > During the decade of sanctions following the 1991 Gulf War, > Iraq tried to maintain production at existing fields > despite an embargo on spare parts and oilfield equipment. > Many of the reservoirs in production have been damaged > through mismanagement and the use of questionable > techniques in an effort to increase current production at > the price of future production. In addition to the > naturally occurring problem of water cut in Iraq's southern > wells (the damaging intrusion of water into oil > reservoirs), many fields have been damaged by the practice > known as water flooding in order to boost current > production. Iraq's oil minister stated that in 2002 only 24 > of 73 Iraqi oil fields were producing. Oil consulting firm > Saybolt International has pointed out the risk of a 5% to > 15% annual production decline at damaged Iraqi oil fields. > A U.N. report in June 2001 said that Iraqi oil production > capacity would fall sharply unless technical and > infrastructure problems were addressed. And U.N. Secretary > General Kofi Annan has warned of a possible "major > breakdown" in Iraq's oil industry if spare parts and > equipment are not forthcoming. The United States has > resisted any efforts for a long term solution to the > problems, insisting on only short-term improvements to the > oil industry. According to the head of the UN Iraq program, > Benon Sevan, the number of holds placed on contracts for > oil field equipment threatens the entire program with > paralysis. Sevan stated in January 2002 that the United > States placed over 80% of the holds, which affect nearly > 2,000 contracts worth approximately $5 billion.15 > > Solving these problems will require major investment from a > consortium of international oil companies. It will take at > least a decade to double output, providing there is no > further damage done. It will take at least $7 billion worth > of investment to bring Iraq back to its 3.5 million b/d > production level. Pushing past that level to 5.5 million > b/d will require at least $20 billion of investment. > Analysts say Iraq has the capacity to produce double that > amount, albeit at an extraordinary cost over an extended > period of time.16 Many international companies have stepped > up to offer the needed investment. Iraq has signed > multi-billion dollar deals with companies from China, > France and Russia. And in recent months Iraq has signed a > number of deals with companies from Italy (Eni), Spain > (Repsol YPF), Russia (Tatneft), France (TotalFinaElf), > China, India, Turkey, and others.17 However, none of these > deals can move forward until they are okayed by the U.N. > Security Council. > > Could all of this go toward explaining why it has become so > urgent for the United States to make war on Iraq and take > over control of Iraqi oil fields? For over a decade, the > U.S. has blocked any reparations or new development of > Iraqi oil resources. In 2001, reports finally came out > announcing that without increased access to spare parts, > repairs and new technology, Iraqi oil fields could be > damaged permanently. Pressure is building in the U.N. to > allow this remediation and modernization of Iraqi oil > infrastructure. Iraq is awarding contracts to major oil > companies from various countries, excluding U.S. and > British companies. And all of this is being blocked largely > by the U.S., while U.S. and British oil companies line up > for a piece of the action in the aftermath of an Iraqi > conquest. > > Let's see, are there any pieces of the picture which we are > missing? Oh yes, the U.S. is studying international law to > determine oil field rights in the event of a U.S. & British > conquest of Iraq. And they believe that international law > would give them considerable leeway in managing Iraq's oil > fields (for the benefit of the Iraqi people, of course).18 > > And now, to round out this picture, let's look at Iraqi oil > exports as compared to US imports. As of July 2002, Iraq > was producing 1.99 million b/d (oil production was 2.45 > million b/d in 2001). Of this, they export 1.5 million b/d, > over one-third of that, 566,000 b/d to the U.S. This is > down from 795,000 b/d (or 53%) in 2001. The route to the > U.S. is very circuitous, as the oil is first purchased by > companies from many countries, including Cyprus, Sudan, > Pakistan, China, Vietnam, Egypt, Italy, Ukraine, and others > and then is resold to U.S. importers, including ExxonMobil, > Chevron, Citgo, BP, Marathon, Coastal, Valero, Koch, and > Premcor.19 There is also an unknown amount of oil being > smuggled out through Syria and other countries. It is > difficult to say how much of this, if any, is making its > way to the U.S. > > Now let's look at the U.S. side of this equation. The U.S. > imported an average of 10.3 million b/d as of September > 2002. Of this, Iraqi oil would only amount to 6% of U.S. > imports (8% in 2001). However, the U.S. derives around 26% > of its daily oil imports from the Middle East-that is 2.3 > million b/d as of August 2002. So Iraqi oil accounts for > about one-quarter of our Middle East imports. Comparing > Iraqi imports to our top sources of imports, Saudi Arabia > exports 1.49 million b/d to the U.S. (14% of total > imports), Mexico exports 1.46 million b/d (also 14% of > total U.S. imports), Canada exports 1.37 million b/d to the > U.S. (13% of the total), and Venezuela-prior to the oil > strike-exported 1.14 million b/d (11% of the total).20 If > this ranking of major oil imports was continued, Iraq would > probably rank in the top ten. However, were the sanctions > removed and the oil infrastructure repaired, Iraq would > undoubtedly rival Saudi Arabia for the number one position; > especially under a US military protectorate with US and > British companies running the oil business. Beyond this, > the conquest of Iraq-if successful-would allow us to add > badly needed spare capacity to world oil production and it > might stop the flight of oil countries from the petrodollar > to the euro. > > Other Oil News > > Venezuela is still recovering from the oil strike. The EIA > now states that Venezuelan oil production gradually rose to > 1.2 million b/d in February.21 The EIA's current short-term > energy outlook assumes that the Venezuelan oil crisis will > be over by March.22 However, they warn that Venezuelan > supplies will not approach pre-crisis levels for another > several months. Furthermore, it is possible that around > 700,000 b/d of production may be permanently lost due to > the strike.23 The EIA warns that OPEC efforts to increase > output to make up for lower Venezuelan exports has reduced > global spare capacity to only 2 million b/d-this spare > capacity coming almost entirely from Saudi Arabia. There is > very little room remaining to make up for unexpected supply > drops or demand increases.24 > > On top of this, Nigeria's white collar union began an oil > export strike on Saturday, February 15th. Nigeria is the > seventh largest oil exporter in the world. Royal > Dutch/Shell, the country's biggest producer, pumps an > average 900,000 b/d. The oil companies expect to replace > strikers with senior staff, and point out that previous > strikes had little impact on exports. However, fear of the > strike caused oil prices to temporarily jump by 16 cents > per barrel.25 It is evident that the market is now so tight > and the world economy so gun-shy that it is to be wondered > how the world will survive an invasion of Iraq. > > On top of all this, there was a small item in the > Australian newspaper The Courier Mail stating that leftist > rebels in Colombia have blown up a large section of that > country's most important pipeline. Operated by Occidental > Petroleum, the pipeline carried 105,000 b/d.26 Little more > is to be found about this story on the various news wires. > The Bush administration has been bolstering military aid to > Colombia, including increasing numbers of advisors. They > have impressed upon the Colombian military that it is of > primary importance to protect the oil pipelines, and they > have labeled the rebels as international terrorists. What > response there will be on the part of the U.S. to this > latest strike at U.S. oil interests is hard to say. > > Finally, in the EIA weekly petroleum updates, we find that > for the week ending February 7th, crude oil imports > declined by another 1.2 million barrels from the previous > week. U.S. commercial crude inventories for that week sank > to 269.8 million barrels, just crossing the Lower > Operational Inventory Level (LOIL). This is the lowest > inventory level since October 1975. However, in the week > ending February 14th, crude oil imports rose to nearly 8.8 > million b/d, the largest weekly average since December > 20th. U.S. commercial crude inventories increased by 3.1 > million barrels to 272.9 million barrels. This was back > above the LOIL, but still 50.4 million barrels below the > level of a year ago.27 > > Natural Gas > > The picture for natural gas (NG) is even worse. As of > February 14th, NG storage stood at 1,168 billion cubic feet > (Bcf), down by 203 Bcf from the week previous. This was 868 > Bcf less that a year ago and 436 Bcf below the 5-year > average of 1,604 Bcf.28 In an article in The Oklahoman, > Tony Say, president of gas marketing company Clearwater > Enterprises said he expects NG reserves to reach an > all-time low of 600 Bcf by the end of the season. Bruce > Bell, Chairman of the Mid-Continent Oil & Gas Association's > Oklahoma Division, warned that once you get down to 700 Bcf > there are serious doubts as to how much gas can be > withdrawn. The nation's gas reserves are stored in > underground caverns, where there must be a certain amount > of gas to create enough pressure to force the reserves > out.29 > > Raymond James & Associates, in a recent report on natural > gas, points out that NG production will continue to fall by > 1.0 -1.5% per quarter for the foreseeable future. They warn > that even if production returned to the feverish pitch of > 2001, it would take three to six months before the new > production would begin to slow down the natural declines in > existing wells.30 Yet the NG rig total has hovered between > 800 and 900 for the past year; at least 100 less than the > number needed to meet national demand, according to Bruce > Bell. Despite rising NG prices for the last couple months, > work has begun on only 15 new wells.31 > > And according the Lehman Brothers, Canadian gas production > is continuing to fall by as much as 4%. And this drop will > coincide with a 500 million cubic feet per day decrease in > NG exports to the U.S. Canadian NG demand rose in 2002 by 2 > to 3% from the previous year. Net exports to the U.S. are > expected to fall by 5% in 2003.32 > > Based on all of this data, the NG crunch of this year could > lead to an NG crisis a year from now. > > ENDNOTES > > 1 Colin Campbell Discussing Oil Depletion, Julian Darley. > Global Public Media, 12/18/2002. > http://globalpublicmedia.com/INTERVIEWS/COLIN.CAMPBELL/ > > 2Matt Simmons discussing oil peak; natural gas; what the > President knows; hydrogen; and Iraq, Julian Darley. Global > Public Media, 2/10/2003. > http://globalpublicmedia.com/INTERVIEWS/MATT.SIMMONS/ > > 3 The Party's Over: Oil, War, and the Fate of Industrial > Societies, Richard Heinberg. New Society Publishers, April > 2003. > http://www.amazon.com/exec/obidos/tg/detail/-/0865714827/qid=1045851880/sr=1 -1/ref=sr_1_1/ > > 002-4461621-4414410?v=glance&s=books > > 4 Ibid. Page 86. > > 5 US Admits Plan to Snatch Iraqi Oil Fields, Mark Ellis & > Gary Jones. The Daily Mirror, 1/25/2003. > http://www.mirror.co.uk/news/allnews/page.cfm? > > objectid=12568779&method=full&siteid=50143 > > 6 Ibid. > > 7 Iraqi Oilfields, Dev George. Oil & Gas International, > 1/22/03. http://www.oilandgasinternational.com/departments/ > > regional_spotlight/jan03_iraq.html > > 8 Iraq Country Analysis Brief. EIA, October 2002. > http://www.eia.doe.gov/emeu/cabs/iraq.html > > 9 Ibid. > > 10 Op.Cit. See note 7. > > 11 Op. Cit. See notes 7 & 8. Oil & Gas International, and > EIA. > > 12 Op. Cit. See note 8. > > 13 Ibid. > > 14 Ibid. > > 15 Ibid. > > 16 Op. Cit. See note 7. > > 17 Op. Cit. See note 8. > > 18 US Studying International Law to Determine Oil Field > Rights in Event of War with Iraq. Drudge Reports, > 1/29/2003. Citing the Wall Street Journal. > http://www.drudgereportarchives.com/data/ > > 2003/01/30/20030130_061815_flash.htm > > 19 Op. Cit. See note 8. > > 20 United States Country Analysis Brief. EIA, November > 2002. http://www.eia.doe.gov/emeu/cabs/usa.html > > 21 OPEC Brief. EIA, 2/7/2003. > http://www.eia.doe.gov/emeu/cabs/opec.html > > 22 Short-Term Energy Outlook-February 2003. EIA, 2/7/2003. > http://www.eia.doe.gov/emeu/steo/pub/steo.html > > 23 Op. Cit. See note 21. > > 24 Op. Cit. See note 22. > > 25 Nigerian Oil Export Strike Starts Saturday -Union, Dino > Mahtani. Reuters, 2/14/2003. > http://story.news.yahoo.com/news?tmpl=story&u=/> > nm/20030214/wl_nm/energy_nigeria_strike_dc_2 > > 26 Rebels Blow up Key Oil Pipeline. The Courier Mail, > 2/6/2003. > http://www.thecouriermail.news.com.au/common/story_page/ > > 0,5936,5944948%255E401,00.html > > 27 Summary of Weekly Petroleum Data. EIA, 2/14/2003. > http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/ > > weekly_petroleum_status_report/current/txt/wpsr.txt > > 28 Weekly Natural Gas Storage Report. EIA, 2/20/2003. > http://tonto.eia.doe.gov/oog/info/ngs/ngs.html > > 29 Cold snap gives boost to gas prices, Adam Wilmoth. The > Oklahoman, 2/8/2003. > http://newsok.com/cgi-bin/show_article?ID=984108&pic=none&TP=getbusiness > > 30 Energy "Stat of the Week" January 21, 2003. Raymond > James & Associates. > http://170.12.99.3/researchpdf/iEne012103b_0738.pdf > > 31 Op. Cit. See note 29. > > 32 Canada Gas Production Seen Falling 2%-4% - Lehman Bros. > The Morning Star, sourcing Dow Jones, 2/12/2003. > http://news.morningstar.com/news/DJ/M02/D12/1045083663075.html
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