The Oil Drum: Europe

I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil - Alan Greenspan (2007)

The Guardian had an interesting article recently on discussions about exploiting 40 billion barrels of Iraqi oil reserves.

The biggest ever sale of oil assets will take place today, when the Iraqi government puts 40bn barrels of recoverable reserves up for offer in London. BP, Shell and ExxonMobil are all expected to attend a meeting at the Park Lane Hotel in Mayfair with the Iraqi oil minister, Hussein al-Shahristani.

Access is being given to eight fields, representing about 40% of the Middle Eastern nation's reserves, at a time when the country remains under occupation by US and British forces. Two smaller agreements have already been signed with Shell and the China National Petroleum Corporation, but today's sale will ignite arguments over whether the overthrow of Saddam Hussein was a "war for oil" that is now to be consummated by western multinationals seizing control of strategic Iraqi reserves.

The subject of Iraqi oil is one which has fascinated me for a number of years, so in this post I'll outline why I believe that Iraq probably has the world's largest oil reserves - or, as Daniel Yergin once said of the middle east, it is "the greatest single prize in all history" (echoing a similar statement by George Kennan at the end of world war 2).

Yesterday, August 6, the EIA published new International Petroleum Monthly data. The new data revised downward previously published estimates, all the way back to 2002, with the biggest revisions in 2007 and 2008. With the revisions, the latest month, May 2008, shows new record-high oil production. Other recent months which had previously set records are now 67,000 barrels per day to 417,000 barrels per day lower than reported just a month ago. In this post, I offer a few thoughts on what the new data suggests.

This is a guest post by A Siegel, who blogs on a range of energy issues at Get Energy Smart! NOW!!! and works with TOD European Editor Jerome a Paris on Energize America, a blog-driven effort to develop innovative and holistic energy policy options in the face of peak oil and global warming.

Earlier today, someone asserted that well over half (or more than $2) of America's $4.10 gallon of gas is due to the war. Another person asked "Is that right?" And, after pulling out some hair from my head, my response was both short and then long.

The short:

Two dollars a gallon is, perhaps, as good a swag as anyone's.

...

I think.

And, the long? well, it's under the fold. :)

This is a guest post by John Robb. John is an author, an entrepreneur, a blogger at Global Guerrillas, and a former USAF pilot in special operations. His book, Brave New War was published in April 2007 by Wiley, which can be purchased here. The book apparently is influential, since Robb was named one of the "Best and Brightest" by Esquire Magazine and invited to speak at a plethora of venues (the DoD, CIA, NSA, NIC, Highlands Forum, Center for Biosecurity, and many more). The book is also being used in universities from the Naval Post Graduate School to Johns Hopkins.

The run-up in oil prices over the last four years is usually framed, likely correctly, as a combination of torrential demand from developing countries (China and India), speculation, and peak supply. Other analysis indicates that production is also being damaged due to NOC mismanagement, political instability, and rapid increases in domestic consumption within oil exporting countries.

However, the rapidity and volatility of current oil prices may be due to a more narrow set of factors surrounding the production of light sweet crude: the comparative quality and scarcity of light sweet crude, world demand, and guerrilla systems disruption.

This is a guest article by David Strahan, author of The Last Oil Shock.

In a widely viewed You Tube clip, taken from a C-Span interview conducted in 1994, Dick Cheney argues persuasively that the United States was right not to topple Saddam Hussein during the first Gulf War. He cites the potential disintegration of the country and the risk of American casualties as good reasons for the decision not to take Baghdad. So what was it that changed his mind by the turn of the century? An acute awareness of impending peak oil.

In a stunning interview for the French (reference) daily Le Monde, Fatih Birol, the chief economist of the International Energy Agency (i.e. the intergovernmental body created after the oil shocks of the 70s to coordinate the West's reaction to energy crises) effectively says that peak oil is just around the corner, and that without Iraqi oil, we'll be in deep trouble by 2015:

Si la production n'augmente pas en Irak de manière exponentielle d'ici à 2015, nous avons un très gros problème, même si l'Arabie saoudite respecte ses engagements. Les chiffres sont très simples, il n'y a pas besoin d'être un expert.

If Iraqi production does not rise exponentially by 2015, we have a very big problem, even if Saudi Arabia fulfills all its promises. The numbers are very simple, there's no need to be an expert

And as long as the US occupies Iraq, production will not increase... Houston, we have a problem...

The story made it to the front page of the Financial Times (Europe's main English-language business paper) this week, so you'd think it is big news - and the headlines is nicely attention grabbing, but what's behind it?

Iraq may hold twice as much oil

Iraq could hold almost twice as much oil in its reserves as had been thought, according to the most comprehensive independent study of its resources since the US-led invasion in 2003.

The potential presence of a further 100bn barrels in the western desert highlights the opportunity for Iraq to be one of the world’s biggest oil suppliers, and its attractions for international oil companies – *if* the conflict in the country can be resolved.

Obviously, that's a pretty big "if", but it's still big news... or is it?

Dr. Michael T. Klare is the Five College Professor of Peace and World Security Studies at Hampshire College in Amherst, Massachusetts. One of the world's leading experts on the energy geopolitics, Klare is perhaps best known for his history and analysis Blood and Oil: The Dangers and Consequences of America's Growing Dependency on Imported Petroleum. Klare is a frequent contributor at TomDispatch, where he provides a welcome alternative to the mainstream media's spoonfed pablum concerning crucial issues like America's preemptive war on Iraq, the Iranian nuclear stand-off and the global chess game to control oil & natural gas resources.

Michael Klare

Klare's presentation at ASPO-USA is nicely summarized by Chris Vernon of The Oil Drum's United Kingdom section —please read Chris' report along with this interview. At the conference, I arranged to e-mail him some questions which he kindly took the time to answer. Subsequently, we did a follow-up interview on the phone. Both the questions and answers are presented verbatim.

The lefty blogosphere is all a-flutter after the article in the Independent about the new Iraqi oil law, which will allow foreign companies to invest in the oil sector via PSAs (production sharing agreements).

These are presented as unfair contracts, which will give the majority of the profits to the Western oil majors, and highly unusual. This is all untrue, and it obfuscates the wider truth that no major Western company will invest in Iraq (under these contracts or under any other scheme) as long as American troops are there and that a civil war is under way.

I've written about this as comments in various diaries, but it's time to have a full diary on this. So here goes.

...and from Alternet:

Even as Iraq verges on splintering into a sectarian civil war, four big oil companies are on the verge of locking up its massive, profitable reserves, known to everyone in the petroleum industry as "the prize."