Hydrocarbon Potential of Middle Eastern Basins of the Gulf -

Hydrocarbon Potential of Middle Eastern Basins of the Gulf -
Geology & Geopolitics mix! Spring 2008 A case that demonstrates that “Actions Speak Louder than Words” Professor Christopher G. St. C. Kendall

Outline of Presentation
Data Sources - Texts Who has all the oil? Countries & Reserves Geological Setting of the Middle East Oil Reserves Recent Oil History of Middle East Conclusions

Texts on History of Petroleum Exploitation
3 books set Middle East petroleum scene: "The Prize : The Epic Quest for Oil, Money & Power" by Daniel Yergin Records history of petroleum Industry in USA, Baku, & Middle East. "Sowing the Wind: The Seeds of Conflict in the Middle" by John Keay. Chronicles activities of British & their allies... "A Peace to End All Peace: The Fall of the Ottoman Empire and Creation of the Modern Middle East" by David Fromkin. Records why British decided to move on Ottoman Empire and results..... These are well written, easy to read informative histories!

Data Sources - Texts Who has all the oil? Countries & Reserves Geological Setting of Middle East Oil Reserves Recent Oil History of Middle East Conclusions

Current Middle East Reserves of Cheap Oil
Crude Oil(BB) - Natural Gas (TCF) Saudi Arabia bbls Tcf – 8 Years Iraq bbls Tcf UAE bbls Tcf Kuwait bbls Tcf Iran bbls Tcf Oman bbls Tcf Yemen bbls Tcf Qatar 3.7 bbls Tcf Syria bbls Tcf Bahrain 0.1 bbls Tcf TOTAL bbls 1,748.2 Tcf Most of these countries oil is in carbonates

Arabian Gulf Fields & the age of their Reservoirs
Tertiary Cretaceous Jurassic { { Paleozoic After Al Sharhan

Environmental Scarcity ---> Social Effects ---> Violent Conflict
Iraq's Role? Thomas Homer-Dixon’s Conflict Model Environmental Scarcity ---> Social Effects ---> Violent Conflict U.S. War Against Terrorism in a deadly phase spreading across Middle East Middle East a geopolitical cauldron - Caspian States on eastern flank & Mediterranean on western flank; bridge between Europe, Africa & Asia Important current battlefields within region include Iraq & Iran, West Bank, Somalia, Sudan & Afghanistan

World Petroleum Exploitation
Non-OPEC countries produced 60% of world's oil in 2008 with a steady increase since 1993 Currently only 4 (Saudi Arabia, Iran, UAE, & Venezuela) of top 10 oil producers are OPEC Most prolific producers are Russia 12.6, Saudi Arabia 10.6, USA 8.4, Iran 4, Mexico 4, China 4, Canada 3, Norway 3, UAE 3, Venezuela 3, Kuwait 3, Nigeria 2.4, Algeria 2, Brazil 2 Non-OPEC countries have most of world's capacity for refining crude oil into gasoline & heating oil

As of January 2004, OPEC countries hold 77% of world's proven oil reserves Most major non-OPEC oil producers are very large consumers, & low exporters World 84 - USA consumes 20.73, imports & exports million bbl/day Today’s price$91.45 Persian Gulf OPEC has the world's lowest oil finding & lifting costs Non OPEC oil liable to price collapse e.g. Russia Consumption grows 3% annually

Commodity Scarcity Exploration potential
Gulf coast & West Texas for small US companies Oil shales of Western USA & Athabaska tar sands Employment in exploration & builders of exploitation models of current oil fields in Secondary & Tertiary recovery mode! At least 1% of you in this room should be millionaires before you retire!

Arabian Basin Traces a polyhistory of plate tectonic & sedimentary fill: Pre Cambrian to Infra-Cambrian - Continental interior Silurian and Ordovician clastics – Continental interior Permian clastics & carbonates – Trailing margin Upper Jurassic Carbonates – Trailing margin Lower Cretaceous Carbonates – Trailing margin Middle Cretaceous – Compression & Zagros Mts initiated Tertiary Carbonates and Clastics - Compressional margin

Oil Production - Arabian Gulf
Productive hydrocarbon section older to West [Paleozoic] & younger in East in the Zagros Mts [ Upper Tertiary]. West to East production includes: Infra-Cambrian Salt Silurian and Ordovician clastics – Unaizah Permian clastics & carbonates – Khuff Upper Jurassic Carbonates - Arab & Tuwaik Mt Group Lower Cretaceous Carbonates – Shuaiba & Thammama Middle Cretaceous – Mishrif Tertiary - Asmari

Zagros Mountain Chain After Dennis Tassa

Structural Provinces - Arabian Gulf
Zagros Fold Mts Mesozoic to Tertiary Foreland Basin Pre-Cambrian Shield Nasa Image

Arabian Gulf tracks the Wilson Cycle
The Wilson Cycle records plate motion opening & closing of ocean basins and the Arabian cycle is: Interior Cratonic sag & fracture basins of Arabia Plate rift & divergence with formation of new ocean basin, the Tethys Plate motion reverses & convergence enables collision, & mountain building, the Zagros Mountain chain

Arabian Gulf Interior Sag Compressional Margin Extensional margin

Evolution of Arabian Gulf
Foreland Basin Compression & Foreland Basin Extensional margin Extensional margin Interior Sag After Kingston et al, 1983

Oil Gas Arabian plate stratigraphic section with
hydrocarbon production Oil Gas

Pre-Cambrian Interior Sag

Silurian Interior Sag

Extensional margin Permian

Arid Tropics Air System
Restricted Entrance To Sea Structural & Depositional Barrier over Hercynian Horst Blocks Permian Khuff Saudi Arabia Oman & UAE Arid Tropics Air System Wide Shadow from Adjacent Continents

Extensional margin Jurassic

Wide Shadow from Adjacent Continents
Restricted Entrance To Sea Depositional Barrier over Hercynian Horst Blocks Upper Jurrassic Saudi Arabia Kuwait, Iran & UAE Tropical Air System ! Wide Shadow from Adjacent Continents

Compression & Foreland Basin Cretaceous to Tertiary After Dennis Tassa

Zagros Fold Mountains - Iran
Compression & Foreland Basin Nasa Image

Zagros Fold Mountains Iran
Nasa Image Compression & Foreland Basin

Zagros Fold Mountains - Iran

After Murris

From International Petroleum Encyclopedia

Arabian Gulf Factory producing carbonates & storing products of cyanbacteria since Permian
Nasa Image

A big day for a bloom!! Organics in the Gulf! Nasa Image

Basin Ramp Open Shelf Restricted Shelf

Sedimentary Section is Source
Collister, James, Robert Ehrlich, Frank Mango, and Glenn Johnson (2004), Modification of the petroleum system concept: Origins of alkanes and isoprenoids in crude oils AAPG Bulletin, v. 88, no. 5 pp. 587–611 Establish that the source of petroleum was once dispersed through much of the sedimentary sections and not necessarily from classic organic rich source rocks.

After Baum, & Kendall

Geological Setting of Jurassic Oil
Seal Seal Reservoir Reservoir Intrashelf Basin Intrashelf Basin Most petroleum reserves from Jurassic section are concentrated around the intrashelf source basin. This is a direct result of the widespread deposition of the upper Jurassic shelf-calcarenite Arab Formation reservoirs and the regional anhydrite Hith seal overlying the Arab Formation. The basin was tectonically stable with very broad and shallow shelf separated from the open ocean to the east by a continental margin.

The Hanifa Formation Oil Fields
Now I will be discussing the Hanifa Formation in more details. The Hanifa Formation source rocks are low-energy, laminated, dark, and organic-rich lime muds that collected under anoxic condition bottom-water conditions. To the north of this intrashelf basin, high-energy, shallow-water grainstones and evaporitic peritidal sediments accumulated across the Rimthan arch. To the east, the continental margin separated the platform from an open ocean in which little or no deposition took place. Next:objectives of the analysis

Hanifa Formation - Berri Field
map The map shows the location of wells used for conducting the study. Next: eustatic sea level and chronostratigraphic charts

Lower Cretaceous - Barremian
Barremian Paleogeography in Gulf Region (Murris1980)

Lower Cretaceous Stratigraphic cross-section of Cretaceous
Eastern Arabia (Alsharhan & Nairn 1986)

Zakum Field - UAE Note fining upwards cycles Pittet et al, 2002

Zakum Field - UAE Anticlinal shape of field Pittet et al, 2002

Geologic Cross-Section - Arabian Gulf
Oil fields become younger from west to east

Arabian Basin Traces a polyhistory of plate tectonic & sedimentary fill: Pre Cambrian to Infra-Cambrian - continental interior Silurian and Ordovician clastics – continental interior Permian clastics & carbonates – trailing margin Upper Jurassic Carbonates – trailing margin Lower Cretaceous Carbonates – trailing margin Middle Cretaceous – compression and collision starts Tertiary Carbonates and Clastics- compressional margin

Oil Production - Arabian Gulf
Productive hydrocarbon section older to West [Paleozoic] & younger in East in the Zagros Mts [ Upper Tertiary]. West to East production includes: Infra-Cambrian Salt Silurian and Ordovician clastics – Unaizah Permian clastics & carbonates – Khuff Upper Jurassic Carbonates - Arab & Tuwaik Mt Group Lower Cretaceous Carbonates – Shuaiba & Thammama Middle Cretaceous – Mishrif Tertiary - Asmari

Recent History of Middle East Oil
"War is the unfolding of miscalculations." Barbara W. Tuchman

Oil Time Line – Important Events
: Kerosene the fuel of choice 1869: Suez Canal opens 1878: Electric Light 1908: Auto Boom starts 1912: UK Navy uses Oil 1914 – 1918: WWI 1920: 9 million vehicles U.S 1938 – 1945: WWII 1948: Israel born 1948: 1st Arab Israeli War 1948: US Net Oil Importer 1952: Iran Oil Nationalized 1956: Suez Nationalized 1956: 2nd Arab - Israeli War 1960: OPEC founded 1967: 3rd Arab - Israeli War 1969: Qaddafi coup 1978: Khomeini coup 1980: Iraq – Iran War : 1st US - Iraq War : 2nd US - Iraq War

"When war is declared, truth is the first casualty." Arthur Ponsonby

Recent History of Middle East Oil
Paraffin no longer hydrocarbon of choice & Baku lost as a source of oil Western oil exploitation of Middle East driven by Loss of Russian Sources Demands of naval shipping Advent of the motor car Iran explored by British before First World War After this war & break up of Ottoman Empire exploration extended to Iraq Initially the British and French were involved & US became equal partner Then US, in connivance with Gubenkian, acquired the Saudi Arabian oil concessions Increased military & civilian needs of West caused conflict with Middle East countries with the immense “cheap” oil reserves Israel Iran OPEC Now the world consumes 85 million barrels (plus) of oil a day these confrontations continue today

Joseph Stalin 1879: December 9 - born in Gori, Georgia.
1893 1903 1879: December 9 - born in Gori, Georgia. 1894: Arrives Tiflis Theological Seminary. 1895: Works with Russian Marxists exiled to Transcaucasia by Tsarist government. : At Tiflis Theological Seminary gathers Marxist students to study Marx, Engels, & Lenin. 1898: January formed workers' Marxist circle in Central Railway Workshops of Tiflis. 1899: May 29 Stalin expelled from Tiflis Theological Seminary for propagating Marxism. : Organized, directed revolutionary activities, writes leaflets, lead strikes & sent to Siberia; received letter from Lenin & escaped back to Baku to lead general strike of Baku workers.

Baku Oil Monopoly Dies 1903 & 1904: Oil worker strikes common against Tsar 1904: Baku kerosene supplied 47% of needs of UK & 71 % of France 1905: Oil worker strikes halt Baku production; Stalin exiled to Siberia : Baku oilfields & refineries control by Shell & Nobel Brothers, supply Russian Army. UK interest in Transcaucasia & oil-rich area 1917: Armed intervention against Bolsheviks in Transcaucasia & East for control of Baku's oil, discussed in London. Henri Deterding, Shell president, buys shares of largest oil producers who fled Baku after Oct revolution. Sets up military-political mission in Iran with General Dunsterville 1918: March pogroms against Azerbaijanis by Armenians & Bolsheviks in Baku. Declaration of Baku Commune establishes links with Moscow & recognizes role of Russian Federation . 1920: April 28, Bolsheviks seize power at Baku & Nobels sell most of Russian holdings to Standard Oil (NJ) by 1923 inflow of Western funds help Russian oil production back to pre-revolutionary levels. 1920: Roughly 9 million gas-burning vehicles now in U.S

Central Asian & Middle East Oil
Batum Baku 1927 Kirkuk Suez 1908 MIS 1869 Dammam 1938 Central Asian & Middle East Oil

British Navy & Petroleum
Fisher Churchill John Arbuthnot “Jackie” Fisher: 1st Baron Fisher (Jan 25, 1841 – July 10, 1920), joined Navy in 1854 & as 3rd Sea Lord built 1st destroyers, nd Sea Lord, in st Sea Lord when Germany & Britain in naval arms race. Preferred battlecruiser with speed not amour, introduced submarines & converted from coal to oil fueling Winston Churchill: After career as journalist, in army and then parliament, in 1912 became 1st Lord of Admiralty & ordered conversion from coal to oil 1901: Spindletop's discovery lead to Shell Transport & Trading needing sales

Oil & Fords Automobile 1896: Ford constructed his first horseless carriage; sold in order to finance work on an improved model. 1908: Ford T in production, price as low as $280. Nearly 15,500,000 sold in USA. Model T heralds beginning of Motor Age and car evolved from luxury item for well-to-do to essential transportation for ordinary man. 1920: Roughly 9 million gas-burning vehicles in the U.S

Zagros Mountains Abundant Oil Seeps Abundant Anticlines

Iranian Negotiations Begin
Jacques de Morgan: Archeologist identified oil seeps in western & SW Persia. 1901: Antoine Kitabgi, friend of Persian grand vizier, Persian commissioner-general of Paris Exposition 1900, wants local oil industry to develop. Helped Baron Julius de Reuter with Iranian government concessions that failed. 1901: Asked Sir Henry Drumond Wolff, once UK minister in Tehran, to locate UK investor for oil concession. 1901: British William Knox D'Arcy (with Australian gold mining fortune) acquires 60 year oil concession for whole Persian Empire except Russian border.

Masjid-i-Suleiman 1905: Burma Oil Comp finances D'Arcy
1907: Royal Dutch Shell incorporated (60%RD - 40%Sh) 1908: Oil struck at Masjid-i-Suleiman 1909: Anglo-Persian Oil Company” forms to develop field 1911: 138 mile pipe Masjid-I-Suleiman - Abadan refinery 1912: Anglo-Persian 10-year contract with Royal Dutch-Shell as outlet for crude & oil products 1914: Anglo-Persian contract to supply Navy’s ships & UK government invest £2 million & becomes major shareholder 1915: Anglo-Persian forms British Tanker Company & at end of WW I owns a shipping fleet 1917: Anglo-Persian buys British Petroleum Company, acquiring a marketing organization for products & founds a research centre at Sunbury-on-Thames in UK

Oil & British Fleet - Iraq
1908: Discovery of giant Masjid-I-Suleiman by Anglo-Persian Oil Co 1908: Mosul Vilayet now has potential & Gulbenkian (Mr. 5%) organizes Turkish Petroleum Co. with UK & Dutch Oil Co’s 1909: Sultan deposed within 24 hours of Anglo-Persian signing concession for Mosul Vilayet : UK Government proposes Royal Navy be oil powered & so needs own source 1914: Government has Anglo-Persian join TPC with 50% interest while buying controlling interest of Anglo-Persian

Calouste Sarkis 5% Gulbenkian
1869. March 29th: Wealthy Armenian family in Istanbul, Banker father imported Russian kerosene to Ottoman empire. Educated in Turkey, & France 1897: Engineering degree, London Kings's College 1898: Financial & oil advisor to Turkish embassies Paris & London 1902: Becomes British Citizen 1907: Helped form Royal Dutch Shell (60%RD - 40%Sh) 1908: Organized UK & Dutch Oil Co’s as Turkish Petroleum Co. Called Mr. 5% from holdings 1910: Consultant to Turkish National Bank pushing Oil exploration in Iraq & opening up Middle East

Calouste Sarkis 5% Gulbenkian
1928: Post WWI architect of Red Line Agreement with British (Persian Oil), Anglo-Dutch (Shell), French (CFP) & US (Exxon & Mobil) joint venture in former Ottoman empire producing areas except Kuwait & Iran for 5% of all oil found. Oil in Iraq & Saudi Arabia made him one of world's richest men. Avoided taxes by shuttling between Ritz Hotel in London & Ritz in Paris. Diplomatic status as accredited to Iraqi embassy of London exempting from taxation Formed Gulbenkian Foundation in Portugal and supported the Arts

Red Line Map of Gulbenkian

Iraq Exploration - Events
28 June 1914: Grand Vizier sends letter to UK & German Governments proposing to issue concession to TPC 1920: Treaty Of Sevres German interests in TPC assigned to France Government of Iraq promised 20% of TPC US Government objects to exclusion of American Companies 1923: Treaty of Lausanne – Iraq becomes British Mandate but status of Mosul Vilayet unresolved 1923: TPC Starts Negotiations with Government March 1925: Signing of Concession with TPC, later Iraq Petroleum Company but with no Iraqi direct interest

Iraq Petroleum Company (IPC) Shareholders
Shell (Anglo-Dutch) % BP (British) % (Anglo-Per & Anglo-Iranian) CFP (French) % (now Total Fina Elf) Exxon (US) % (now Exxon-Mobil) Mobil (US) % (now Exxon-Mobil) Gulbenkian 5% (Independent) Companies also agreed not to compete with each other through most of previous Turkish Empire, including Saudi Arabia : Exxon & Mobil reneging on agreement when they formed Aramco in Saudi Arabia in 1930’s.

The Way it was! Results of 1920 Treaty of Sevres

Iraq – First Major Discovery
14th Oct 1927 Baba Gurgur 1 (Kirkuk #1) The 6th Exploration Well Spudded after Concession granted in 1925 Well blew wild at 90,000 bbls/Day Reserves of approx 17 Billion barrels in Tertiary & Cretaceous 13th October 1927, Qaiyarah-1, 4,000 Bpd, 120 API

History of Petroleum Exploration
Max Steineke 1933: Chevron acquire lease to explore in Saudi Arabia 1938: Steineke found oil at Dammam dome 1938: Oil was first discovered in Kuwait 1939: Chevron production & exported 1st oil 1939: Oil is discovered in Qatar The start of the golden age of US involvement with exploration for foreign cheap oil

History of Middle East Oil Exploration
“War does not determine who is right—only who is left” Bertrand Russell

Oil Time Line – Important Events
: Kerosene the fuel of choice 1869: Suez Canal opens 1878: Electric Light 1908: Auto Boom starts 1912: UK Navy uses Oil 1914 – 1918: WWI 1920: 9 million vehicles U.S 1938 – 1945: WWII 1948: Israel born 1948: 1st Arab Israeli War 1948: US Net Oil Importer 1952: Iran Oil Nationalized 1956: Suez Nationalized 1956: 2nd Arab - Israeli War 1960: OPEC founded 1967: 3rd Arab - Israeli War 1969: Qaddafi coup 1978: Khomeini coup 1980: Iraq – Iran War : 1st US - Iraq War : 2nd US - Iraq War

Oil became commodity of military success In Second World War Germany controlled the oil of Romania Wanted to acquire Baku (Russian) & Persian Gulf (British Empire) BP active in Middle East & controlled Persian Gulf until USA acquired exploration concessions in Saudi Arabia (5%) Cheaper oil for all!!!

Center of Gravity 1944 is shifting to the Middle East”
De Golyer: “The center of gravity of world oil production is shifting to the Middle East” Ras Tanura Refinery Saudi Arabia begins operations to become largest refinery in World

“Petroleum” What to do in the Middle East?
US government to acquire direct ownership US government to negotiate agreement with British Allow private companies to conduct the business

Yalta 1st Option: Ruled out
2nd Option: Before going to Yalta, Roosevelt withdrew it from Senate 3rd Option: Won

Growing Demand & Rising Production 1945: 26 million cars
Many new discoveries USA 1948 Net exporter Net importer

History of the Oil Price

March 12th, 1947 Truman Doctrine
New Aramco: Socol, Standard Oil of NJ, Texaco, Socony Gulf Oil – Shell in Kuwait Iranian contract between Anglo Iranian & Standard Oil, Socony

Europe in crisis Marshall Plan

Birth of Israel 1946 June - Oil giant Burgan field discovered
1948 May First Arab - Israeli war 1951 May st shipment of Kuwait crude oil

King Ibn Saud Ibn Saud’s Dilemmas: - Birth of Israel
US guarantee of Saudi Arabian independence Soviet threat

Advancement in Technology
Post-war petroleum order Center : Middle East Market : USA, Western Europe, Japan Technology : Huge development Problem : Large surplus of oil How to divide profit?

Stress on Seven Sisters or Big Oil
50-50 Deal, December 1950 But producing countries wanted more money and power!

Korean War - “Iranian Card” Iran: 40 % of Middle Eastern oil Weak Shah
US interest Korean war British hatred Nationalization, May 1951, Mossadegh (Mossy)

World events,

"What a country calls its vital economic interests are not the things which enable its citizens to live, but the things which enable it to make war. Petrol is much more likely than wheat to be a cause of international conflict." Simone Weil

Dr. Mohammad Mossadegh King Reza Pahlavi
Expropriation vs. economic warfare, 1952 No oil export, no money, economic trouble Law and order collapsing Mossadegh turned to Moscow U.S. and British assisted coup Shah regains power Oil consortium: Jersey, Socony, Texaco, Standard of California, Gulf; Shell; Anglo Iranian Result: USA becomes major player in Middle East, 1954

Suez Suez represented post-war petroleum order:
2/3 of Europe’s oil passed through Suez 2/3 of traffic in Suez was oil

Gamal Abdel-Nasser 1952 A coup removed King Farouk
Colonel Gamal Abdel Nasser became dictator Rejected Western involvement Pan-Arabism “Greatest international crime” – the creation of Israel Acquired weapons from the Soviet block

Aswan Whether to build the Aswan dam?
US rejected providing the finance Revenge: expropriation of Suez Canal, July 26, 1956 The French and British wanted military action! Eisenhower did not want war!

"An inglorious peace is better than a dishonorable war." Mark Twain

1956 - Aramco confirms scale of Ghawar and Safaniya
2nd Arab Israeli War October 29, 1956 War plot against Egypt: France, UK, & Israel Eisenhower was furious Soviet Union threatened by rocket attacks Revolution in Hungary Result: Nasser became a hero and leader of Arabs Aramco confirms scale of Ghawar and Safaniya Oil found in Abu Dhabi

1948 1972 World oil production 8.7 million barrels 42 million barrels Middle East 1.1 million barrels 18.2 million barrels U.S. production share 64% 22% U.S. reserves share 34% 7%

Stress on Seven Sisters or Big Oil
50-50% is not enough any more Nasser ascendant Soviets build Aswan Syria joins Egypt: United Arab Republic Nasser controls oil: Suez and pipelines Producing countries wanted more money and power

Middle East and OPEC events, 1947-1973
History of the Oil Price Middle East and OPEC events,

September 1960, Organization of Petroleum Exporting Countries (OPEC) founded in Baghdad, Iraq OPEC’s proposed to unify & coordinate members' petroleum policies OPEC members' national oil ministers meet regularly to discuss prices Since 1982 set crude oil production quotas

Original OPEC members include Iran, Iraq, Kuwait, Saudi Arabia, & Venezuela Between 1960 & 1975, expanded to include Qatar (1961), Indonesia (1962), Libya (1962), United Arab Emirates (1967), Algeria (1969), & Nigeria (1971) Ecuador & Gabon were members of OPEC, but Ecuador withdrew in December 1992, & Gabon followed suit in January 1995

Current 11 OPEC members are Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, & Venezuela Produce some 40% world's oil Have more than 77% world's proven oil reserves OPEC also holds most of world's excess oil production capacity

OPEC End of 1950s: Soviet Union second largest oil producer
Oil companies cut prices OPEC’s aim in 1960: Build national refineries National integrated oil companies Stabilize market for themselves, % share

Six Day War 1960s: more discoveries in Africa, large oil surplus
Nasser’s prestige declining He wanted to gain recognition: liquidation of Israel Blockade against Israeli shipping, Military buildup with Syria, Jordan, Iraq June 5, 1967: 3rd Arab-Israeli war, 6 day war Occupation of Sinai, Gaza, West Bank, East Jerusalem

Oil embargo against Israel’s friends
Arab oil decreased by 60% No effect – oil is abundant, cheap Embargo lifted in September

Richard Nixon End of 1960s, early 1970s
Recession in US and British power Vietnam war Anti-Americanism becomes a great fashion Nixon-doctrine 1971: collapse of Bretton Woods, replaced by floating exchange rates Demand in oil was catching up with supply – end of surplus Huge economic growth fueled by oil US oil production: 11.3 million barrels per day, the peak More dependency on Middle Eastern oil

Muhammar Qaddafi Occidental Petroleum discovered oil in Libya in 1966
Qaddafi coup, 1969 Increase in oil price All the countries increased their profit share

Anwar Sadat Yom Kippur War Egypt was bankrupt when Nasserism ended
Sadat wanted to restore order & make peace with Israel Israel disinterested because of its 1967 success 1973 Yom Kippur war

Watergate The Soviet Union supported Egypt and Syria
The USA supported Israel World War conflict was imminent Oil exporters increased oil prices 100% Arabs cut oil supply and eventually stopped exporting to USA A weak president in the Watergate agony contributed to the oil crisis

History of World Petroleum Exploration
"The best way to destroy an enemy is to make him a friend." Abraham Lincoln

Ayatollah Ruhollah Khomeini
Iran: too much money – corruption, chaos, political tensions Shah represented modernization Shiite fundamentalists hated US as main ally of Shah Escalating chaos in oil industry By December 1978 no oil exports from Iran Shah escapes February 1, Khomeini returns to Tehran

Jimmy Carter Second Shock
Panic in the world market: price went up from $13 to $34 From March 1979, Iranian export started to come back Shortage in oil: long lines at gas stations Peace accord: Camp David

Hostages November 4, 1979 : Hostage crisis
Shah allowed into USA for medical treatment West, especially USA seemed very weak Soviets invaded Afghanistan Price: $45

No Stress on Seven Sisters or Big Oil
Boom times Alaska, Mexico discoveries North Sea: the biggest play of all

The History of Prices $100 / barrel Oil Iraq/Iran War Hostages US
New reserves IEA seaks With OPEC Failure Regan Raises US Oil Pices & Allocation Controls Crude Futures Traded NY Iraq Invades Kuwait USA & UK Invade Iraq Iran Revolution Chinese Demand Surges Increases OPEC Market Share IEA says China drives Prices Asian Collapse US Net Imports Domestic Production Exceed

Saddam Hussein of Iraq September 22, 1980: Iraq attacks Iran
Early 80’s: Two drastic changes: Huge investment in exploration Decreasing demand Result: oil surplus June 1982: Lebanon war Golden age for oil geologists

Cheap oil: financial crisis in some oil exporters Mukluk dry hole: end of exploration boom End of pessimism of the 70s Economy is booming, but not because of oil fuel Oil is not that dangerous as before

Desert Storm August 2, 1990: Iraqi invasion of Kuwait
New oil shock, supply decreased Loss had been compensated by December from other sources January 17, 1991: Desert Storm February 28, cease fire

OPEC suspended price band after Sept 11 believing stability of market more important than OPEC price target. Officially suspended Jan 2002 but basket price again within band, & OPEC members speak again of keeping prices within $22-$28/barrel range

Cheap transportation in USA essential to maintain even the most rural subsistence economy!

“World Petroleum Reserves”

Iraq's Role "By 2010 we will need [a further] 50 million barrels a day. The Middle East, with two-thirds of the oil and the lowest cost, is still where the prize lies." - US Vice President Dick Cheney, as Halliburton chief executive officer, London, fall 1999 Cynic’s perspective is that Bush & Cheney's Iraq war is over & its “Mission Accomplished” Costs may reach over trillion dollars, & anywhere from 50,000 to 500,000 Iraqis & 3,941 US military dead Paid for by the US Treasury printing more dollars, or deficit spending [$250 Billion in the red]!

Iraq's Role

Saddam Hussein of Iraq Golden age for oil shale and gas begins
March 19, 2003: US & UK attack Iraq Events of 2000’s produce two drastic changes: Huge increases in oil prices Price of dollar falls Result: Economic recession begins in US Golden age for oil shale and gas begins

Iraq's New Petroleum Laws
Iraqi resources Nationalized. New “Law” drafted by US consultants hired by US administration; vetted US Oil, International Monetary Fund, former US deputy defense secretary Paul Wolfowitz' World Bank, & US Agency for International Development replacing nationalization. Production sharing agreements (PSAs) has Operating Companies getting up to 75%. Sixty-five of Iraq's roughly 80 oilfields open for bid. National revenue distribution Kurds to north, Shi'ites to south & Sunnis in center. Most of reserves in Shi'ite-dominated south, Kurdish north holds best exploration prospects Iraqi oil controlled by "Federal Oil & Gas Council", oil experts from inside & outside Iraq, includes US executives. Iraqi public & overwhelming majority of Parliament members out of loop. Original language English, not Arabic.

The History of Prices $100 / barrel Oil Iraq/Iran War Hostages US
New reserves IEA seaks With OPEC Failure Regan Raises US Oil Pices & Allocation Controls Crude Futures Traded NY Iraq Invades Kuwait USA & UK Invade Iraq Iran Revolution Chinese Demand Surges Increases OPEC Market Share IEA says China drives Prices Asian Collapse US Net Imports Domestic Production Exceed

Data Sources - Texts Who has all the oil? Countries & Reserves Recent Oil History of Middle East Geological Setting of the Middle East Oil Reserves Conclusions

Effect of Iraq? A Response To Increased Consumption, Weak Dollar & War
Mortgage Collapse & Weak Dollar Misguided, Misconceived Paternalistic Objectives To Stabilize Oil Prices

Wall Street Journal Jan 3, 2008
China Effect Annual Consumption To Increase Annual Consumption To Drop Wall Street Journal Jan 3, 2008

Demand for Oil

The Global Picture

Long-term Conclusions
Oil is a depleting finite resource Political & geological factors conspire to control fluctuating but increasing prices Oil industry unable to control oil price speculation influenced by short-term events including increasing consumption, weak currency, weather, speculator trading tactics, or war Though non-OPEC oil producers could maintain huge, long-life reserves by reduced production, production of cheap oil of West continues to peak & go into decline Small oil companies in USA uniquely positioned to make more profit from their assets

Conclusions Burn it in transport or use it for petrochemicals?

Conclusions Now for a Beer!

Lecture Ends!!

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