Iraqi Oil: Black Gold or Black Hole?
Posted by Gail the Actuary on April 27, 2009 - 10:05am
This is a guest post by Nawar Alsaadi. Nawar currently lives in Canada, but lived in Iraq until 1990. He still has close ties to the country, and has been following the situation closely there.
Investors and global oil companies such as Shell Petroleum, Eni, China National Petroleum, and Exxon Mobile betting on Iraq are certain to be disappointed.
Ever since the fall of Baghdad in April 2003, we have heard about the unlimited potential for the Iraqi oil. Often news reports mention that Iraq has the third largest oil reserves in the world, and that Iraq's oil ministry has a goal of producing 6 million barrels/day of oil over the medium term.
However, six years after the fall of Baghdad, the country is nowhere close to producing 6 million barrels a day. As a matter of fact, the country is still not producing at the same level it did before the war (2.2m bpd vs 2.5m bpd before the war). It is worth noting that the pre-war level was achieved despite years of war and crippling economic sanctions. Yet despite current access to capital and technology, the country could not yield better results than oil production under the Saddam regime in the midst of war and sanctions.
There are several reasons why Iraq has failed to rise to the occasion, and in this article I will attempt to address some of them:
• Endemic corruption
• Political reserves
• Bad management
• Political rivalry and foreign oil company stalemates
• Political insecurity
Endemic Corruption
As of last year, according to the corruption ranking of Transparency International, Iraq ranked 2nd worst in the world. It was slightly higher then Somalia and in line with Myanmar. Actually if we were to follow the survey from 2003 to 2008, we see the following erosion in the country corruption score (10 being the highest, and 1 the lowest):
Thus despite the Iraqi government assurances that it is doing its best to combat corruption, it seems that corruption is growing at an alarming rate, taking Iraq to the path of overtaking the failed state of Somalia in the near future.
Political Oil Reserves
It is often claimed that Iraq has the third largest oil reserves at 113 billion barrels. The source for these numbers is rarely discussed. Thus it is worth looking at the origin of those claims.
Iraq nationalized the oil industry in 1972 when it took full control of the western controlled Iraq Petroleum Oil Company (IPOC). At that time Iraq’s oil reserves stood at 35.9 billion barrels according to the IPOC and were reported by Baghdad to be at 30 billion barrels as recently as 1982. However, interestingly enough, as the Iraq-Iran war raged and Iraq’s need for additional revenues to finance the war grew, Iraq’s oil reserves jumped to 41 billion in 1983, followed by a jump to 48 billion in 1987 and finally they topped 100 billion by the end of the war in 1988. However after the complete halt of exploration due to the 1991 gulf war, Iraq oil reserves jumped to 112.5 Billion in 1995, and this is where they stand today.
Iraq was not alone in significantly increasing its reserves, several OPEC nations did the same, one reason is that OPEC production quotes at the time where determined by the country’s declared proven reserves, thus we see a race between the OPEC members to increase reserves within this period:
Furthermore none of the above nations allow for any decrease in reserves to account for the already produced oil, as of 1995 when Iraq declared an increase of its reserves to 112.5 Billion, the U.S. Geological Survey calculated that at least 22 billion barrels of Iraq oil reserves have already been produced by that date, and if we were to update those number to 2009, we can safely add an additional 10 billion barrels produced in the last 13 years.
So what is a reasonable estimation for the remaining Iraqi reserves?
According to Dr. Colin Campbell a prominent oil geologist and founder of the Association for the Peak Study of Oil and Gas (ASPO) Iraq oil reserves stand at about 60 billion barrels, or about half the official estimates.
Bad Management
Since the fall of Baghdad and the start of the “democratization” process, the country has lost thousands of technocrats under the pretext of the their Baath political affiliation. This has opened the door to mainly political appointments at key Iraqi ministries including the Ministry of Oil. The lack of oil industry experience by the appointed, combined with the surging levels of corruption has conspired to limit the growth in the Iraqi oil production since 2003. This failure is amplified by the ministry’s failure to bring production back to 2002 levels six years after the regime change.
However, what is more worrisome after several years of miss-management is that Iraqi oil production is on the verge of witnessing a sharp decline in production to possibly under 2 million barrels a day, as indicated from recent news reports:
February 24th 2009
A Guardian newspaper article talked about a 250,000 barrels/day decline in Iraqi oil output, and the alarm of the oil ministry in regard to the issue:
Pressure problems at two southern oilfields are the main reason for a decline of 250,000 barrels per day. That, on top of oil's $100 a barrel price collapse since July last year, has already forced Iraq to cut its budget twice.
Alarmed by the loss of output from its reliable southern oilfields, Baghdad sent a high-powered committee to investigate and devise a quick fix.
April 17th 2009
Creeping water cut levels, this second article from the Guardian indicates an aggressive plan by the Iraqi oil ministry to deal with wet crude through the issuance of several tenders to deal with the issue:
It has issued a blitz of tenders recently for degassing and dehydration plants, valves, control systems, pumping software, pumps, storage tanks, and equipment for treating wet crude -- oil mixed with high levels of ground water.
For those who don’t know the significance of wet crude, as oil wells age, the extracted oil is often mixed with water. An increased water to oil ratio indicates an imminent production problem and can lead to a total collapse in production, if not treated adequately.
The most dire warning came on April 23th 2009, as reported in this MEED article:
The sources tell MEED the country's oil output could drop by up to 10 per cent by December 2010 as production from state-run South Oil Company (SOC) falls by 220,000 barrels a day (b/d) as a result of a deterioration in the productivity of its wells at fields including South and North Rumaila, West Qurna and Missan.
SOC suffered a 100,000 b/d fall in production in 2008. The sources say the company will suffer further 100,000-b/d drops in both 2009 and 2010.
The drop in production has already forced SOC to cut supplies to local refineries to meet crude export requirements.
Furthermore:
"The reality is that there is a crisis in the making," says one executive from an international oil company that has attended meetings with SOC to address the problem.
"Everyone is used to focusing on security and infrastructure problems whenever something is not going right in Iraq, but this time it is down to physics."
Jabbar al-Luaibi, a former head of SOC who now advises the Oil Ministry on all oil projects in southern Iraq, says the collapse in production is due to Baghdad falling behind with its drilling programme over the past six years and the declining productivity of its existing wells.
"It has got to the point where we have 300 wells not flowing in some of our biggest fields, and that means a lot of work just to get us back on track to where we were a few years ago," says Al-Luaibi.
"We know there has been a 100,000-b/d decline in 2008 and we will see the same drop from the production platform in 2009 and 2010. After that, we could be looking at even sharper falls."
Al-Luaibi says the problems in production can be attributed to a delay in the maintenance of existing wells, reservoir management problems and the amount of water leaking into the reservoirs.
As indicated from recent news reports, Iraq oil industry seems to be in a dire state, and the country is scrambling to maintain oil production at current levels. However, if the performance of the Iraqi government over the past few years is any indication, their current efforts are unlikely to solve the issue.
Political Rivalry and Foreign Oil Company Stalemates
One of the main issues blocking the development of the Iraqi oil wealth is the political rivalry and mistrust between the various political factions governing the country. The greed and the competition for power has lead to a multi-year stalemate in the passage of the key hydrocarbon law introduced in 2006 and revised four times so far. And it does not seem that a passage is near, based on this April 17th 2009 headline:
Kurdish minister 'not very optimistic' oil law soon passed
This headline is of key significance, since the Kurds are considered to be the stumbling block for the approval of the law mainly due to issues related to exploitation of the rich Kirkuk oil fields. Thus, such a comment from Ashti Hawrami the Kurdish natural resources minister does not indicate a change in their stance anytime soon.
In light of the unlikely passage of the key hydrocarbons law, the oil ministry started looking for ways to invite oil companies into Iraq without the passage of the law, under what is called “technical” oil contracts. The first plan for awarding such two-year service contracts to western oil companies was undertaken in 2007, with a goal of increasing the country’s oil production by 500,00 barrels/day through signing five 100,000 barrels/day contracts. However, by 2008, no such contracts were signed, and the terms where changed to one-year. But due to growing political opposition to such no-bid contracts, the whole plan was scrapped by the end of the year.
Yet the Iraq oil ministry led by Mr. Hussain al-Shahristani was determined to sign deals with foreign oil companies. It went ahead and signed a gas deal in September 2008 with Shell Petroleum to exploit Iraqi gas, which is estimated to be burned at a rate of $7 billion per year for lack of gas processing facilities. However the $4 billion deal has faced opposition almost from the start, and as of April 17th 2009, Mr. Jabir Khalifa Jabir, secretary of the Iraqi parliament's oil and gas committee announced the following:
"We are going to do everything we can to revoke this deal and to push Shell out," Jabir told Reuters. "Both these deals are illegal because they didn't go through parliament”.
“The companies and their lawyers knew the old Iraqi oil law very well," he added, saying that any new deals Baghdad signs in bidding rounds under way with BP and others would also be subject to revocation.”
More recently, Iraq announced the opening of the Nassiriyah oil field for bidding to foreign oil companies, in an effort to produce 100k barrels/day. A decision was supposed to be made by the end of April; however, by April 23rd 2009, the deadline was pushed back to the end of June:
Abdul Mahdy al-Ameedi, deputy director general at Iraq's Petroleum Contracts and Licensing Directorate, said the ministry had asked the three companies to review their previously submitted technical and commercial offers according to "new requirements" made by the ministry.
I believe one must wonder if the “new requirements” made by the ministry has anything to do with the corruption index highlighted in the start of the article!
So what does Iraq have to show for its efforts in inviting in foreign oil companies? The sole signed and progressing contracts are with an unheard of British oil firm named Mesopotamia Petroleum Company, and a $3 billion contract with China's CNPC, a contract that was initially signed in 1997 under the Saddam regime. Like the Shell Petroleum deal, the Iraqi parliament considers this contract also illegal.
Thus as indicated from the above issues, Iraq is facing significant political problems in its efforts to invite oil companies. The Kurds and the central government are locked in a war to control Kirkuk oil; the Kurds are unlikely to allow the passage of the oil law unless they have more control on Kirkuk; while the Iraqi government is unlikely to allow any Kurdish oil to be fully developed or exported unless the Kurds submit to its wishes. Meanwhile, the oil ministry is in a constant struggle with the politically driven parliament, as all of its plans are systematically blocked for political reasons and on suspicion of corruption.
Political Instability
2008 was a year of relative calm in Iraq. However, it seems that 2009 is turning to be a year of further instability. To better understand the current instability, it is worth looking into why 2008 was relatively stable.
2008 witnessed a weakening of the insurgency, largely due to the successful American efforts of recruiting 90,000 ex-insurgents in what is called the Awakening Councils, which are nothing more then Sunni armed militia’s funded by the US at a rate of $300 per member/per month. The US introduced this program in an opportune moment as Al-Qaeda’s bloody methods and thirst for control created a significant rift within the insurgency. This rift within the insurgency and the financial and armed support for the councils created a relative level of stability in the former hot spots such as Anbar, parts of Baghdad and Diyala.
In addition to the above, the Iraqi government was profiting handsomely from the explosion of oil prices to above $100 a barrel for most of 2008. This windfall in wealth helped the government fund an overly large security force and the creation of a massive welfare state where close to 80% of the population is dependent one way or another on the government for employment, housing or food. As a matter of fact, the government got so wealthy that Mr. Nouri al Maliki was walking down Baghdad’s streets in the summer of 2008 handing out dollars.
The situation is much changed in 2009. The US passed the control of the Awakening Councils to Baghdad, but the Iraqi government has refused to incorporate more then 20% of the members of the councils into the police and army, and only a handful have been recruited to the official security forces to date. Furthermore, recent reports indicate that the government is arresting members of the councils. By March 28th we had the following news reports:
On March 28, clashes erupted in Baghdad’s Fadhil district after Iraqi troops arrested the leader of the local Awakening Council, Adil al Mashhadani, one of many former Sunni insurgents who had allied with American forces in the fight against al Qaeda-inspired Salafi militants in Iraq. Mashhadani’s men staged a two-day uprising, which was put down by Iraqis with considerable help from American troops fighting against their former allies.
A few days later on April 7th 2009, there was a wave car bombs attributed to the councils' growing distrust of the government:
Seven car bombs exploded across Baghdad yesterday in a surge of violence linked to growing dissatisfaction among the Sunni militias that helped turn the tide against al-Qaida and other insurgent groups
And as recently as April 24th, several bloody attacks of a sectarian nature took place on Shia pilgrims, with the most dangerous aimed at the holy Khadamiya Shrine in Baghdad killing 65 people, and bringing memories of the Golden Dome in Samarra attack in February 2006, which lead to a massive escalation in inter-ethnic violence in 2006 and 2007.
To compound the above problem, the Iraqi government is running out of money due to the collapse in both oil prices and oil production. As a result, the country’s budget was revised down three times--down to $58 billion from $80 billion a few months earlier. It is likely to be reduced again, as the current budget is based on $50 oil. (Iraqi oil trades at a discount to WTI.) This situation prompted Iraq to consider an IMF loan.
The collapse in Iraqi revenues has significant implications with respect to the security situation. The most obvious impact is the freezing of security forces hiring, which was announced on March 20th 2009. This freeze directly affecting the hiring of the ex-insurgent Awaking Council members. Furthermore, the lowered revenues are curtailing significantly much needed investment in crumbling civil infrastructure, social services and much-needed investments to boost oil services.
In the midst of the above challenges, the current US administration is marching ahead with its plans to withdraw from Iraq, a move that will likely create a vacuum that will further weaken the Iraqi government and may very well lead to a civil war between the rival factions.
There are many questions that remain unanswered in Iraq. The fate of Kirkuk remains illusive. The recent UN report on Kirkuk was received coldly in Iraq, and the Kurds consider their parliament as the only appropriate venue to solve the issue. The Sunnis remain deeply distrustful of the Shia, and today the Sunnis have well trained and well organized militia to defend their interests, while the Shia remain divided between loyalty to Iran by some and loyalty to the country by others.
The above discussion offers only a glimpse of the political, physical and operational limitations on Iraq's ability to produce any significant amount of oil in the next few years. These issues are an indication that Iraq is likely going to experience a sharp decline in production (or perhaps stagnation at best) in its production levels over the foreseeable future.
The implications of this discussion are of great significance to investors in the oil industry, as Iraq is often looked at as one of the potential bright spots for increased oil production over the medium term. It is even more important within the context of an expected oil supply shortage starting in 2013, as often repeated by the IEA.
Hence, while it might be profitable to invest in oil over the next few years, it might be wise for the oil industry and oil investors to await more stability and clarity in Iraq before moving into that country.
Disclosure: The author has no positions in any of the above mentioned companies.
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This article was published Aril 26, 2009 in Seeking Alpha. It has been edited for clarity.
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so missing oil is like those pesky WMD that have yet to appear.....
no wonder the USA is pulling out !
no oil - no troops!
Forbin
I must be getting (more) cynical in my old age......
Bomb them until they get it right.
cfm, Equal Opportunity Iraqi/Afghani/person before Geithner/Obama/fascisti, Gray, ME
Actually I think the Iraqi resistance had a primary goal of not allowing their oil to be siphoned off by the Americans and British - so they might view this as success rather than "failing to rise to the occasion".
As for the rest of the post, I couldn't disagree more with it - Iraqi oil reserves are huge - we didn't invade for the figs, as one American general once noted.
See here for why I believe Iraqi oil reserves are over 300 billion barrels...
http://peakenergy.blogspot.com/2008/11/iraqs-oil-greatest-prize-of-all.html
http://anz.theoildrum.com/node/4675
While it is obvious that more serious exploration would be needed to settle the issue to any degree, here are a couple of papers estimating quite a lot less oil yet to be "proved" in Iraq:
http://www.searchanddiscovery.net/documents/gong03/index.htm
One by Jean Laherrere:
(PDF alert)
http://www.oilcrisis.com/iq/iraqLaherrere.pdf
Let me see in 1972 when the Iraqis took over their oil business the oil reserve estimate was 35.9 billion barrels. The current inflated numbers for OPEC are 113 billion barrels. Dr. Campbell gives a number of 60 billion barrels.
To add to the mix the WOR appears to be increasing(probably a lot).
This leaves me with several choices:
1) The initial numbers were very low.
2) Someone has found a lot of new Oilfields(In an area under exploration since at least the WWI era).
3) There is a problem with Iraqi oil estimates on the high side.
I have never worked in Iraq but it would appear based on this post and what I know that Iraq probably will have difficulty in drastically increasing oil production even if the political landscape miraculously clears.
I am glad I am not in the current US administration trying to set a rational policy.
Ah, but contemplate the significance of this:
From Iraq’s Oil and the Future « Aleklett’s Energy Mix. Mr. al-Chalabi's tenure covered the time of reserves revisions, and if he is sincere it would call into question the significance of the 80s OPEC gains as indicative of a definite near-term peak - assuming the size of reserves is the be-all and end-all of dating when a nation does peak. Contrast this with the 2006 revelation that in all likelihood Kuwait did fudge their reserves estimates upward, to confuse matters.
Peakoil.com thread on Iraq: Iraq has ‘more crude oil’ than Saudi Arabia, says author. User rockdoc123 has some interesting insights about the geology of the region. With all this talk of reserves in abundance it is curious that only a few smallish new fields have been discovered, in the north. Moujahed and Sadad Al-Husseini authored a paper strongly critizing the IHS notion that the western desert has hundreds of billions of barrels waiting to be tapped: Petroleum Resources Of The Western Desert of Iraq.
RIGZONE - Iraq Launches Tenders for 60 Wells in Southern Oil Fields
"In an area under exploration since at least the WWI era)."
yes except the period in the early '80's when iraq was conducting a war with iran, since the '91 sanctions, and since the search for wmd's began.
the problem with the us occupying iraq, is that it is just too profitable, imo.
The people of Iraq should be left alone to govern their own country. As time goes by it seems as if the U.S. has added a new territory. I don't want to see it labeled on a map someday as NPR-I (to US). The irony of all the oil US forces are using to 'free Iraq' so we can get their oil is depressing.
This is just a group of elite's competing for the last dregs of resources on a increasingly plundered planet. The last one standing will win.
The move by the US had geopolitical interests, other than the pure resource play.
They seem to have partially gotten away with it.
Thanks Nawar. Great summery of where Iraq "oil potential" stands today. Just a WAG but I suspect the Chinese will play an ever increasing role in Iraq oil develop (to whatever limited degree that may be in the short term). From what I've seen of Chinese activities elsewhere in the world they can deal with the corruption. In fact, the unavoidable corruption may offer the Chinese a certain advantage. US corporations, under current federal law, have a great deal of difficulty dealing under the table. China does not. Now that oil revenue is down the Iraq oil industry is all the more dependent upon external capital. China is in the process of converting much of its US $ reserve to hard assets. Such investments/deals with Iraq (or any other sovereign) are not as risky as the once were. The World Court has developed much more control over such matters. While they might not have great control over a sovereign directly, they can now penalize a crude purchaser if that buyer allows a sovereign try to circumvent a prior deal. If China does develop a strong relationship with Iraq the real issue may not be how much oil the country will eventually produce but, rather, how much of its reserve base be dedicated to China in the future.
You make some good points. The US is at a definite disadvantage in dealing in countries where under the table payments are needed, while China is not. This puts us at a disadvantage.
Oh, I don't know about that. Mexico smuggles into the US each year some 20 tonnes of heroin, 120 tonnes of cocaine, 11,000 tonnes of marijuana, and God knows how much speed, as well as around 1 million migrants. The US for its part smuggles around 730,000 firearms into Mexico annually. Two-way trade adds up to more than US$100 billion.
There's no way that volume of product and money can possibly move between the two countries without a substantial number of corrupt US officials, both law enforcement and otherwise.
So look around your country, I'm sure you can find quite a few people skilled at paying "under the table".
Thanks for your comments Rockman, I see your reasoning in expecting a bigger role for China, the problem however is really internal at this point, both the Shell and CNPC deals are being blocked by the parliament; to put it simply, foreign companies or countries have no counter party in Iraq to make a deal with, the oil ministry can’t push through with deals without an oil law, and the oil law is not likely to pass through parliament unless the Kurds have more control on the northern oil, something the central government will never allow.
Regards,
Nawar
It is a shame that the folks in Iraq now also have money/greed dividing them Nawar. Before religion and politics were enought to deal with. I'm not just picking on Iraq: oil wealth has always brought with it the specter of fierce confrontation even in more stable sytems...even in the US during the early 20th century.
Yeap -- China will come in and clean up everything. They are playing this game a few notches above the US right now. Not sure how all of these will lead China -- but as long as they can export all their junks to Middle East and get paid with oil, they will walk away happy.
Further, see Friedman's book "The Next 100 Years", in which the author makes a strong case that US interests in the middle east (or anywhere else in the world for that matter) do NOT involve any access to resources, but instead simply a need to de-stabilize the region sufficiently that no monolithic Moslem regional power could evolve to even regionally challenge US power. It's an extremely Machiavelian hypothesis, but I see no reason it would not be an accurate analysis. It certainly helps make sense of what to me has otherwise been a wierdly chaotic US foreigh policy over the past half-century. The only reason I still harbour doubts on the theory is I have difficulty imagining the required training system for new recruits to US foreign service. Even granting that policy at this level is only implemented by the most senior 10% of foreign service officers, recruitment and indoctrination must be an horrendously delicate task, one which I have doubts any government bureaucracy could be capable of.
The schoolyard bully syndrome.
If the schoolyard bully does not have the intellect and personality to move in and control/dominate the situation, they simply disrupt it so as not to allow any other structure to exist through which his/her schoolyard status might be challenged.
No need to recruit, train or indoctrinate. Just allow the bully to do their worst.
This is not an attack on the States, it happens at all levels, in all countries.
The current banking crisis has revealed it's own players .. just imagine what it must have been like having Fred the Shred in your playground at school !
It's also my understanding that most of the oil infrastructure (pipelines, storage, transfer facilities, etc) is in dire need of virtually complete replacement ($50 billion needed); I don't believe that Iraq could pump 6 million barrels per day even if all the above issues you mention would somehow be magically solved if the infrastructure is not repaired. Of course, the issues you mention are indeed real and crippling, all of which goes to support your thesis that Iraq's oil output will continue to be disappointing, even to those who participated in the war in order to receive a 'slice of the pie'.
I believe that a lot of their problems relate to bad management. When Saddam was in power, the dictatorship managed their greatest asset with an iron fist. Now there is much more bureaucracy, and that's never good for making profits.
Eric T. http://www.jazdoilandgas.com
Thanks for the political update. I had been wondering why the number of suicide bombings had been rising. They were clearly targeting the Shia majority.
Baghdad has become a city of walls. The violence between the communities has been suppressed by physically isolating them, but think Gaza or West Bank on a small scale - walls breed inequality, suffering and hatred that can only be contained by military means for so long.
Clearly the US under Obama has decided that Iraq is no longer worth the cost, but once the US troops leave they will not be there on the streets with their high tech patrols to keep the internecine violence locked down. The plan is for a staged withdrawal, first to the 'enduring bases' and then a general demobilisation and return home, leaving enough troops on the ground to ensure loyalty of the Iraqi government and a backdoor to return large numbers at short notice.
I suspect once the patrols end, the streets will dissolve once more into bloodletting, but it will not be reported in any media. It will degenerate until the US is forced to withdraw in quiet ignominy and the country will eventually be ruled by a brutal Islamic regime once more.
I wish that articles such as this were appearing in the Washington Post and the New York Times.
It seems like newspaper budgets are very low now, and all the focus is on a few topics--including the financial crisis, renewable energy, and swine flu.
Good article, Gail, but I miss some important informaton with more bad news: the energy spent by the US Army in engulfing the gulf and assuring (mainly for Western consumers) the output oil flow from Iraq. It should be specially important if you could infer, from any data with all the energy expenses of the US Army in all the Gulf (Saudi Arabia, Kuwait, Emirates, and Iraq and the one to face the Iranians) the one spent in Iraq itself, even more difficult to assess. I had calculated some time ago that they may be spending in between 0.4 and 0.7 Mbpd by all related invasion concepts, including supply lines from the US. So, the Iraq war might have perhaps been almost in energy break even during the first years, for the US.
Net energy and EROEI must include the increasing military energy efforts (to the denominator) worldwide, to grant and secure the appropriation of alien energy resources. The duality of the sailor in the sunk submarine -with no emerging capability, at the bottom of the sea, 1,800 eet below surface- : with limited oxygen, the faster the crew moves, the faster the oxygen depletes. Two ways of acting: the desperate sailor who moves frenetically back and forward with the adjustable spanner in his hands and the one sitting in a corner, to breath as slow as possible, clicking in the wall, with the same spanner: di-di-di-da-da-da-di-di-di (SOS), just in case somebody from outside can make a miracle, while internally ordering his thoughts looking at the family photo.
It seems to me that the US is acting in Iraq like the first sailor.
You are right. Using up a significant share of the oil Iraq does produce through all of our military activities is hardly a useful approach.
Here is what the EIA shows for net oil exports from Iraq through 2007 (2008 was up to about 1.7 mbpd, but they show January production to be down about 150,000 bpd from December).
Here is the chart showing US imports from Iraq (US imports from Iraq were up about one-third in 2008 over 2007, which went to offset some of the decline from CMV (Canada, Mexico, Venezuela) in 2008.
http://tonto.eia.doe.gov/dnav/pet/hist_chart/MTTIMIZ2a.jpg
This is out today, an amazing strategy to enhance interest in the Iraqi fields!:
In the end it would be cheaper and safer for the international oil companies to process “oil sands” then dig for oil in the Iraqi sand.
Regards,
Nawar
Perhaps Nawar. Maybe bumping up the bonuses might even benefit the Chinese…cut out some competition. About 14 years ago I saw China buy a Venezuelan oil field for over $150 million. The field was producing less then 200 bopd. But a similar field had been redeveloped by a US operator which took production from less then 100 bopd to over 40,000 bopd. I’ve had very limited conversations with the Chinese but it’s always amazing how they view business. Profit is almost an unrecognizable word to them. They are (or were about 5 years ago) focused solely on access to oil. They see oil as the mother’s milk to national growth and the see the power gain from such advancement in terms that cannot be measured in dollars and cents. To them oil is not money…it’s power.
Are we really any different ?
I'd argue the power of the US dollar only works to hid the real game to some extent not that we don't play the same game. To a large extent the "profits" are really forced into the system for the US at least to make it look like oil is profitable not that it really is as the resulting debt levels show.
Its our mothers milk also it just we make it look like we are playing the free market game.
Rckman,I fear that you are dead on in saying that to the Chinese, oil is not money but power.Apparently even the majority of the folks on this site would rather not think about just how likely it is that a world wide war will result as a result of peakoil/economic collapse interplay sometime in the next few years.Anyone who doubts this should run the thought experiment as if he/she were an alien anthropologist (well acquainted with our history and geology)writing a report predicting our near term future.
I hope like### I am wrong.
Lets assume that the original reserve estimate of 35.9 is good but qualify it for now and say this is the easy oil remaining in Iraq. Any additional real reserves probably require significant investment to extract and probably will at best keep production rates at current levels. The chances of this are of course doubtful.
Now the article then states Iraq has probably produced 32 billion barrels leaving about 4 billion barrels of oil.
Next lets assume that this remaining fast oil is being extracted at a 20% depletion rate. Why well why not these are mature fields with extensive well systems brute force drilling a lot of wells works just as well as extracting via advanced technologies for "fast oil" I.e oil not mixed with water and still under pressure etc.
This would put Iraq oil production at about 2.2mbd assuming I did the math right 4000 million barrels .20% = 800 million barrels a year or 2.2 mbd.
Now taking into account significant hot oil sales out of Iraq over the decades field damage and a high probability that the last 20% won't come out at anywhere near 2mbd we can readily discount the last year of the five year extraction and probably the year before. Realistically Iraq probably only has 2-3 years worth of significant oil exports left.
This suggests that the US would probably plan on exiting from Iraq and leaving it to the Chinese to get whats left in 2-3 year from now it 2009 now so thats would be 2011-2012 when we exit.
Lets see...
http://news.bbc.co.uk/2/hi/middle_east/7577730.stm
What do you know..
Perfect timing :)
Now whats really interesting is given that the above predicts main Iraqi production will collapse before significant work is done to use advanced extraction methods I just don't see that we are really leaving the Chinese much. Exports will be minimal and only available at high cost. I think Iran will end in the same boat also.
One can also imagine that the withdrawal of US troops coinciding with the collapse in oil production will probably result in Iraq becoming a failed state. The Chinese if they really need Iraq will have no choice but to place a significant number of troops in the region making things dicey esp for Russia and Iran.
You can come up with all kinds of fascinating war games as a result of this. Assuming the US stays in Afghanistan to protect its interest in the Stans above it that produce oil and gas and that we keep pressure on the Iran from Afghanistan you have the situation that Iran will be in effect surrounded with China replacing the US in Iraq Russia to the north and the US still in Afghanistan. China will probably be having its own Vietnam experience in Iraq and I'm sure the US will be only to happy to supply the Al-Queda freedom fighters in Iraq working to defeat Chinese aggression. Or maybe we will let the Russians do the honors.
My only guess as to the invasion in the first place was in hopes that some of the new Iraqi reserves where real and it obviously did not work out well. It was really the last place and last chance the US had to secure a significant source of oil and it simply did not work out.
I'm sure now the realization is that Iran is effectively in the same boat as Iraq and not worth invading worth pressuring but not invading. Irans reserves where about twice as large but their production rate has been consistently about twice as much as Iraq given the same scenario for Iran I can't see them lasting much longer than Iraq and they are stable enough to be facing a larger export land problem.
I give Iran five or six more years at best before the country also collapses just like Iraq.
You have such cheery thoughts. Should we go build wind turbines, coal mines, or what?
500,000 dead civilians. Depleted uranium fired from C130 warthogs through residential neighborhoods. The infrastructure, already in a shambles after years of sanctions, still crippled. A war fought for completely discredited pretenses to which the perpetrators apparently will not be held accountable as the Obama administration anounces that they are not interested in "looking at the past." IMHO the fact that the Iraq oil fields are not living up to the Neocons rosy scenarios is merely a sad irony. Just think if we lived in a country where these Neocon motherfuckers would be tried as war criminals and hung like their nazi counterparts at Nuremburg.
Most will not be able to travel, and "people" like Negroponte could be prosecuted for war crimes in any honest court on Earth.
Maybe, like the French Aristocracy, they will no longer be a issue, as this mass extinctions unwinds.
A-10 Warthogs. C-130 gunships.
The spirit of your comment is spot-on.
I thought I might have got the C130 and the A10 confused. I also made the mistake of assumimg that everyone here at the oildrum is from the US. Apologies to the people from the civilised world.
In regard to the war criminal issue: we might recall that a former Bush administration official was/is detained recently in Italy on international war crimes charges related specifically to torture (Although many think that the Italian president Berlusconi, a Neocon fellow-traveler, will intervene on behalf of the suspect).
Also, in Canada recently an activist was arrested by the RMP for attempting a citizen arrest of former president Bush on war crimes charges. I think it is interesting to note that this was Bush's first international venture in his new career as "motivational speaker." In the US these people wil probably never be charged but one can be somewhat heartened that in the future they will always travel abroad with fear and trembling.
The reason this thread originally caught my attention is because I never see much discussion about the political/economic arrangements foisted upon the Iraqi people by the US businessmen/politicians who are so concerned about democracy and freedom. When the topic is raised it is usually constrained to technical aspects: production numbers, the number of car bombs, troop levels, etc. This original thread pretty much followed along these lines.
I wonder if the less than rosy realities of Iraqi oil development has more to do with Iraqi resistance to these Neocon privatisation schemes (Which are seen by Iraqis as attempted theft of their natural resources) than "sectarian violence," "corruption," or any number of "blame the Iraqi," kind of reasons that are put forward by US observers. The US invasion of Iraq was/is an imperial endeavor. The fact that it has been somewhat unrealised does not change this fact and any attempt to analyze events related to this crime without considering the coersive, brutal and murderous aspects of the imperial project is turning a blind eye to the crux of the issue. It is ideed difficult to sift through the imperial propoganda, so much so that an accurate picture is perhaps impossible.
:)
I think that developing new renewable lifestyles is probably going to be more important.
Eventually I think renewable energy will play a role but I think its more a village by village issue.
Also I think done correctly demand for electricity to live a post oil lifestyle will be quite low.
Assuming we can maintain technology I think the only real use for electricity is for a small amount of lighting and information centers. This can readily be covered with small renewable sources and you can have some outages as its not absolutely critical.
Everything else from washing to food can be done without electricity. This does not mean without technology just non electrical approaches are both possible and feasible.
Plenty of literature exists on low energy living. Overall it does imply a return to a working home i.e where someone has to do a significant amount of work in the home to provide for daily living.
I am in the mobile phone industry so some may claim my views are biased but my experience has been that mobile technology is something no society wants to give up.
http://www.textually.org/textually/archives/cat_mobile_phone_projects_th...
Barring loss of the ability to create mobile phones I think they will endure along eventually with larger screen devices. My own pet concept project is to have a mobile phone with a decent video output jack so you computer simply becomes your mobile phone hooked to a large screen and blue tooth or wireless usb keyboard and mouse. Its something I pitched hard inside Motorola when I worked there to no avail. Modern phones like the Iphone and G1 are more that capable of acting as full desktop computers given a simple video out capacity.
Next I assume some serious advances in power usage for lcd or lcd/led or organic leds are going to make it onto the market. For arm based computers the power usage of the computer itself is not a big deal.
http://www.tomshardware.com/news/hd-lcd-display,5661.html
Now as far as transportation goes boats of some sort will always be around. Trains should make a comeback and using the remaining fossil fuels and some organic fuels are readily possible for limited air travel.
A solar zeppelin is something I hope to see emerge. Overall I expect electronic communication to both remain and become ever more acceptable replacing a lot of our travel. People who can work from home probably will society will change to reduce moving people around simply to have them type at a computer. And of course the number of jobs not dealing with daily living will drop dramatically anyway.
I guess I don't really see that its all that big of a deal if you simply quit living the SUV/McMansion suburban lifestyle. I think you will have a choice of a village with a train commute or working at home or in the surrounding fields. A small manufacturing town concentrated in areas with good hydroelectric and good ports i.e a return to the port city. Nuclear will I think play a large role in areas where you have a good port but no electric supply. Wind where its available reasonably close to a port city and probably at the village level where possible. Another use for wind is powering long distance rail networks and solar maybe depending on solar cell expenses. Certainly for the minimal use case of communication you should see small solar arrays become popular they make sense probably often coupled with some small windmill.
Storage is a nasty issue and its something I'm personally working on I favor liquid nitrogen since it also has the side product of providing refrigeration and freezing. Pumped water storage, compressed air and flywheels are all feasible. I think long term the cost and complexity of batteries and fuel cells will result in them becoming secondary storage devices.
As far as local transport goes I think we will see our road networks crumble so I think a return to horse and buggy and bicycles is probably going to become the norm. The wealthy may use electric cars but on the same hand we know how to build good suspensions so luxurious horse drawn carriages for the rich who are no longer in a hurry is probably going to become the standard. The wealthier class will probably simply fly or use helicopters.
We could very well see the flying car finally arrive on the scene but for a long time restricted to the top of the upper classes.
So I guess I see a world of flying cars, donkey carts, bicycles and mobile phones with some interesting engineering and simply no need for a lot of energy.
This also implies no roads with many areas returning to forest and implicitly I'm suggesting a fairly significant die off with a lot of regional war and some hopefully limited nuclear war. So its not a pleasant world just one thats changed to not use a lot of energy. Different regions will experience different levels of die off. I'd say I expect certain areas to come through fairly unscathed thus my assumption that we will keep our technology level while other regions will become dead zones and then eventually be resettled to some population level generally much lower than we have now. Politically I've got no idea but I suspect that at least for the foreseeable future most areas will be ruled by some sort of fascist or semi-socialist sort of government i.e government via strongman of some sort. In some places it will be benign dictatorships and in others horror. I'm betting that political fragmentation will result in limiting the scale of warfare this along with simple lack of oil will I hope prevent a global WWIII from erupting instead I think we will see persistent and deadly smaller scale war for decades.
Despite the current swine flu scare I really do expect massive pandemic outbreaks to become common as regions fall apart this coupled with war and global warming will I think work to cause enormous death tolls throughout most of the world. I expect even the wealthiest regions to have starvation and problems.
Regardless the world that emerges will I think be like I outlined at the top its one that will for the most part return to basic subsistence agriculture for most with a small elite supported by a small class of experts closer to the guilds of the middle ages than traditional middle class.
One wonders what will happen in Universities. I'd suspect that they become very political and full of propaganda despite continuing to teach needed engineering skills. The purer sciences tend to get hammered in this sort of political environment so once can guess that advancement will only be made in areas that benefit the elite probably closer to Stalins Soviet Union or Hitlers Germany. We can hope of course that some sort of at least Greek level of free thinking continues although even here we are dealing with and effective slave society supported by a large underclass. Arguably better but not the type of democracy we know now.
From there on out I think it only really depends on global warming and if we actually control our population. If we control our population and global warming is not too bad a slow accumulation of wealth and stabilization should lead to the societies becoming more and more open overtime as labor can slowly command higher and higher wages.
Now since I don't see us losing our technology if we don't also control our population we could have a second time of horrors this time with extensive use of biological weapons. If so after that assuming we don't become extinct I think we will then control our population.
So depending on when we decide to control our population we are looking at anywhere from a few hundred years to a thousand before we finally start truly growing on a new renewable and stable path.
Good comment. What's your estimate of the odds as a form of government of, rather than a "strongman / dictatorship / monarchy" form of government, some very stable areas developing a means of "true democracy" exploiting modern communications systems to allow every citizen to vote on every piece of legislation, eliminating the "middleman / representative / politician (corruptible)" in present systems? Perhaps in regions of very high stability, eg. Norway, Sweden, perhaps parts of Canada, Australia?
Lots of people know and care about manny things but still, in manny, perhaps most issues, is the majority ignorant.
I would perfer to get more people involved in politics and vitalize the local municipial level.
A very good trend is the blogging trend since it makes more people part of a spontanous political processs.
And the third thing I hope for is more voting with the wallet, personal day to day decisions about things that dont need to be controlled with slow politics or cumbersome referendum. (The problem is not the ballot box, voting machine or web page, but the process. )
And a fourth good idea is to add more transparancey to the political process but that also need good professional or peoples journalists. We go a problem with lazy professional journalists that count taxi reciepts but has a blind spot for informal corruption not involving money and spotting bad reasoning is way above their abilities.
Regions with high stability can gradually improve on their stable systems. For Sweden where I live I like the idea to unsyncronize the municipiality voting from the government vote and run them in 2-4 year syncronization like the olympic games.
Switzerland do lots of referendum but it took generations to build that tradition.
It is hard to change a political system and dramatic changes seldom work out, the wise thing is to gradually improve on the good things you have.
I agree in general.
Potentially some regions of the US and Canada might also be able to develop similar local democracies.
The Swiss are a good example. And your right it takes generations to really build a true democracy that can withstand terror. I have more hope for benign strongmen that may eventually return to a more representative government. If you read history it becomes apparent that often major changes in politics hinge on someone being able to seize power during troubled times. But on the same hand the outcome is almost random.
And of course you have the problem that a benign government will be surrounded by less benign powers.
The Swiss benefited from not having much worth taking and also living where it what they did have was hard to take.
However this is a perfect example of complex systems I'd argue that anyone would agree we could not predict the next president or given the current situation even if we are going to have one. However although people intrinsically understand this what I don't think they understand is no other complex system is inherently more predictable than this. You can't easily back off from the concept of predicting the president and find any complex system that is less unpredictable. They are all 100% unpredictable. You can set bounds and probabilities and come up with highly probable outcomes but thats not true prediction.
I'd argue if you could predict one complex system perfectly you could predict all complex systems with certainty. The are intrinsically the same. There is no difference between predicting when a side pile will collapse with exact timing and predicting the next president of the US.
What we call time i.e a series of events that are effectively irreversible and complex systems interact in a strange way. Indeed when you get to simple systems that are predictable the flow of time itself becomes difficult to measure. It seems you have a choice you can predict relative time differences in events for simple systems i.e you can predict when a cannonball will land vs when it was shot. But you can't easily tell the exact time it was shot. Complex systems tend to have age in them but you can't tell when they are going to change relative time becomes difficult to determine much less the actual move.
This of course reeks of something like the uncertainty principle in quantum mechanics working regardless of the complexity of the system. This suggests that we don't really have a good understanding of how complex quantum systems transition to classical behavior. The correspondence principle
http://en.wikipedia.org/wiki/Correspondence_principle
Does not apply to large numbers of quantum particles close to the ground state or our good old chemical bonds in molecules. Obviously classical measures of some of the properties of bulk matter work but not all a blatantly obvious one is color another is magnetic properties and even electrical properties. Bulk matter is based on quantum which itself is based deeply on the inability to predict with certainty.
Chaos a non quantum theory is based on exponential divergence and this itself can offer no prediction as the smallest change can eventually lead to highly divergent results.
This by no means prevents us from defining the most probable outcomes. Playing the game of perfect timing is a fools game and is intrinsically wrong. Looking at a world that rejects the fact its really messed up and surmising that in general most people will happily support anyone who claimed they could keep things working like they are is easy to justify.
The chances of me becoming a leader proposing that we need to give up most of the comforts of our current civilization to prevent a long dark period that might span thousands of years being made a leader are safely determined to be zero :)
I'd argue that even the most fringe survivalist harbors the dream of emerging from his cave to be ruler of the world. In general everyone offering a solution also proposes that they are as part of the solution assured of a decent position in its execution. Of course they still need to keep their car to move quickly between supervising renewable projects they are to important to waste time riding a bicycle.
Sorry to be so cynical but its one reason the Catholic church invented the vow of poverty even the most sincere person can become easily corrupted by taking on the trappings of wealth in order to advance a good cause.
This is why my proposal is fairly simple we do nothing to solve our problems we get our personal lives in order and go learn to grow tomatoes. Sort of a extreme version of ELP :)
Seriously though if you work hard to live a low impact lifestyle at the individual level and if your example is taken up by others then you have solved the problem.
If you go back to my long post then what I've said is yes we need a small amount of electricity to maintain our information networks and I see no reason why we need give them up. But the rest of our lives can be lived in a manner much closer to the 17th century than the 20th. Certainly we can innovate to make our lives easier I see no reason we could not also explore the use of robotics esp after populations decline.
But thats not really the point the point is if you simply just change yourself then hopefully your neighbor and his neighbor eventually I think you can see the big problems have a way of working themselves out. They work because you build a consensus of like minded and most importantly correct groups of people. Suddenly you can do the right things as a group and there are no fractures and fissures and inequalities that open up the door for tyranny. If you look at the Swiss you will see that this is their strength.
Is it big projects or silver bullets I don't think so. I think we should keep the information flowing because its useful and of course some reasonable medical care is not a bad thing. These are things I hope we do keep along with our extensive scientific knowledge base. However even they are not required whats required is to live renewable lives as individuals and then as groups.
memmel,
May I say a fascinating theory & one which appears to fit the numbers although I wouldn’t want to put any bets on the geopolitical scenario that you outline at the end ... just too many variables.
memmel,
May I say a fascinating theory & one which appears to fit the numbers although I wouldn’t want to put any bets on the geopolitical scenario that you outline at the end ... just too many variables.
memmel,
May I say a fascinating theory & one which appears to fit the numbers although I wouldn’t want to put any bets on the geopolitical scenario that you outline at the end ... just too many variables.
memmel,
May I say a fascinating theory & one which appears to fit the numbers although I wouldn’t want to put any bets on the geopolitical scenario that you outline at the end ... just too many variables.
Apologies for the multiple, duplicate posts is there any way for me to delete them?
Anyone know how they increased to even 60B Boe? Could this be an inflated estimate too?
Books are showing up back in Iraq. As they say:
"there's a saying in the Arab world: Cairo writes, Beirut publishes, Iraq reads"
Lets hope these people get a shot at a new view. That may not get what they want the first time around, but it could happen.
I totally agree. The best way to help Iraq turn around is to engage their minds, not lead them with fear.
---
http://www.tomorrowsworldcompetition.com/
They asked student to think of ways to inform the public on climate change, flooding, and how water efficiency can turn things around. I think their videos are great, definitely worth your time!
Any body remember exactly what Aynn Rand's character in "Atlas Shrugged" had to say about a corrupt government being able to reopen a mine closed during a collapse?
I believe (it's been a long time) it was Henry Reardon and that he thought any competent engineer could do it in a year or two, but that a "people's government"(?) would never do it.
If you want to read a book that vividly demonstrates the way government can get it all wrong in an emergency, you can't do better. Please don't try to interpret the book literally as a social blue print, just read it for the insights to be gained from it.