Transcript Document

Hydrocarbon Potential of
Middle Eastern Basins of the Gulf
Geology & Geopolitics mix!
Spring 2008
A case that demonstrates that
Professor Christopher G. St. C. Kendall
“Actions Speak Louder than Words”
[email protected]
803-777-2410
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
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!
Christopher G. St. C. Kendall
Arabian Gulf
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!
Christopher G. St. C. Kendall
Arabian Gulf
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!
Christopher G. St. C. Kendall
Arabian Gulf
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!
Christopher G. St. C. Kendall
Arabian Gulf
Outline of Presentation
Data Sources - Texts
Who has all the oil? Countries & Reserves
Geological Setting of Middle East Oil
Reserves
Recent Oil History of Middle East
Conclusions
Christopher G. St. C. Kendall
Arabian Gulf
Current Middle East Reserves of Cheap Oil
Crude Oil(BB) - Natural Gas (TCF)
Saudi Arabia
Iraq
UAE
Kuwait
Iran
Oman
Yemen
Qatar
Syria
Bahrain
TOTAL
263.5 bbls 204.5 Tcf – 8 Years
112 bbls 109 Tcf
97.8bbls 212 Tcf
96.5 bbls 52.7Tcf
89.7 bbls 812.3Tcf
5.3 bbls 28.4 Tcf
4.0 bbls 16.9 Tcf
3.7 bbls
300.0 Tcf
2.5 bbls 8.5 Tcf
0.1 bbls
3.9 Tcf
675.1 bbls 1,748.2 Tcf
Christopher G. St. C. Kendall
Most of these countries oil is in carbonates
Arabian Gulf
Arabian
Gulf
Fields
& the age
of their
Reservoirs
AfterChristopher
Al Sharhan
G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
World Petroleum Exploitation
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 13.15 &
exports 1.048 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
Christopher G. St. C. Kendall
Arabian Gulf
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!
Christopher G. St. C. Kendall
Arabian Gulf
Outline of Presentation
Data Sources - Texts
Who has all the oil? Countries & Reserves
Geological Setting of Middle East Oil
Reserves
Recent Oil History of Middle East
Conclusions
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
Zagros Mountain Chain
After Dennis Tassa
Christopher G. St. C. Kendall
Arabian Gulf
Structural Provinces - Arabian Gulf
Mesozoic to Tertiary
Foreland Basin
Pre-Cambrian Shield
Nasa Image
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
Arabian Gulf
Compressional
Margin
Extensional &
Compressional
Margin
Extensional
margin
Extensional
margin
Christopher G. St. C. Kendall
Arabian Gulf
Evolution of Arabian Gulf
Foreland Basin
Compression &
Foreland Basin
Extensional margin
Extensional margin
Christopher G. St. C. Kendall
Arabian Gulf
Interior Sag
After Kingston et al, 1983
Oil
Gas
Christopher G. St. C. Kendall
Arabian plateArabian
stratigraphic
section with
Gulf
hydrocarbon production
Pre-Cambrian
Christopher G. St. C. Kendall
Arabian Gulf
Silurian
Christopher G. St. C. Kendall
Arabian Gulf
Extensional margin
Permian
Christopher G. St. C. Kendall
Arabian Gulf
Restricted
Entrance
To Sea
Permian Khuff
Saudi Arabia
Oman & UAE
Structural &
Depositional
Barrier over
Hercynian
Horst Blocks
Arid Tropics Air System
Christopher G. St. C. Kendall
Wide Shadow
from
Adjacent Continents
Arabian Gulf
Extensional margin
Jurassic
Christopher G. St. C. Kendall
Arabian Gulf
Extensional margin
Jurassic
Christopher G. St. C. Kendall
Arabian Gulf
Restricted
Entrance
To Sea
Upper Jurrassic
Saudi Arabia
Kuwait, Iran
& UAE
Depositional
Barrier over
Hercynian
Horst Blocks
Tropical Air System !
G. St. C. Kendall
Wide ShadowChristopher
from
Adjacent Continents
Arabian Gulf
Compression &
Foreland Basin
Cretaceous
to
Tertiary
Christopher G. St. C. Kendall
Arabian Gulf
After Dennis Tassa
Zagros Fold Mountains - Iran
Compression &
Foreland Basin
Nasa Image
Christopher G. St. C. Kendall
Arabian Gulf
Zagros Fold Mountains Iran
Nasa Image
Christopher G. St. C. Kendall
Arabian Gulf
Zagros Fold Mountains - Iran
Christopher G. St. C. Kendall
Arabian Gulf
Christopher G. St. C. Kendall
Arabian Gulf
After Murris
After Murris
Christopher G. St. C. Kendall
Arabian Gulf
From International Petroleum Encyclopedia
Christopher G. St. C. Kendall
Arabian Gulf
Arabian Gulf
Factory producing carbonates &
storing products of cyanbacteria
since Permian
Nasa Image
Christopher G. St. C. Kendall
Arabian Gulf
A big day for a bloom!!
Nasa Image
Christopher G. St. C. Kendall
Arabian Gulf
Ramp
Open
Shelf
Basin
Restricted
Shelf
Christopher G. St. C. Kendall
Arabian Gulf
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.
Christopher G. St. C. Kendall
Arabian Gulf
Christopher G. St. C. Kendall
After Baum, & Kendall
Arabian Gulf
Geological Setting of Jurassic Oil
Seal
Seal
Reservoir
Reservoir
Intrashelf
Basin
Intrashelf
Basin
Christopher G. St. C. Kendall
Arabian Gulf
The Hanifa Formation Oil Fields
Christopher G. St. C. Kendall
Arabian Gulf
Hanifa Formation - Berri Field
Christopher G. St. C. Kendall
Arabian Gulf
Lower Cretaceous - Barremian
Barremian Paleogeography in Gulf
Region (Murris1980)
Christopher G. St. C. Kendall
Arabian Gulf
Lower Cretaceous
Stratigraphic cross-section of Cretaceous
Eastern Arabia (Alsharhan & Nairn 1986)
Christopher G. St. C. Kendall
Arabian Gulf
Zakum Field - UAE
Pittet et al, 2002
Note fining upwards cycles
Christopher G. St. C. Kendall
Arabian Gulf
Zakum Field - UAE
Pittet et al, 2002
Anticlinal shape of field
Christopher G. St. C. Kendall
Arabian Gulf
Geologic Cross-Section - Arabian Gulf
Oil fields become younger from west to east
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
Outline of Presentation
Data Sources - Texts
Who has all the oil? Countries & Reserves
Geological Setting of Middle East Oil
Reserves
Recent Oil History of Middle East
Conclusions
Christopher G. St. C. Kendall
Arabian Gulf
Recent History of Middle East Oil
"War is the unfolding of miscalculations."
Barbara W. Tuchman
Christopher G. St. C. Kendall
Arabian Gulf
Oil Time Line – Important Events
1850 - 1910: 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
1990-91: 1st US - Iraq War
2003 - : 2nd US - Iraq War
Christopher G. St. C. Kendall
Arabian Gulf
World Petroleum Exploitation
"When war is declared, truth is the first casualty."
Arthur Ponsonby
Christopher G. St. C. Kendall
Arabian Gulf
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 - 1948
Iran - 1952
OPEC - 1960
Now the world consumes 85 million barrels (plus) of oil a day these confrontations
continue today
Christopher G. St. C. Kendall
Arabian Gulf
Joseph Stalin
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.
1896-1898: 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.
1898-1904: Organized, directed revolutionary activities, writes
leaflets, lead strikes & sent
to Siberia; received letter from Lenin
Christopher G. St. C. Kendall
& escaped back to Baku to lead
strike of Baku workers.
Arabiangeneral
Gulf
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
1914-18: 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
Christopher G. St. C. Kendall
Arabian Gulf
1850-1920
Batum
Baku
1927
Kirkuk
Suez
1908
1869
Dammam
1938
Central Asian & Middle East Oil
Christopher G. St. C. Kendall
Arabian Gulf
Fisher
British Navy
& Petroleum
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, 1902 2nd Sea Lord, in 1905 1st 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
Christopher G. St. C. Kendall
Arabian Gulf
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-todo to essential transportation for ordinary man.
1920: Roughly 9 million gas-burning vehicles in the U.S
Christopher G. St. C. Kendall
Arabian Gulf
Zagros Mountains
Abundant Oil Seeps
Abundant Anticlines
Christopher G. St. C. Kendall
Arabian Gulf
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.
Christopher G. St. C. Kendall
Arabian Gulf
Masjid-i-Suleiman
D’Arcy
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
Christopher G. St. C. Kendall
Arabian Gulf
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
1912-1913: 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
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher
G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
Red Line Map of Gulbenkian
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
Iraq Petroleum Company (IPC)
Shareholders
Shell (Anglo-Dutch)
BP (British)
CFP (French)
Exxon (US)
Mobil (US)
Gulbenkian
23.75%
23.75% (Anglo-Per & Anglo-Iranian)
23.75% (now Total Fina Elf)
11.875% (now Exxon-Mobil)
11.875% (now Exxon-Mobil)
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.
Christopher G. St. C. Kendall
Arabian Gulf
The
Way it was!
Results
of
1920 Treaty
of
Sevres
Christopher G. St. C. Kendall
Arabian Gulf
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,
Christopher G. St. C. Kendall
Arabian Gulf
4,000 Bpd, 120 API
History of Petroleum Exploration
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
Max Steineke
Christopher G. St. C. Kendall
Arabian Gulf
History of Middle East Oil Exploration
“War does not determine who is right—only who is left”
Bertrand Russell
Christopher G. St. C. Kendall
Arabian Gulf
Oil Time Line – Important Events
1850 - 1910: 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
1990-91: 1st US - Iraq War
2003 - : 2nd US - Iraq War
Christopher G. St. C. Kendall
Arabian Gulf
History of Petroleum Exploration
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!!!
Christopher G. St. C. Kendall
Arabian Gulf
Center of Gravity
1944
De Golyer:
“The center of gravity of world oil production
is shifting to the Middle East”
1945 - Ras Tanura Refinery Saudi Arabia begins
operations to become largest refinery in World
Christopher G. St. C. Kendall
Arabian Gulf
“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
Christopher G. St. C. Kendall
Arabian Gulf
Yalta
1st Option: Ruled out
2nd Option: Before going to Yalta, Roosevelt withdrew it
from Senate
3rd Option: Won
Christopher G. St. C. Kendall
Arabian Gulf
Growing Demand &
Rising Production
1945: 26 million cars
1950: 40 million cars
Many new discoveries
USA
1948
Net exporter
Net importer
Christopher G. St. C. Kendall
Arabian Gulf
History of the Oil Price
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
Europe in crisis
Marshall Plan
Christopher G. St. C. Kendall
Arabian Gulf
Birth of Israel
1946 June
- Oil giant Burgan field discovered
1948 May 14 - First Arab - Israeli war
1951 May
- 1st shipment of Kuwait crude oil
Christopher G. St. C. Kendall
Arabian Gulf
King Ibn Saud
Ibn Saud’s Dilemmas: Birth of Israel
US guarantee of Saudi Arabian independence
Soviet threat
Christopher G. St. C. Kendall
Arabian Gulf
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?
Christopher G. St. C. Kendall
Arabian Gulf
Stress on Seven Sisters or Big Oil
50-50 Deal, December 1950
But producing countries wanted
more money and power!
Christopher G. St. C. Kendall
Arabian Gulf
Korean War
“Iranian Card”
Iran: 40 % of Middle Eastern oil
Weak Shah
US interest
Korean war
British hatred
Nationalization, May 1951, Mossadegh (Mossy)
Christopher G. St. C. Kendall
Arabian Gulf
History of the Oil Price
World events, 1947-1973
Christopher G. St. C. Kendall
Arabian Gulf
History of Middle East Oil Exploration
"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
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
Suez
Suez represented post-war petroleum order:
•
•
2/3 of Europe’s oil passed through Suez
2/3 of traffic in Suez was oil
Christopher G. St. C. Kendall
Arabian Gulf
Gamal Abdel-Nasser
1952
1954
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
Christopher G. St. C. Kendall
Arabian Gulf
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!
Christopher G. St. C. Kendall
Arabian Gulf
History of Middle East Oil Exploration
"An inglorious peace is better than a dishonorable war."
Mark Twain
Christopher G. St. C. Kendall
Arabian Gulf
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
1956 - Aramco confirms scale of Ghawar and Safaniya
1958 - Oil found in Abu Dhabi
Christopher G. St. C. Kendall
Arabian Gulf
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%
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
History of the Oil Price
Middle East and OPEC events, 1947-1973
Christopher G. St. C. Kendall
Arabian Gulf
History of Petroleum Exploration
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
Christopher G. St. C. Kendall
Arabian Gulf
History of Petroleum Exploration
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
Christopher G. St. C. Kendall
Arabian Gulf
History of Petroleum Exploration
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
Christopher G. St. C. Kendall
Arabian Gulf
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, 60-40 % share
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
Oil embargo against Israel’s friends
Arab oil decreased by 60%
No effect – oil is abundant, cheap
Embargo lifted in September
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
ArabianEastern
Gulf
More dependency on Middle
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
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
History of World Petroleum Exploration
"The best way to destroy an enemy
is to make him a friend."
Abraham Lincoln
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
Hostages
November 4, 1979
: Hostage crisis
Shah allowed into USA for medical treatment
West, especially USA seemed very weak
Soviets invaded Afghanistan
Price: $45
Christopher G. St. C. Kendall
Arabian Gulf
No Stress on Seven Sisters or Big Oil
Boom times
Alaska, Mexico discoveries
North Sea: the biggest play of all
Christopher G. St. C. Kendall
Arabian Gulf
The History of Prices
Iran
Revolution
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
History of the Oil Price
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
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
History of Petroleum Exploration
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
Christopher G. St. C. Kendall
Arabian Gulf
History of Petroleum Exploration
Cheap transportation
in USA essential to maintain
Christopher G. St. C. Kendall
Arabian
Gulf
even the most rural
subsistence
economy!
“World Petroleum Reserves”
Christopher G. St. C. Kendall
Arabian Gulf
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]!
Christopher G. St. C. Kendall
Arabian Gulf
Iraq's Role
Christopher G. St. C. Kendall
Arabian Gulf
Saddam Hussein
of Iraq
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
Christopher G. St. C. Kendall
Arabian Gulf
Iraq's New Petroleum Laws
1972 - 1975 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.
G. St. C. Kendall
Original language English,Christopher
not Arabic.
Arabian Gulf
The History of Prices
Iran
Revolution
Christopher G. St. C. Kendall
Arabian Gulf
Outline of Presentation
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
Christopher G. St. C. Kendall
Arabian Gulf
Effect of Iraq?
A Response To
Increased Consumption,
Weak Dollar & War
A Response To
Mortgage Collapse
& Weak Dollar
Misguided, Misconceived
Paternalistic Objectives
Christopher G. St. C. Kendall
To Stabilize Oil Prices Arabian Gulf
China Effect
Christopher G. St. C. Kendall
Arabian Gulf
Wall Street Journal Jan 3, 2008
Demand for Oil
Christopher G. St. C. Kendall
Arabian Gulf
The Global Picture
Christopher G. St. C. Kendall
Arabian Gulf
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
Christopher G. St. C. Kendall
Arabian Gulf
Conclusions
Burn it in transport
or use it for
petrochemicals?
Christopher G. St. C. Kendall
Arabian Gulf
Conclusions
Now for a
Beer!
Christopher G. St. C. Kendall
Arabian Gulf
Lecture Ends!!
Christopher G. St. C. Kendall
Arabian Gulf