Transcript Exploitation of Oil A History of Entrepreneurs Who Made it Happen What does it all mean to us all? Christopher G.

Exploitation of Oil
A History of Entrepreneurs
Who Made it Happen
What does it all mean to
us all?
Christopher G. St.C. Kendall
Kendall 2007 UT - AAPG
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!
Kendall 2007 UT - AAPG
Current Middle East Reserves
•Saudi Arabia
•Iraq
•UAE
•Kuwait
•Iran
•Oman
•Yemen
•Qatar
•Syria
•Bahrain
•TOTAL
Crude Oil(BB) - Natural Gas (TCF)
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
Kendall 2007 UT - AAPG
Most of these countries fields are in carbonates
World Petroleum Exploitation
Non-OPEC countries produced 60% of
world's oil in 2005 with a steady increase
since 1993
Currently only 4 (Saudi Arabia, Iran, UAE, &
Venezuela) of top 10 oil producers were
OPEC
Most prolific producers are Saudi Arabia 11,
Russia 9, USA 8, Iran 4, Mexico 4, China 4,
Canada 3, Norway 3, UAE 3, Venezuela 3,
Kuwait 3, Nigeria 3, Algeria 2, Brazil 2
Non-OPEC countries have most of world's
capacity for refining crude oil into gasoline &
heating oil
Kendall 2007 UT - AAPG
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
Kendall 2007 UT - AAPG
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
Persian Gulf OPEC has the world's lowest
oil finding & lifting costs
Non OPEC oil liable to price collapse e.g.
Russia etc
Consumption grows 3% annually
Kendall 2007 UT - AAPG
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!
Kendall 2007 UT - AAPG
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
Kendall 2007 UT - AAPG
History of Petroleum Exploitation
How: Seeps (Oil Springs), & Wells - Hand Dug &
Drilled (Percussion & Rotary)
Where: Asia, Middle East, Europe & America
Use: Heat, Paving, Light, Kerosene, Transport
(Ships and Automobiles)
Entrepreneurs: John Rockefeller, Nobels,
Rothschilds, Marcus Samuel, William D’Arcy,
Henri Deterding, Calouste Sarkis Gulbenkian
Movers: Stalin, Ford, Fisher, Churchill, Ibn Saud,
Mossadegh, Shah Reza Pahlavi, Nasser,
Khomeini, Mohammar Qaddafi, Saddam Hussein
Kendall 2007 UT - AAPG
The Players
John Rockefeller
Standard
Oil
Rothschild
Nobel Brothers Oil
Baku Oil
Nobles Robert, Ludwig, & Alfred
Marcus Samuel
William D’Arcy
Persian
Shell
Oil
Henri Deterding
Transportation
Calouste Gulbenkian
5% Arabian
Oil
Kendall 2007 UT - AAPG
Royal
Dutch
Shell
Movers &
Shakers
Henry Ford
Admiral Fisher
Henry Ford
Jackie Fisher
Winston Churchill
Ibn Saud
Dr. Mohammad Mossadegh Ibn Saud
Mossadegh
Shah Reza Pahlavi
Gamal Abdel Nasser
Ayatollah Ruhollah Khomeini
Mohammar Qaddafi
Saddam Hussein
Gamal Abdel
Nasser
Kendall
2007 UT - AAPG
Saddam
Hussein
Khomeini
Winston
Churchill
Shah
Qaddafi
Early History of Oil Monopolies
Appalachians: Key Elements
Rail Boom of US (1830-1860)
Refining of Oil for Kerosene (1850)
Oil Boom after Drake’s well (1859)
Standard Oil Incorporated (1870)
Light bulb of Thomas Edison (1878)
Baku: Key Elements
Rail Boom of Russia (1830-1917)
Refining of Oil for Kerosene (1830)
Oil Boom with Nobel Brothers Incorporation (1875)
Tanker "Zoroaster" (1877) & Pipeline (1897-1907)
World Wide: Key Elements – Spindletop (1901)
Suez Canal Built (1869)
Henry Ford MassKendall
Produces
Cars (1908) 9m – (1922)
2007 UT - AAPG
Royal Navy Converts to Oil (1912)
Early History - Appalachians
Dr. Abraham Gesner – 1849
Distills Kerosene
from Oil - Whale Oil Ends
1855- assist
bookkeeper
1862
Clark &
Rockefeller
Hewitt
&
Tuttle,
quickly
Invest in Refinery
cashier & bookkeeper
Drake’s well (1859)
1830-1860 US Rail Lines
boom
Kendall 2007 UT - AAPG
1860 – 1875 Oil Boom
Standard Oil Monopoly Grows
John Rockefeller - Timeline
1867: Rockefeller & Andrews absorbed William Rockefeller's refinery,
& Henry M. Flagler joins partnership
1870: Standard Oil Company forms - John D. Rockefeller president,
William Rockefeller, Flagler, Andrews & Stephen Harkness
1870: Uses South Improvement Company secret rebates for better
rates with Pennsylvania Railroad (PRR), Eire, & New York Central
Standard Oil organization buys-up opposing interests, or guarantees
financial security & jobs as partners gaining a monopoly on oil
production in US
1882: Separate companies organized in each state
1890: Standard Oil controlled over 90% of refined oil in USA
1895: Rockefeller retires from active business but keeps his title as
president till 1911
Kendall 2007 UT - AAPG
Standard Oil Monopoly Ends
John Rockefeller - Timeline
1900: Mergers made Standard Oil the largest company in U.S. with
fields located in U.S. Began exporting products to Europe & Far East
competing with "Shell" Transport & Trading Company & Royal Dutch
Petroleum Co.
1901: Jan 10 Spindletop's discovery & uncontrolled exploitation
busted Standard Oil) monopoly in U.S. so now it competed with Shell
Transport & Trading, (begun life ferrying oil produced by Rothschilds
and Nobles in Baku to Far East and Western Europe) and Royal Dutch
1903: Royal Dutch & Shell Oil established the jointly owned Asiatic
Petroleum Company Limited to combat Standard Oil.
1911: May 15 Supreme Court US sees Standard Oil, now holding 64%
of oil market, as a monopoly & orders form some 37 new companies
Kendall 2007 UT - AAPG
Early History of Oil Monopolies
Appalachians: Key Elements
Rail Boom of US (1830-1860)
Refining of Oil for Kerosene (1850)
Oil Boom after Drake’s well (1859)
Standard Oil Incorporated (1870)
Light bulb of Thomas Edison (1878)
Baku: Key Elements
Rail Boom of Russia (1830-1917)
Refining of Oil for Kerosene (1830)
Oil Boom with Nobel Brothers Incorporation (1875)
Tanker "Zoroaster" (1877) & Pipeline (1897-1907)
World Wide: Key Elements – Spindletop (1901)
Suez Canal Built (1869)
Henry Ford MassKendall
Produces
Cars (1908) 9m – (1922)
2007 UT - AAPG
Royal Navy Converts to Oil (1912)
Caspian Sea
Arab Scholars
& Marco Polo
report civilized man
using oil seeps on
Abseron Peninsula
as source of light &
fuel
With industrialization
1830-1901 became
world’s largest
source of
kerosene & oil
Zagros Mountains
Kendall 2007 UT - AAPG
Rothchild
Early History - Baku
1880’s Invests in Oil
Exploration, Refineries, Rail &
Ships
1830-1917 Rail
Boom of Russia
Tsars Alex II & III
Invest in Oil & Rail
1878 - Bibi-Heybat?
Nobel Brothers Oil
1897 - 1907: Nobel’s
Kerosene Pipeline
1875 – Nobels Invest in Oil,
Exploration & Refineries,
1883: Rothchild’s
Railway
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2007
UT - AAPG
1877
– Nobels
Invest Tankers
1875 – Invest in
Kerosene Flimsies
Baku Oil Monopoly Grows
Nobels & Rothchilds - Timeline
1873: Russia used Nobel’s guns which needed a supply of walnut
wood for gunstocks from Caucasus region. Oil fever just began in
Baku & Robert saw profit & brought a small refinery & kerosene plant
with "walnut money"
1879: With his younger smarter brother Ludwig founded Nobel
Brothers' Oil Producing & Extracting Company.
Ludwig, organized & engineered modern technology related to oil
production. Built 1st tanker, Zoroaster, in Caspian Sea reducing
transport expenses. Success led to tanker fleet (including Moses,
Spinoza, & Darwin) further increasing turnover with Nobel’s supplying
Russia with Baku oil via rivers & Caspian Sea. Ludwig 1st to introduce
railway tanks for oil transport.
1879: Built a pipeline reducing transport expenses by five, paying for
itself in a year. Built iron oil reservoirs with tank parks in Baku & other
cities.
1880's Rothschild's interests in Baku supply their refinery on Adriatic
with Russian oil. In exchange built a railroad from Baku to Black Sea
port of Batum. Baku oil now major world supplier & new railroad
meant Rothschilds had more oil than they could sell & now competing
Kendall 2007east
UT - AAPG
with Standard oil, sought markets
of Suez.
1890: Baku now busiest port in world.
Baku Oil Monopoly Lives
Nobels, Rothchilds, Shell & Standard Oil
1878: Marcus Samuel expanded from antiques, curios, bric-a-brac, & exotic
sea shells to selling cased Russian kerosene in Far East, top-selling fuel in
world & used for lamps and stoves
Standard Oil under priced competitors to defend its Asian markets &
controlled almost all world’s supplies.
12 years later Samuel visited Baku with Rothschilds & thought to export oil
to Far East via Suez Canal (opened in 1869), countering Standard Oil
competition in region. Built eight tankers that met safety regs. of canal to
Singapore & Bangkok after noticed harbor in Constantinople jammed with
tankers loading Russian oil. Rejected Standard's acquisition overtures,
Samuel created "Shell" Transport & Trading in 1897.
1898: Rothschild brothers formed Mazut Transportation Society & by 1912
owned 13 large tankers in Caspian with auxiliary ships; partnered with Shell
to transport excess kerosene to Far East.
1900: Nobel Brothers & Rothchild's have oil production exceeding US
1901: Jan 10 Spindletop's discovery meant that Shell Transport & Trading,
that had been ferrying oil produced by the Rothschilds and Nobles in Baku
to the Far East & Western Europe could compete directly Standard Oil at a
favorable rate
1903: Royal Dutch & Shell established jointly owned Asiatic Petroleum
Company Limited
Kendall 2007 UT - AAPG
Joseph Stalin
1893
1903
1879: December 9 - Joseph Vissarionovich Djugashvili (Stalin) was
born in Gori, Georgia.
1888-94: Elementary clerical school in Gori.
1894: Begins studies at Tiflis Theological Seminary.
1895: Contacts groups of Russian Marxists exiled to Transcaucasia
by tsarist government.
1896-1898: At Theological Seminary in Tiflis gathers Marxist
students & studies 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 &
escaped back to Baku toKendall
lead2007
general
strike of Baku workers.
UT - AAPG
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: Revolution halts production at Baku by oil worker strikes; Josef
Dzhugashvili (Josef Stalin) exiled to Siberia
1911: Musavat party urges a Muslim state with Azerbaijan under Turkey
1914-18: Baku oilfields & oil refineries control by Shell & Nobel
Brothers, supply Russian Army. UK interest in Transcaucasia & oil-rich
area
1917: Armed intervention, aimed at Bolsheviks in Transcaucasia & East
to gain 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 in Baku & Nobels sell most of
Russian holdings to Standard Oil (NJ). Standard Oil protests
nationalization refuses cooperation with Soviet government. Mobil,
invests in Russia. Continued inflow of Western funds help Russian oil
production to recover, & by 1923 oil exports climb back to prerevolutionary levels.
Kendall 2007 UT - AAPG
1920: Roughly 9 million gas-burning vehicles now in the U.S
Early History of Oil Monopolies
Appalachians: Key Elements
Rail Boom of US (1830-1860)
Refining of Oil for Kerosene (1850)
Oil Boom after Drake’s well (1859)
Standard Oil Incorporated (1870)
Light bulb of Thomas Edison (1878)
Baku: Key Elements
Rail Boom of Russia (1830-1917)
Refining of Oil for Kerosene (1830)
Oil Boom with Nobel Brothers Incorporation (1875)
Tanker "Zoroaster" (1877) & Pipeline (1897-1907)
World Wide: Key Elements – Spindletop (1901)
Suez Canal Built (1869)
Henry Ford MassKendall
Produces
Cars (1908) 9m – (1922)
2007 UT - AAPG
Royal Navy Converts to Oil (1912)
Batum
Baku
Kirkuk
Suez
Central Asian & Middle East Oil
Kendall 2007 UT - AAPG
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
Kendall 2007 UT - AAPG
Oil & Fords
Automobile
1896: Ford had constructed his first horseless
carriage which he 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 the United States. The
Model T heralds beginning of Motor Age and the car
has evolved from luxury item for the well-to-do to
essential transportation for the ordinary man
1920: Roughly 9 million gas-burning vehicles now in
the U.S
Kendall 2007 UT - AAPG
Zagros Mountains
Abundant Oil
Seeps
Abundant
Anticlines
Kendall 2007 UT - AAPG
Iranian Negotiations Begin
Jacques de Morgan: An archeologist noted oil seeps
in western & SW Persia.
1901: A friend of Persian grand vizier, Antoine
Kitabgi, Persian commissioner-general of Paris
Exposition 1900, thinks local oil industry will develop.
Helped Baron Julius de Reuter with Iranian
government concessions that failed.
1901: Asked Sir Henry Drumond Wolff, once UK
minister in Tehran, locate UK investor for oil
concession.
1901: UK William Knox D'Arcy (with Australian gold
mining fortune) acquires 60 year oil concession for all
Persian Empire except
Russian border.
Kendall 2007 UT - AAPG
Masjid-i-Suleiman
D’Arcy
1905: Burma Oil Comp supplies D'Arcy with more finance
1908: Oil at Masjid-i-Suleiman
1907: Royal Dutch Shell incorporated (60%RD - 40%Sh)
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 DutchShell 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 marketingKendall
organization
for products & founds
2007 UT - AAPG
a research centre at Sunbury-on-Thames in UK
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
Bank pushing Oil
Kendall 2007National
UT - AAPG
exploration in Iraq & opening up Middle East
Calouste Sarkis
5% Gulbenkian
1928: Post WWI architect of Red Line Agreement
with British (Persian Oil), Anglo-Dutch (Shell),
French (CFP) & US (Exxon & Mobil) joint venture in
former Ottoman empire producing areas except
Kuwait & Iran for 5% of all oil found.
Oil in Iraq & Saudi Arabia made him one of world's
richest men.
Avoided taxes by shuttling between Ritz Hotel in
London & Ritz in Paris.
Diplomatic status as accredited to Iraqi embassy of
London exempting from taxation
Formed Gulbenkian Foundation in Portugal and
supported the Arts
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Red Line Map of Gulbenkian
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The Gulbenkian TPC Agreement
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Oil & British
Fleet - Iraq
1908: discovery of giant Masjid-I-Suleiman by
Anglo-Persian Oil Co reinforces potential of
Mosul Vilayet
1909: Sultan deposed within 24 hours of AngloPersian 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
Kendall 2007 UT - AAPG
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
Kendall 2007 UT - AAPG
Iraq Petroleum Company (IPC)
Shareholders
Shell (Anglo-Dutch) 23.75%
BP (British)
23.75% (Anglo-Per & Anglo-Iranian)
CFP (French)
23.75% (now Total Fina Elf)
Exxon (US)
11.875% (now Exxon-Mobil)
Mobil (US)
11.875% (now Exxon-Mobil)
Gulbenkian (Independent) 5%
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.
Kendall 2007 UT - AAPG
The
Way it was!
Results
of
Treaty
of
Sevres
Kendall 2007 UT - AAPG
Iraq – First
Major Discovery
14th October 1927
Baba Gurgur 1
(Kirkuk #1)
The 6th Exploration Well
Spudded after Concession
was granted in 1925
Well blew wild at 90,000
bbls/Day
Reserves of some 17 Billion
barrels in Tertiary &
Cretaceous
13th October 1927, Qaiyarah-1,
4000 Bopd, 120 APIKendall 2007 UT - AAPG
History of Petroleum Exploration
1933: Chevron acquired a lease to explore
in Saudi Arabia
1938: Steineke found oil at the Dammam
dome
1938: Oil was first discovered in Kuwait
1939: Chevron had production & exported
the first oil
1939: Oil is discovered in Qatar
The start of the golden age of US
involvement with exploration for
Kendall 2007 UT - AAPG
Max Steineke
foreign
cheap
oil
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
Kendall 2007 UT - AAPG
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 was active in Middle East & retained
control of Persian Gulf until the USA
acquired exploration concessions in
Saudi Arabia (5%)
Cheaper oil for all!!!
Kendall 2007 UT - AAPG
Center of Gravity
1944
De Golyer:
“The center of gravity of world oil production
is shifting to the Middle East”
1945 - Ras Tanura Refinery begins operations
eventually becomes largest refinery in world
“Petroleum”
What to do in
the Middle East?
• US government to acquire direct ownership
• US government to negotiate an agreement with British
• Allow private companies to conduct the business
Yalta
1st Option: Ruled out
2nd Option: Before going to Yalta, Roosevelt withdrew it
from Senate
3rd Option: Won
Growing Demand &
Rising Production
1945: 26 million cars
1950: 40 million cars
Many new discoveries
USA
1948
Net exporter
Net importer
History of the Oil Price
Kendall 2007 UT - AAPG
March 12th, 1947
Truman Doctrine
1. New Aramco: Socol, Standard Oil of NJ, Texaco, Socony
2. Gulf Oil – Shell in Kuwait
3. Iranian contract between Anglo Iranian & Standard Oil,
Socony
Europe in crisis
Marshall Plan
Birth of Israel
1946 June
- Oil giant Burgan field discovered
1948 May 14 - First Arab - Israeli war
1951 May
- 1st shipment of Kuwait crude oil
King Ibn Saud
Ibn Saud’s Dilemmas: • Birth of Israel
• US guarantee of Saudi Arabian independence
• Soviet threat
Advancement in
Technology
Post-war petroleum order
Center
: Middle East
Market
: USA, Western Europe, Japan
Technology : Huge development
Problem
: Large surplus of oil
How to divide profit?
Stress on Seven Sisters or Big Oil
50-50 Deal, December 1950
But the producing countries wanted
more money and power!
Korean War
“Iranian Card”
Iran: 40 % of Middle Eastern oil
Weak Shah
US interest
Korean war
British hatred
Nationalization, May 1951, Mossadegh (Mossy)
History of the Oil Price
World events, 1947-1973
Kendall 2007 UT - AAPG
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 regained power
Oil consortium: Jersey, Socony, Texaco,
Standard of California, Gulf; Shell; CFP;
Anglo Iranian
Result: USA becomes major player in Middle East, 1954
Suez
Suez represented the post-war petroleum order:
2/3 of Europe’s oil passed through Suez
2/3 of traffic in Suez was oil
Gamal Abdel-Nasser
1952: A coup removed King Farouk
1954: Colonel Gamal Abdel Nasser became dictator
Rejected Western involvement
Pan-Arabism
“Greatest international crime” – the creation of Israel
Acquired weapons from the Soviet block
Aswan
Whether to build the Aswan dam?
US rejected
Revenge: expropriation of Suez Canal, July 26, 1956
The French and British wanted military action!
Eisenhower did not want war!
2nd Arab Israeli War
War plot against Egypt: France, UK, & Israel
October 29, 1956
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 the Abu Dhabii
1948
1972
World oil production
8.7 million barrels
42 million barrels
Middle East
1.1 million barrels
18.2 million barrels
U.S. production share
64%
22%
U.S. reserves share
34%
7%
Stress on Seven Sisters or Big Oil
50-50% is not enough any more
Nasser ascendant
Soviets build Aswan
Syria joins Egypt: United Arab Republic
Nasser controls oil: Suez and pipelines
Producer countries wanted more money and power
History of the Oil Price
Middle East and OPEC events, 1947-1973
Kendall 2007 UT - AAPG
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
Kendall 2007 UT - AAPG
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
Kendall 2007 UT - AAPG
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
Kendall 2007 UT - AAPG
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
Six Day War
1960s: more discoveries in Africa, large oil surplus
Nasser’s prestige declining
He wanted to gain recognition: liquidation of Israel
Blockade against Israeli shipping,
Military buildup with Syria, Jordan, Iraq
June 5, 1967: 3rd Arab-Israeli war, 6 day war
Occupation of Sinai, Gaza, West Bank, East Jerusalem
Oil embargo against Israel’s friends
Arab oil decreased by 60%
No effect – oil is abundant, cheap
Embargo lifted in September
Richard
Nixon
End of 1960s, early 1970s
Recession in US and British power
Vietnam war
Anti-Americanism becomes a great fashion
Nixon-doctrine
1971: collapse of Bretton Woods, replaced by floating
exchange rates
Demand in oil was catching up with supply – end of surplus
Huge economic growth fueled by oil
US oil production: 11.3 million barrels per day, the peak
More dependency on Middle Eastern oil
Muhammar
Qaddafi
Occidental Petroleum discovered oil in Libya in 1966
Qaddafi coup, 1969
Increase in oil price
All the countries increased their profit share
Anwar Sadat
Yom Kippur War
Egypt was bankrupt when Nasserism ended
Sadat wanted to restore order & make peace with Israel
Israel disinterested because of its 1967 success
1973 Yom Kippur war
Watergate
The Soviet Union supported Egypt and Syria
The USA supported Israel
World War conflict was imminent
Oil exporters increased oil prices 100%
Arabs cut oil supply and eventually stopped exporting to USA
A weak president in the Watergate agony contributed to the
oil crisis
No Stress on Seven Sisters or Big Oil
Boom times
Alaska, Mexico discoveries
North Sea: the biggest play of all
Ayatollah Ruhollah Khomeini
Iran: too much money – corruption, chaos, political
tensions
Shah represented modernization
Shiite fundamentalists hated US as main ally of Shah
Escalating chaos in oil industry
By December 1978 no oil exports from Iran
Shah escapes
February 1, Khomeini returns to Tehran
Jimmy Carter
Second Shock
Panic in the world market: price went up from $13 to $34
From March 1979, Iranian export started to come back
Shortage in oil: long lines at gas stations
Peace accord: Camp David
Hostages
November 4, 1979 : Hostage crisis
Shah allowed into USA for medical treatment
West, especially USA seemed very weak
Soviets invaded Afghanistan
Price: $45
History of the Oil Price
World events, 1973-1981
Kendall 2007 UT - AAPG
Saddam Hussein
of Iraq
September 22, 1980: Iraq attacks Iran
Early 80’s:
Two drastic changes: Huge investment in exploration
Decreasing demand
Result: oil surplus
June 1982: Lebanon war
Golden age for oil geologists
Cheap oil: financial crisis in some oil exporters
Mukluk dry hole: end of exploration boom
End of pessimism of the 70s
Economy is booming, but not because of oil fuel
Oil is not that dangerous as before
Desert Storm
August 2, 1990: Iraqi invasion of Kuwait
New oil shock, supply decreased
Loss had been compensated by December from
other sources
January 17, 1991: Desert Storm
February 28 cease fire
History of the Oil Price
World events, 1981-1999
Kendall 2007 UT - AAPG
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
Kendall 2007 UT - AAPG
World Petroleum Exploitation
Non-OPEC countries produced 60% of
world's oil in 2005 with a steady increase
since 1993
Currently only 4 (Saudi Arabia, Iran, UAE, &
Venezuela) in top 10 oil producers were
OPEC
Most prolific producers are Saudi Arabia 11,
Russia 9, USA 8, Iran 4, Mexico 4, China 4,
Canada 3, Norway 3, UAE 3, Venezuela 3,
Kuwait 3, Nigeria 3, Algeria 2, Brazil 2
Non-OPEC countries have most of world's
capacity for refining crude oil into gasoline &
heating oil
Kendall 2007 UT - AAPG
History of Petroleum Exploration
Cheap transportation in USA essential to maintain even the
Kendall 2007 UT - AAPG
most rural subsistence economy!
“World Petroleum Reserves”
Kendall 2007 UT - AAPG
Iraq's Role
Kendall 2007 UT - AAPG
Iraq's Role
"By 2010 we will need [a further] 50 million
barrels a day. The Middle East, with twothirds 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
From cynic’s perspective Bush & Cheney's
Iraq war may be over & its “Mission
Accomplished”
Costs of over trillion dollars spent, &
anywhere from 50,000 to 500,000 Iraqis &
3,161 US military dead
Kendall 2007 UT - AAPG
Iraq's New Petroleum Laws
From 1972 to 1975 Iraqi resources Nationalized. Replaced by
production sharing agreements (PSAs) - Operating
Companies get up to 75%. Sixty-five of Iraq's roughly 80
oilfields open for bid. National revenue distribution Kurds
in north, Shi'ites in south and Sunnis in center. Most of
reserves are in Shi'ite-dominated south, Kurdish north
holds the best explartion prospects
New “Law” drafted by US consultants hired by USA
administration; vetted US Oil, International Monetary Fund,
former US deputy defense secretary Paul Wolfowitz' World
Bank, & US Agency for International Development.
Original language English, not Arabic.
Iraqi oil to be controlled by "Federal Oil and Gas Council", oil
experts from inside & outside Iraq, includes US executives.
Iraqi public & overwhelming majority of Parliament members
Kendall 2007 UT - AAPG
out of loop.
Iraq's Role
Thomas Homer-Dixon’s Model For Conflict
Environmental Scarcity ---> Social Effects ---> Violent Conflict
U.S. War Against Terrorism enters second
deadly phase spreading to other regions of
Middle East this year
Middle East a geopolitical cauldron Caspian States on eastern flank &
Mediterranean on western flank; bridge
between Europe, Africa & Asia
Important current battlefields are located
within this region:- Iraq & Iran, the West
Bank, Somalia, Sudan & Afghanistan
Kendall 2007 UT - AAPG
Iraq's Role
U.S. hoped to pursue military objectives without
threat of interrupted oil supply
Bush secured agreement with Putin to access
oil from Russia against threats of another OPEC
oil embargo
Exploration & production booming in Russia as
new pipelines develop
ChevronTexaco, BP Amoco, ExxonMobil,
Conoco, & Royal Dutch Shell work with Russia
to develop oil fields with investment &
technology
Saudi relations with USA, world’s largest oil
importer, strong despite war on terrorism,
continued problems
with Iraq & renewed
Kendall 2007 UT - AAPG
violence in Israel & Palestine
Chokepoints
Over 30 million barrels/day pass through narrow
shipping lanes & pipelines
Strait of Hormuz between Oman/Iran - 15.4
mbbs/day
Strait of Malacca between Malaysia/Singapore - 9.5
mbbs/day
Bab el-Mandab between Djibouti/Eritrea/Yemen 3.3
mbbs/day
Suez Canal & Sumed Pipeline Egypt; connects the
Red Sea & Gulf of Suez - 3.1 mbbs/day
Bosphorus Turkey - 1.7 mbbs/day
Russian Pipelines/Ports, e.g. Druzhba - 1.25
mbbs/day
Panama Canal & Pipeline
- 0.6 million mbbs/day
Kendall 2007 UT - AAPG
IRAQ’s Role
Crude Oil(BB) - Natural Gas (TCF)
Saudi Arabia
Iran
Iraq
Kuwait
264.3 bbls
132.5 bbls
115 bbls
101.5 bbls
204 Tcf
94.5 Tcf
110 Tcf
55 Tcf
Washington forecasts a drop in Iraq output to 1.3
million barrels a day by year end from just under
2 million in January. Before war 2.6 million
As military confrontation interrupts Iraqi exports,
Saudi Arabia & other OPEC members provide
spare capacity to cover shortfalls
Kendall 2007 UT - AAPG
Conclusions
As in 1986 & 1998 Gulf War, Oil prices have risen
with current US - Iraq War
OPEC responding by countering Russian moves
to take market share from Saudi Arabia & other
Middle East producers
Russia is stronger today than it was in 1986 &
more powerful ally but it is depleting its reserves
Islamic world fighting back, namely the terrorist
element:
e.g. Strait of Hormuz could be blocked by
sinking of major oil tankers as threatened by
Osama bin Laden; no longer fiction of
geopolitical thriller, as Osama dreams of oil
Kendall 2007 UT - AAPG
prices of over $100
a barrel!
Long-term Conclusions
Oil industry unable to protect against commodity
market’s speculators benefiting from war
Oil markets influenced by short-term events of
war & weather, & trading tactics of speculators
Other political & geological factors also in play
Oil is a depleting & finite resource
Non-OPEC oil producers could have huge, longlife reserves paralleling production declines
Small oil companies in USA uniquely positioned
to make more profit from their assets
Never the less without care, production of cheap
oil of West will continue to peak & go into decline
Kendall 2007 UT - AAPG
Standard
Oil
Persian
Oil
Baku Oil
Nobel Brothers Oil
Royal
Dutch
Shell
Shell
Transportation
Long-term
Conclusions
As entrepreneurs of 19th century so OPEC,
other producing countries & consuming
countries all aim to stabilize the energy
market for themselves from:
National integrated oil companies
National refineries
Kendall 2007 UT - AAPG
5% Arabian
Oil
Conclusions
Now to
Supper!
Kendall 2007 UT - AAPG