Saudi Gazette | Syed Rashid Husain
Shale gas — or the emergence of fracking technology to be precise — has revolutionized the energy world. It has given a sense of the otherwise elusive supply security to the industrialized world. The story began in the US. This shale gas revolution in America has turned around the industry. Today it contributes to one-third of the United States’ gas supplies. By 2030, it might provide half. US oil and natural gas production is increasing at its fastest rate in five decades, courtesy of the shale revolution. The Bakken formation, one of the country’s largest shale gas reservoirs, produced 0.1 million barrels per day in 2007. In 2012, it produced over one million barrels per day. This rapid growth is set to continue over the next decade too. BP expects North American shale gas production to increase by 5.3 percent annually (on average) until 2030.
But this is only half of the story. Shale gas and water make a disastrous, rather explosive, mix. Fracking involves blasting millions of gallons of water, combined with chemicals and proppants such as sand into the ground, to crack open the shales and this is now a real concern. Hydraulic fracking, which is currently opening up untold oil and gas resources in Texas, has run into a potential problem there because of the long-term drought that has afflicted the Lone Star State in recent years. As early as 2011, according to an article published by First Enercast Financial, oil and gas drillers started to recognize that they might have a problem because of a shortage of water. The problem is exacerbated because the unique geology of the Eagle Ford formation, where Texas gets much of its shale oil and gas, requires more water to frack open the product.
Water is an issue. Many say the next round of global wars could be to secure scarce water resources. A senior Canadian diplomat, once told this correspondent; “look, we are a water rich country. And we know it fully well; the day there is a scarcity of water next door, we would find a pistol pointed at our head, to ensure a regular supply.” Shale gas is a black hole for water, argue Asit Biswas Julian Kirchherr in a paper, carried by Huffngton Post. Exploiting the resource requires and pollutes massive amounts. And because of this water footprint, France in2011 banned hydraulic fracturing. Today, the United States’ water resources are diminishing according to 2012 Yale Environmental Performance Index (EPI). Exploiting shale gas may exacerbate these problems, Biswas and Kirchherr underline.
The typical horizontal shale well requires 5 million gallons of water to complete, according to Chesapeake Energy, which has fracked more shale wells in Ohio than any other company. The International Energy Agency (IEA) too agrees. The sheer volume of water consumed is not a problem per se in water-rich states such as Pennsylvania. However, it may become a major obstacle in water-parched states such as Texas. With shale gas exploitation exploding the water consumed by Texas’ Barnett Shale will increasingly compete with other industries and private consumers, the paper argues. Environmentalists also note that water used in fracking cannot be treated and reintroduced to the water supply where it eventually will cycle through to become rain.
Lea Harper, founder of the Southeast Ohio Alliance to Save Our Water, an anti-fracking organization, said “water is being wasted in a one-time use for a single industry.” “We cannot make more water,” she said. “We can find renewable sources of energy.” Other countries are also joining in the shale bandwagon, making the water issue acute. China is reported to have huge, un tap huge resource. Saudi Arabia, the world’s biggest oil exporter, is planning to drill about seven test wells for shale gas this year. “We know where the areas are,” Minister Al-Naimi said at a conference in Hong Kong, referring to the shale deposits. “We have rough estimates of over 600 trillion cubic feet of unconventional and shale gas so the potential is very huge and we plan to exploit it.”
Saudi Aramco, has been searching for shale gas in the northwest of the country as it explores for unconventional resources such as sour gas in the oil-rich eastern region and in the Empty Quarter deserts, Senior Vice President of Upstream Amin Nasser told a conference March 10 in Manama. However, even Aramco is conceding that finding the necessary amount of water will be difficult, Nasser said at the Manama conference. Faced with this challenge, oil and gas companies have been attempting to overcome the problem by recycling fracking fluid. Texas Tribune reported that a new technology, dubbed “waterless fracking,” could address the problem of water use in fracking operations. A Canadian company called GasFrac is using a combination of gelled propane and butane to conduct fracking, without the use of water. The technology is new and may cost more than conventional hydraulic fracking. And in addition to propane, some companies are also experimenting with carbon dioxide and nitrogen.
However, besides cost, some other issues are with this prospect too. An article in Scientific American discusses environmental issues involving waterless fracking. Waterless fracking produces less wastewater, which is a positive environmental advantage over conventional fracking. However since water is used to produce and liquefy propane, the overall water savings for the process are unclear. Propane, being an explosive chemical, does also pose some safety issues, though GasFrac claims that it has multiple safety protocols. Oil companies working in Saudi Arabia are also alive to the issues. “It’s here in Saudi Arabia where we are developing our best technology,” Aaron Gatt, characterization group president at Schlumberger told the audience at the Manama conference. “We are trying to find solutions to produce shale gas in Saudi Arabia with the least amount of water.” The fracking industry is still in its infancy. In order to deliver the revolution, that it has promised and in fact unleashed too, it will have to overcome many obstacles. The water issue is just the one — that needs immediate attention — all around the globe.
In the June 23 article in the Financial Times on quantitative easing of the United States, there is a gigantic fact here that few really understand. It is the 2.9 trillion dollars of Federal Reserve Credit. At the time of the fall of Lehman there was only 900 billion of this credit built up from 1914, and in the three months following the Lehman catastrophe the Fed created one trillion in new credit, or a hundred years worth, to save the system, and another trillion over the past few years to keep the United States from falling back into crisis and to try to grow it out of its problems. Would Germany want to pull the plug on Greece or Portugal to face another Lehman as they could not be sure how much effect a Greecian collapse could have on the derivative structure? I might add in passing that these quadrillion of derivatives described by Warren Buffett as a potential financial weapon of mass destruction, and whose description was confirmed by the historical events of October, 2008, have not served as a deterrent for their continued utilization as the derivative aggregates continue to mushroom into larger proportions.
A way of analyzing how useful this additional two trillion has been is to divide this base in 2008 of 900 billion into the GDP then of 14.4 trillion, which was a turnover figure of 16. But in 2010 the 2.9 trillion or thereabouts divided into 15 trillion or a turnover ratio of 5. The money is just not being used effectively which is largely reflected by the excess reserves of 1.3 trillion.
The Federal Reserve credit figure is a vitally important figure for it is used by the banks as its base for fractionalizing or expanding loans as a form of money supply. If you use a 1% reserve requirement, the mathematical expansion is over 100 times which is why Milton Friedman calls this reserve base high powered money as it expands at a huge multiple in the banking system. It is also important to realize that the credit system of these banks is a closed loop and no money leaks from it except when it is converted to cash, and no money leaks overseas unless it is converted to cash and carried overseas. The latter is not easy to do with western nations watching like hawks these cash transfers via the terrorist laws, or really enemy of the people statutes a la Soviet Russia. Essentially, this credit dollar based on deposits at banks floats against the credit Yuan or credit Yen in a similar manner.
The problem with this floating system is that it is not clean. There are dirty floats all over. And instead of the dollar floating by supply and demand against the Yuan, the Chinese erect a currency tariff against our goods by buying our currency to raise its value so they can dump their goods on us. If currencies truly float, the deficit countries based on excess say dollar credits would fall making it harder for them to buy imports, and it would serve as a self-correcting mechanism. This mechanism is interfered with by these dirty floats.
When we talk about hot money in the United States of about 11.7 trillion we refer to deposits or Treasury instruments that can be immediately sold and converted to foreign credits. If this hot money were to be converted all at once into foreign credits, the currency would crash as it would constitute a dollar exposure and not a dollar turnover as the 4 trillion that turns over on the foreign exchange market each day. The only reserves the United States has against this potential run on the dollar is about 300 billion plus of gold at market and currencies at market. This is far too small to tackle the problem and if the gold were sold on the spot it would crash its price causing it to yield much less an amount than the nominal reserve value. A high Federal Reserve official told me if any of the Arabian Gulf States were to try to remove overnight many trillions of their foreign investment from the United States, it would be regarded as an act of war and the assets frozen. Even less can provoke the United States as in the case of their friend and ally, Mubarek.
The issue of turnover against exposure discussed above can be easily explained by the following comparison. If you have a billion dollars to trade with which is hypothetically all my net worth, and I buy and sell bonds all day to the tune of 300 billion dollars, then it would be foolhardy to say that what is my billion of reserves against my trading prowess of 300 billion dollars a day in bonds. But the exposure I have is a billion, and against that exposure the turnover means nothing except as to whether I lose or gain money each day. If I lose two billion dollars, I am broke, and minus one billion dollars. That demonstrates that when the president of the New York Federal Reserve, William McDonough, told me at a gathering what is 11.7 trillion (it was less then but I am using the current figure to avoid confusion) in hot money exposure when less than half that amount trades each day, either he did not know himself or he was purposely trying to mislead me as to the significance of this exposure that can be ruinous.
The three trillion exposure to China due to their surpluses is therefore potentially very dangerous for the United States and other deficit countries as if they converted these dollar credits into Yuan credits as the Middle Eastern countries could, the dollar credit system would also collapse on the foreign exchange markets. It is not likely to lead to a short-term catastrophe as China is not prepared to cease exporting to us and others, and nor would benefit from a world depression as it would deter their march into becoming the dominant world power. In any event, China’s dollar credits would also be frozen if the effort were initiated as those of the Gulf States of Arabia.
Martin Feldstein thinks that China has adopted a two prong effort to eliminate these surpluses by vigorously encouraging the reduction of savings by a massive increase in domestic consumption and a gradual but significant rise in the Yuan. But in the event Feldstein is wrong, nationalist forces are growing in the deficit countries who are watching their internal industries being destroyed, and while we don’t see convulsions in the near future due to these misalignments of currency, we do see it in the more distant future.
Another example of exposure versus turnover is the high frequency turnover in the stock and Forex markets. The average holding or turnover of stock in the United States is twenty seconds. In the Forex markets, which is 70% electronically based on preset algorithmic trading, the roundtrip trades or turnover are completed in under a second on average, and the Big Five players are in and out in under 1/10 of a second. This is truly an unproductive use of capital as it produces nothing of value to the society, as well as most of the quadrillion of derivatives. The Tobin transactional tax to discourage this wasteful expenditure of national resources is one way to redirect bank credit. As John D. Rockefeller laid out for his Standard Oil combine that is best reflected in one of its former components, EXXON, whose Rockefeller principles they still follow, derivatives for decreasing risk are an authentic business purpose but not to gain speculative profit. As John D. wrote in his “Random Reminiscences”, “Standard Oil is not concerned in speculative interests as the oil business itself is speculative enough, and its successful administration requires a firm hand and a cool head.” And this principle was carried forward in a recent Annual Report of EXXON that stipulated that derivatives are only used to protect investment but not speculation. An example would be farmers selling their futures in corn to Kellogg to pay for seed, and supplies, so that Kellogg can be able to plan on a stable price for their corn flakes but not otherwise for the purpose of gambling using bank credit. Or in the case of EXXON, their selling in the future their refinery production of products to be sure they reaped the money necessary to pay for the building of the refinery while it gives the buyer an assured supply of product at a fixed price they can plan on.
There is a misconception that the creation of bank credit, or the M-3 money supply, is solely the concern of the banks and should remain within the confines of the free market. But the creation of money out of nothing in our fractionally reserved banking system is essentially a conversion of the wealth of one part of the population to another, and at the very least should be guided by the government as Dr. Hjalmar Horace Greely Schacht did as Reichbank President in 1933 where no bank credit was allowed to be used for unproductive purposes such as speculation and where he turned around the catastrophic unemployment situation relatively quickly which should be an inspiration to our Euro friends John Maynard Keynes in his introduction to the 1938 German edition of his “General Theory of Employment, Interest and Money” declared that Dr. Schacht was the greatest exemplar of this theories. (This approach was replicated after World War Two by the Schacht Reichbank protege, Dr. Wilhelm Vocke, who created the German postwar economic miracle, and my friend, George Champion, who was then head of Chase Manhattan Bank, invited him over in the 1950s to explain this to the American Banking Association). It was Schacht in 1923 who stopped the German hyperinflation by ceasing to supply credit to the currency speculators who were shorting the Mark, and this created a surge in the Mark ending the hyperinflation. The speculators could no longer go to the central bank for credit to cover their short but had to buy it in on the open market. Similarly, the Chinese authorities blocked the speculators and insulated their economy from the so-called Asian currency contagion of 1997 by buying both the Hang Sang Index and their own currency which the speculators had shorted thereby creating a bloodbath among the speculators–who promptly called in Milton Friedman to call foul as government intervention against manipulation was not regarded by him a part of the functioning of a free market. Creation of money was always historically under the rule of the sovereign whether it was a monarchy or Congress and not to be held in private hands for their use according to their sole discretion.
This does not even cover the lender of last resort role. Even Goldman Sachs had to flee to for cover in the Lehman debacle under the Federal Reserve tent despite almost all of their positions being in the right direction, as well as General Electric, who could not turn over their commercial paper liabilities created under the so-called genius of management, Jack Welsh, to save interest expenses against the higher interest expenses for the more conservative long-term bond issuances, which is another reason for the right of the government to exercise control over this sector that they have to bail out or face the destruction of their economy. The thought of this Jack Welsh must cause the great Thomas Edison to turn over in his grave.
We can look at total central bank gold reserves of 30,562.5 tons or 977,984,000 ounces, and divide these ounces into the world M-3 estimated to be 60 trillion, and come out $63,000.00 per ounce. This relates to the earlier value of the dollar as $20.00 an ounce in 1920. This expansion validates Aristotle’s contention in Politica 1:3:23 that the interest rate system is contrary to nature in that the gold, paper or credit cannot produce its own children, or the liquidity to cover the interest without either hypothecating the gold or issuing more paper money or credit. What this means in ordinary lingo is that if I own a house, and it is worth ten million dollars, and I sell ten five million first mortgages on it, then I have hypothecated the asset gaining fifty million in credit on a ten million dollar asset. Doesn’t that sound familiar in the various alphabet soup derivatives involved in the last Lehman crisis? So when England in 1900 had a 3% gold base against its Pound credits, it had hypothecated its gold over 33 times with similar Pound issuances. It was an untenable gold interest rate system as the dwindling ratio of gold ounces could not sustain a run on the central bank because of the inverse credit pyramid, and the Pound failed in 1931 with the English going off the gold standard.
There is the question of whether gold is in sufficient quantities to allow for expansion of an economy but the liquidity for the economy can be achieved by the gold rising in value if there is a proliferation of other commodities far in excess of the gold base, and in that sense gold should float as a money in the form of a commodity against other commodities. Therefore, in a system under Sharia law gold savings would be rewarded as the production of the system expanded, and it would create a much more valuable gold and a certainly honest currency. The rising value of gold in such a situation would also furnish the additional liquidity for the financing of the growth of the economy.
Even a currency separated from gold, whose value constitutes a form of secular transubstantiation, follows the same laws of the interest rate system as it must continuously create the credit or liquidity to pay the interest until it starts to disintegrate in currency crises based on the aggregates becoming unmanageable. This is why historically all currencies so divorced from a metallic metal, and based on the interest rate system, die. The British economist Alfred Marshall was the last one to struggle with this paradox and could not solve it. He could not figure out how to circumvent the fact that the interest rate system cannot create its own liquidity except through diluting the currency, credti or gold until it expires.
The goal of consolidating Europe into one state goes back in modern times to Napoleon Bonaparte’s Continental System whose goal was to create a system of Empire that was self-sufficient and would preserve within it its industrial capacity against the exports of Britain.
The Euro is a new effort led by Germany to achieve a new Continental System. It was Germany that pressed the Euroland nations to extend the Nato Alliance to Poland to protect its industrial investment in eastern Europe in direct violation of the agreements with Yeltsin.
Germany’s foremost goal was to create this 16 trillion Euro common market and Euro currency as a direct competitor of the United States where it would finally have a similar market to scale its products. It is for this reason we do not see Germany giving up on this dream just because a Portugal at 1.4% of Euroland in GDP, or Greece at 1.8% are having problems. These problems benefit Germany though it cries with crocodile tears of distress over the thought of subsidizing the weaker nations while its exports soar as the Euro falls. These German export profits more than offset some lending to the states as Greece and Portugal that are in IMF tribulation, and these exports act, indeed, as a self-correcting mechanism for the Euro as the trade surplus generated by Germany will act to counter the Euro’s fall.
If there are any problems here it is between the bank exposure of the main Euro nations in lending to the banks of Portugal and Greece, and they would be concerned with triggering another derivative crisis that happened when Lehman went down. The pulling of the plug at Lehman detonated parts of the quadrillion derivatives which represent 17.5 times the world GDP of 65 trillion. The currency component of this derivative structure is 58 trillion alone, or nearly the GDP of the entire world.
The price of Brent crude oil is up again this morning over $124 a barrel. It’s up from $107.65 at the end of last year as a result of increasing tensions with Iran following the imposition by the US and Europe of tough new sanctions on Iran. They are already reducing the ability of Iran to export crude oil. Last year, Iran exported about 2mbd. That is likely to get cut by half or more. That’s not enough to explain why oil prices are soaring given that global oil supply is around 88mbd. Of course, concerns are mounting that the diplomatic and economic confrontation with Iran could turn into a military conflict that would disrupt oil traffic coming out of the Persian Gulf. This certainly explains why oil prices are rising.
Global oil demand, on the other hand, is weakening and suggests that oil prices could fall sharply if the Iranian issue can be resolved without push coming to shove. As I’ve explained previously, I believe that the sanctions are rapidly crushing Iran’s economy and may force the Mullahs to give up their ambitions to build nuclear weapons. This may take some time, of course. Meanwhile, if oil and gasoline prices continue to rise, I expect that the Obama administration will coordinate a global release of supplies from the Strategic Petroleum Reserves, as occurred last summer in response to the drop in Libya’s exports.
The latest data compiled by Oil Market Intelligence show that global oil demand flattened during January at 89.1mbd, based on the 12-month average. Old World oil demand (in the US, Western Europe, and Japan) fell to 37.7mbd during the month, back to the global recession lows of 2009. New World oil demand rose to a new record high of 51.4mbd.
No Peak Oil – Why Then is Saudi Aramco Opening Old Wells for Heavy Crude?
By James Burgess | Fri, 17 February 2012 18:57
Following the Iranian Revolution in 1979 demand of oil from Saudi Arabia fell from ten million barrels per day (bpd) to three million bpd. As a result of the reduced production many small oil wells were closed down, including the Dammam oil field, home to Saudi Arabia’s oldest wells. Sadad al- Husseini, once the executive vice president for exploration and development at Saudi Aramco, said that, “we simply didn’t need small fields like Dammam, and in fact shut in fully or partially many other fields including Khurais, Khursaniya, Qatif, Abu Hadriya, Harmaliyah and several others.”
Currently oil demand is at high levels once more and due to supply fears from Iran countries are always looking to increase their output. Saudi Aramco, the world’s largest oil exporter, has recently announced its intentions to re-open the Dammam field after 30 years, according to an EIU report. Husseini said that “the Dammam field can operate easily with current technology and Saudi Aramco conducted a 3-D seismic survey over the entire area almost 10 years ago,” which leads them to believe that it still holds as much as 500 million barrels of heavy crude oil and will increase their production by 100,000 bpd.
In the 30 years since its closure the Dammam area has changed vastly and is now surrounded by metropolitan areas, which could make drilling for oil a very difficult challenge, and one that will receive much protest and opposition by local residents. However Husseini has assured that Saudi Aramco will proceed “in the most modern, environmentally sensitive and professional manner that least affects the adjacent community.”
Aramco is also undertaking a project to increase production of heavy crude at the world’s fifth largest oil field, the Manifa field in the Persian Gulf, in order to maintain total oil production levels at 12 million bpd.
Has the United States beaten peak oil? Not so fast.
February 17, 2012
In the past five years, warnings about peak oil have gained a lot of traction. U.S. oil production, after all, has fallen sharply since 1970. Global oil output has plateaued of late, even as China and India are demanding ever more crude. And that’s all caused prices to soar.
Yet the recent shale-oil boom in North Dakota has some analysts brushing off this gloomy perspective. A new research note (pdf) from Citigroup argues that the recent surge in North American production has “buried” the peak-oil hypothesis. New drilling technology has allowed companies to extract oil from once-inaccessible shale rock, which has, in turn, allowed the U.S. to slash its oil imports dramatically. What’s more, there are tantalizing shale deposits all around the world — in Argentina, Australia, and even France. So does that mean that, as the Citigroup analysts say, the peak-oil hypothesis is “dead”? Well, not so fast.
For one, the recent discoveries in North Dakota, while promising, need to be put in context. As a less-buoyant research note from Barclays Capital emphasizes, North Dakota’s shale plays still only produce 0.5 million barrels of oil per day. In an average year, tiny swings in China’s appetite for crude can easily gobble all of that up. What’s more, the United States still remains the largest importer of crude oil and other refined products in the world, at about 9 million barrels of oil per day. We’re still very far from erasing that dependency.
Now, one reason that the United States imports so much oil is that many of its domestic fields, in places like Texas and California,have been in steep decline for decades. Back in 1970, the United States churned out 10 million barrels of oil per day. Now? We produce just 6 million. The Citigroup analysts expect that new shale oil plays, if combined with further exploration in the Gulf of Mexico and Alaska, could add 3.5 million barrels per day between 2010 and 2022. But as long as other domestic fields keep declining, the shale boom won’t be enough to get back to our peak. The industry will have to drill furiously simply to maintain the status quo. (Indeed, the International Energy Agency sees U.S. oil production rising briefly to 6.7 million barrels per day and then sinking back down to 6.1 million barrels through 2035 — about where we are today.)
What’s more, there are a lot of assumptions in Citigroup’s analysis that are far from certain. Take the decline rate. Conventional oil fields typically see a drop in output of about a 5 percent to 8 percent rate per year. But, as some companies working in the Bakken field in North Dakota are now discovering, shale oil can dwindle far more rapidly than that. One oil executive tells Foreign Policy’s Steve LeVine that oil wells in the Bakken field can decline by more than 90 percent in the first year, leveling off at 8 percent per year thereafter. Once a well dries up, the company has to move over to a nearby spot in the field. That’s a lot of new drilling. And all that drilling is pricey. Which means, the executive notes, that if the price of oil were to suddenly drop, a lot of companies could quickly go bust and production could dry up in short order.
The other thing to note here is that greater oil independence is no guarantee that the United States will be immune from world events. As my colleague Steve Mufson observes, the United States now imports 15 percent less oil than it did in 2005. Yet prices remain sky-high — in part due to global factors like Chinese demand and tensions with Iran. Indeed, the $326.5 billion that the United States paid for foreign crude in 2011 was its second-highest total ever — just slightly less than in 2008. Granted, that import bill would have been even larger without the shale boom, but it’s a handy reminder that “oil independence” isn’t the same thing as cheap gasoline.
Add it all up, and America still has plenty of reason to reduce its reliance on oil of all sorts, foreign and domestic. A big reason why U.S. oil imports have shrunk since 2005 is that our gasoline use has plummeted. Part of that is due to the grinding downturn, part of it is the fact that people are (slowly) purchasing more fuel-efficient cars, and part of it is that Americans are driving less. And there’s little reason to think that reducing oil use will become somehow less important in the years and decades ahead.
DHAHRAN – The first research center in Saudi Arabia that focuses on the research and development of new technologies that will explore and unlock the potential of the Kingdom’s unconventional resources, such as shale oil, heavy oil, and tight gas was formally inaugurated here Wednesday by Ali Al-Naimi, Minister of Petroleum and Mineral Resources.
The Dhahran Unconventional Resources Research and Technology Center opened its door at the Dhahran Techno Valley (DTV), the current site of other international organizations engaged in R&D in the oil, gas, and petrochemical sectors.
Present during the inauguration were Khalid Al-Falih, president and chief executive officer of Saudi Aramco, Dr. Khaled Al-Sultan, rector of King Fahd University of Petroleum and Minerals (KFUPM), and Chad Deaton, executive chairman of Baker Hughes, the partner of Saudi Aramco in the R&D venture.
Baker Hughes, a global leader in the supply of oilfield services, products, technology and systems to the worldwide oil and natural gas industry, has already constructed its facility at DTV, which is adjacent to Saudi Aramco and KFUPM.
The opening of the center will allow Baker Hughes to better cooperate with Saudi Aramco, the academic community in the region, and local and regional customers “to solve the challenges unique to unconventional resources, such as tight gas, shale oil, and heavy oil in the Kingdom,” according to Martin Craighead, Baker Hughes president and CEO.
Aside from the fossil resources of oil and gas, the Kingdom also has huge reserves of unconventional resources waiting to be explored.
Besides bringing to the Kingdom technologies in exploring unconventional resources, Baker Hughes will also provide educational sponsorship programs to Saudi female scientists and engineers to pursue their MA, MSC or Ph.D programs in universities overseas, according to Craighead.
Baker Hughes will also continue its partnership with the Saudi Petroleum Services Polytechnic in Dammam in sponsoring work and volunteer programs for young Saudi students. This year, some 30 university students across all disciplines will be offered opportunities to work in the Kingdom and other Gulf countries.
KFUPM rector Sultan said he never doubted that DTV would become the hub of R&D in the oil, gas, and petrochemical sectors in the region.
“We are an oil producing country, and therefore our resources – both in oil and reserves and the robust research programs of our universities – are our greatest asset in hosting world-class companies right here in Dhahran, the center of the oil industry,” he said.
Sultan said the Baker Hughes center, estimated to cost between SR700 to SR800 million, will offer research opportunities to students and postgraduate students of KFUPM in areas of petrophysics, drilling, geomechanics, fluids and production technology.
Baker Hughes has a long association with the Kingdom’s oil industry. Over the last five years, the company has invested more than $180 million in local infrastructure that has provided career development opportunities for young Saudis
China backs Iran and Pakistan, and will replace the United States in Afghanistan as its ally with Pakistan as the United States forces withdraw. The projection of force by the United States in Afghanistan could never have succeeded under these circumstance with Pakistan and China actively opposing the United States presence there. Pakistan and Afghanistan are critical components in China’s defense perimeter against India where China cannot allow the United States and India to form an outflanking action in Afghanistan against Pakistan. Iran is outside the Chinese defense perimeter as China is still developing into a sea power to protect its lines of oil supply and project its power to secure Iran. In the meantime, China has armed Iran with its most advanced missiles that can be nuclear tipped, and those nuclear bombs for tipping being available in the black market, so that Iran can secure itself. Iran is a strategic source of oil for China. China cannot allow itself to be found in the same position as Japan in 1941 where most of its oil came from insecure sources and was cut off by the United States, Britain and the Netherlands in July of 1941 as a act of war to protect Russia’s eastern borders against a Japanese attack while the Germans were rapidly advancing towards Moscow. That threat from Japan was tying up 1.5 million Russian troops on the eastern front with China and Manchuria. That is a major reason for the rapid development of armaments of the most advanced type in China so much so that its importation of arms from Russia has collapsed as it has replaced the Russian munitions with equipment manufactured in China of equivalent or superior quality.China has developed an anti-missile missile that can strike down a reentering satellite into the earth’s atmosphere at speeds greater than the standard United States intercontinental missile carrying nuclear bombs and its silent submarines have been surfacing undetected near United State aircraft carriers demonstrating the vulnerability of the United States fleet whose carrier task forces are a major means of projecting United States power as the Spanish Armada once was (swept away in the seas around Britain). China’s manufacturing of silent submarines equipped with nuclear tipped cruise missiles are about 21 a year against 1 a year in the United States giving China the capability to project a force of nuclear tipped cruise missiles near to the shores of the United States as the United States did to the Soviet Union with the nuclear submarines armed with Trident cruise missiles during the Reagan Administration that balanced the nuclear force projection around the Soviet Union in favor of the United States making the land based missiles in Europe unnecessary.
Key oil figures were distorted by US pressure, says whistleblower
Exclusive: Watchdog’s estimates of reserves inflated says top official
Monday 9 November 2009 21.30 GMT
The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the International Energy Agency who claims it has been deliberately underplaying a looming shortage for fear of triggering panic buying.
The senior official claims the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves.
The allegations raise serious questions about the accuracy of the organisation’s latest World Energy Outlook on oil demand and supply to be published tomorrow – which is used by the British and many other governments to help guide their wider energy and climate change policies.
‘There’s suspicion the IEA has been influenced by the US’ Link to this audio
In particular they question the prediction in the last World Economic Outlook, believed to be repeated again this year, that oil production can be raised from its current level of 83m barrels a day to 105m barrels. External critics have frequently argued that this cannot be substantiated by firm evidence and say the world has already passed its peak in oil production.
Now the “peak oil” theory is gaining support at the heart of the global energy establishment. “The IEA in 2005 was predicting oil supplies could rise as high as 120m barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105m last year,” said the IEA source, who was unwilling to be identified for fear of reprisals inside the industry. “The 120m figure always was nonsense but even today’s number is much higher than can be justified and the IEA knows this.
“Many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further. And the Americans fear the end of oil supremacy because it would threaten their power over access to oil resources,” he added.
A second senior IEA source, who has now left but was also unwilling to give his name, said a key rule at the organisation was that it was “imperative not to anger the Americans” but the fact was that there was not as much oil in the world as had been admitted. “We have [already] entered the ‘peak oil’ zone. I think that the situation is really bad,” he added.
The IEA acknowledges the importance of its own figures, boasting on its website: “The IEA governments and industry from all across the globe have come to rely on the World Energy Outlook to provide a consistent basis on which they can formulate policies and design business plans.”
The British government, among others, always uses the IEA statistics rather than any of its own to argue that there is little threat to long-term oil supplies.
The IEA said tonight that peak oil critics had often wrongly questioned the accuracy of its figures. A spokesman said it was unable to comment ahead of the 2009 report being released tomorrow.
John Hemming, the MP who chairs the all-party parliamentary group on peak oil and gas, said the revelations confirmed his suspicions that the IEA underplayed how quickly the world was running out and this had profound implications for British government energy policy.
He said he had also been contacted by some IEA officials unhappy with its lack of independent scepticism over predictions. “Reliance on IEA reports has been used to justify claims that oil and gas supplies will not peak before 2030. It is clear now that this will not be the case and the IEA figures cannot be relied on,” said Hemming.
“This all gives an importance to the Copenhagen [climate change] talks and an urgent need for the UK to move faster towards a more sustainable [lower carbon] economy if it is to avoid severe economic dislocation,” he added.
The IEA was established in 1974 after the oil crisis in an attempt to try to safeguard energy supplies to the west. The World Energy Outlook is produced annually under the control of the IEA’s chief economist, Fatih Birol, who has defended the projections from earlier outside attack. Peak oil critics have often questioned the IEA figures.
But now IEA sources who have contacted the Guardian say that Birol has increasingly been facing questions about the figures inside the organisation.
Matt Simmons, a respected oil industry expert, has long questioned the decline rates and oil statistics provided by Saudi Arabia on its own fields. He has raised questions about whether peak oil is much closer than many have accepted.
A report by the UK Energy Research Centre (UKERC) last month said worldwide production of conventionally extracted oil could “peak” and go into terminal decline before 2020 – but that the government was not facing up to the risk. Steve Sorrell, chief author of the report, said forecasts suggesting oil production will not peak before 2030 were “at best optimistic and at worst implausible”.
But as far back as 2004 there have been people making similar warnings. Colin Campbell, a former executive with Total of France told a conference: “If the real [oil reserve] figures were to come out there would be panic on the stock markets … in the end that would suit no one.”