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
Article history

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.”

Published by The New York Sun on 2005-12-08

David Lifschultz carries his solution to the world’s oil problems in a beaten-up briefcase.

David Lifschultz

Literally.

“See – here,” Mr. Lifschultz, CEO of GenOil, said, bringing out a blue velvet box and opening it gingerly. “This is it.”

Inside the box, nestling on a blue cushion, were two vials.

One contained heavy crude oil with the sediments lodged at the bottom. Of the two varieties of crude oil that are lifted from the ground – at the rate of 82 million barrels a day – heavy crude is used for industrial purposes such as asphalt manufacturing, and for production of heating oil; heavy crude is high in carbon.

“Now this is what our hydrogenation does,” Mr. Lifschultz – the scion of a family that once ran a trucking empire – said, pointing to the other vial. “GenOil‘s process cracks the oil molecule of heavy oil, and combines with carbon hydrogen in a unique hydrocracking process – which lightens the oil. By increasing the ratio of hydrogen to carbon, the oil is lightened.”

That lighter oil can be used for making gasoline, thereby driving down the price of gasoline – which has touched $3 per gallon in recent months. The process also increases the value of this “hydrogenated” oil by up to $20 a barrel after cost, Mr. Lifschultz said – which means that the average of barrel of heavy crude, which currently sells $20 less than that of light crude, will attract the same price as that of light crude. [New York's main contract, light sweet crude for delivery in January, lost 73 cents to close at $US59.21 a barrel.]

Next month, Mr. Lifschultz’s company – whose market capitalization is $70 million and whose stock is sold over-the-counter – is scheduled to start producing 1,200 barrels a day of upgraded oil at Silver Eagle Refining in Salt Lake City. Also on the cards is production by Lukoil, the Russian energy giant.

Mr. Lifschultz spins so many facts, figures and projections during a conversation that it sometimes gets bewildering. But then, with the patience of an avuncular professor tutoring a cognitively challenged student, he decelerates his speech and explains what GenOil’s hydrogenated solution means to the world’s oil problem.

The problem is this: Some 82 millions barrels of heavy and light crude oil are lifted from the ground each day. The 11 members of the Organization of Petroleum Exporting Countries – OPEC – account for 30 million barrels, or 40% of this production, with Saudi Arabia producing 9 million barrels a day; the rest comes from non-OPEC countries such as Norway, Britain, Mexico, Canada, China, Malaysia, and India. Of the world’s daily production, 22 million barrels is in heavy oil.

Now the daily overall demand for both heavy and crude oil is also 82 million barrels, of which 16 million barrels is for heavy crude. But the demand for light oil is rising on account of accelerating industrialization in developing countries like Brazil, China, and India.

This rising demand is associated with the number of vehicles in the world. There are an estimated 600 million cars and trucks in the world’s 191 countries. Of these, 200 million are in America, where the daily demand is for 20 million barrels – two-thirds of it for transportation.

By 2050, Mr. Lifschultz said, there will be 1.2 billion cars in China alone.
That means an additional 78 million barrels a day of light crude will need to be produced just for that behemoth alone. At current production rates, that figure is well beyond the capacity of the oil-producing states, even though the world’s proven crude oil reserves are nearly 1 trillion barrels, some 261 billion barrels in Saudi Arabia alone.

“Now consider the costs of building new production facilities for increasing the extraction and processing of oil,” Mr. Lifschultz said. “They are prohibitive.”

By his reckoning, it would cost $120 billion to build a conventional plant that would process 2 million barrels a day. To build plants that would process the expected additional demand of 78 million barrels a day could cost $30 trillion – the entire world’s current gross domestic product.

“The heavy oil that is converted through GenOil’s low-cost process – about $60 million for 100,000 barrels – can be replaced by nuclear power or clean-burning coal, thereby providing a viable alternative to the West’s exposure to Middle East oil,” Mr. Lifschultz said. “It is practical and can be done right now. It does not need further research as fuel cells or solar energy, which are not competitive fuels for propelling cars.”

Pranay Gupte,
Senior Writer and Global-Affairs Columnist

Oil and gas supplies will struggle to keep up with world demand growth, making energy prices more expensive and more volatile in the long term, the head of Europe’s largest oil company has warned.

Peter Voser, the chief executive of Royal Dutch Shell, told the Financial Times: “We will have a lot of volatility ahead of us that we cannot avoid … for energy prices in general.”

EDITOR’S CHOICE
Shell fears year-long delay over Alaska – Jan-13

Shell says age of cheap oil and gas is over – Jul-28

Shell plans to expand Vietnam business – Sep-07

Shell agrees to sell Gassled interests – Sep-01

In depth: Oil – Sep-13

He added: “We most probably will see a tightening of the supply-demand balance and hence rising energy prices for the long term. I think we should just get used to that.”

His comments add to the pressure on US policymakers both to develop America’s own oil and gas resources and to invest in alternatives to fossil fuels.

Shell this week secured air quality permits from the US Environmental Protection Agency that it required to drill in the Arctic Chukchi Sea next summer, although it still needs to surmount further regulatory hurdles before it can proceed.

Mr Voser said he believed that the US administration and Congress now had a greater understanding of the benefits of allowing Arctic drilling, compared with last year when Shell was turned down for those permits after an appeal, and forced to put on hold its plans to drill in the summer of 2011.

Exploiting US resources would strengthen energy security, create jobs and generate more tax revenues, he said.

However, he added that there was still an immense challenge in meeting growing world demand for energy.

The problem was not a lack of oil and gas in the ground, he said, but inadequate investment, following cuts by many companies since the start of the financial crisis.

“While demand tends to pick up in one or two years, a typical cycle for a good big oil and gas project is six to eight years,” he said.

Oil output from fields in production declines by 5 per cent a year as reserves are depleted, so the world needed to add the equivalent of four Saudi Arabias or 10 North Seas over the next 10 years just to keep supply level, even before much of an increase in demand, Mr Voser said.

Economic development and production growth meant that demand would inevitably rise.

“Therefore countries like Iraq, like Russia: we need to develop those oil resources,” he said.

Benchmark US crude was $86 per barrel on Wednesday, down from its most recent peak of almost $115 in May, but up from a low of about $33 in 2009.

Natural gas prices have been subdued in the US because of abundant supplies of shale gas unlocked by improved production techniques but have risen along with oil in much of the rest of the world.

The crisis in Libya is halting production of some of the world’s most coveted oil. The reservoirs beneath its desert landscape yield crudes that are easily refined into diesel and petrol and also low in sulphur, making them cleaner to burn. Opec, of which Libya is a member, has adequate spare supplies to replace the country’s lost production – but the quality is mostly inferior. “Libya is a producer of light, sweet crude,” says Andy Lipow, president of Lipow Oil Associates, a Houston consultant. “The spare capacity among Opec members is heavy, high-sulphur crude.” This means sustained, widespread stoppages of Libyan production could require oil companies to do more than just replace lost barrels.

They would need to find barrels of equivalent quality from Algeria, Nigeria, the Caspian region or the North Sea. The bidding could further raise prices for the kinds of high-quality crudes that underpin benchmark oil futures contracts and reduce fuel output from refineries unable to afford them.

Crimping Libya’s crude flow comes at an inconvenient time. The world’s thirst for oil is especially strong in diesel and other distillates, which JPMorgan estimates will account for more than half the world’s demand growth this year. Light crudes yield more diesel per barrel than heavier crudes.

Environmental regulators are also clamping down on sulphurous fuels to combat air pollution, boosting demand for low-sulphur , or “sweet”, crudes. Europe this year limited sulphur content in fuels for some machinery and on inland waterways, and in 2012 will expand the restrictions to trains, according to the International Energy Agency.

Similar trends are taking place in the US. The US Department of Energy just sold 2m barrels of high-sulphur heating oil from a strategic reserve and will soon be bidding for the same amount of low-sulphur oil this summer, further stoking demand.

Before the crisis Libya produced about 1.6m barrels of oil a day, or 1.4 per cent of global oil output. At least half its production was halted as of Wednesday.

Libya’s crude stream includes Es Sider, whose light density and low sulphur content of 0.44 per cent makes it an alternative to light, sweet global benchmarks such as the UK’s Brent blend or West Texas Intermediate in the US. Repsol YPF, the Spanish oil producer, has shut down the huge El Sharara oilfield 800km south of Tripoli, whose crude is a mere 0.07 per cent sulphur.

“This definitely will have an impact. Those are high-quality barrels that you will potentially lose,” says David Kirsch, market analyst with PFC Energy, a Washington-based consultant.

Saudi Arabia, the de facto custodian of Opec’s 4.7m b/d of effective spare capacity, will “meet any shortage,” oil minister Ali Naimi said this week. But its oil is a poor substitute for Libya’s. Arab Light, the leading Saudi oil by volume, is a relatively high 1.8 per cent sulphur and heavier, so more difficult to refine into light products such as diesel.

Some analysts are already drawing comparisons to 2008, when a shortage of light crudes well-suited for diesel helped send Brent and WTI above $145 a barrel. Brent reached $111 on Wednesday, a two-and-a-half-year high.

“Growth in global diesel demand combined with tightening environmental regulations will put increased pressure on demand and prices for light sweet crudes,” energy economist Philip Verleger says. “This could be 2008 all over again.”

Analysts caution that the situation is in many ways different from 2008. Refiners have since invested hugely in turning heavy barrels into light products. Global refinery distillation capacity is also up 3.3m b/d since 2008 to 92.5m b/d, says Toril Bosoni, IEA refining analyst.

Commercial oil stocks in western countries, while declining rapidly in the fourth quarter, in December still topped levels of December 2007, the IEA reported. In the US, the 727m-barrel strategic crude reserve contains 293m barrels that are low in sulphur. The IEA suggested that Opec would act first to fill any shortfall from Libya.

But fearful times spur companies to add to stocks as a precaution. Lawrence Eagles, JPMorgan head of oil research, says: “This kind of uncertainty raises demand for inventories.”

What role should oil sands play in the world’s future energy mix?

Oil sands and heavy oil production are essential to meeting global energy demands. According to the International Energy Outlook world energy consumption is projected to increase 49% from 2007 to 2035. To meet global demand all sources of energy production will have to grow dramatically including light oil production, heavy oil production, nuclear energy, coal, CTL, GTL, renewables, natural gas, as well as alternatives such as electric vehicles and wind energy.

The world oil supply has peaked, consumption from the emerging markets of China and India is increasing while the new discoveries of conventional oil have been decreasing. There are different estimates of conventional proven oil reserves ranging from 400 billion barrels to 1.3 trillion, which would equate to a 14 year or 43 year supply of oil. For geopolitical and economic reasons OPEC producing countries have been incentivized to overstate reserves (in order to produce more under OPEC quotas) so we think the actual number is closer to the lower estimate. Thus the production of unconventional oil reserves such as heavy oil are needed to come online in order to meet global energy demands.

The production of tar sands comes with a high cost, both financially and environmentally with production about 3 times as carbon intensive as conventional oil production, and the environmental pollution in the tail ponds often leading to high levels of mercury, arsenic, lead and other contaminants creeping into rivers and waterways near tar sand production sites. There is also air pollution and carbon dioxide emission.

About 6 years ago I led an effort by our office with the gameplan to buy heavy oil reserves throughout the United States. At the time we evaluated acquiring heavy oil both in Utah, Texas and elsewhere onshore in the US. We had identified, analyzed and submitted bids on heavy oil fields with a few billion barrels of reserves and with very similar characteristics in terms of API, and oil quality as the Opti Canada/Nexen field in Canada. However the challenge was knowing with certainty that we could get the environmental permits, and then that the environmental impact would not be devastating to the surrounding area. In highly populated areas like Utah and Texas using conventional SAGD technologies we found the prospect of acquiring, and producing the heavier oil such as 2 API oil would have been a challenge using conventional existing technology and given the environmental impact. Bottom line is we shelved the project, as we could not stomach the potential environmental liability. As such Genoil, an energy tech company we have both funded and developed which has a heavy oil hydroconversion upgrading technology (which is much less polluting than conventional coking methods of upgrading heavy oil) also has environmental technologies and oil water separation technologies that separate oil from water and help clean up and prevent environmental pollution. Governments have and will continue requiring oil companies to become socially responsible and invest in clean up technologies and efforts.

Many of the heavy oil projects that are economically and environmentally viable right now are in more remote and less populated areas either in Alberta, Canada or Siberia, Russia. Governments, as well as environmental groups are constantly monitoring pollution from tar sands projects and measuring the cost benefits. The contaminated dovetails can be cleaned up and governments have been working with oil producers to ensure a cleanup of the pollution created, especially after reports that birds in the area were dying after swimming in the polluted waters.

The bottom line is we need oil sands projects to come online aggressively to meet global energy demands and unless most of the world wants to go back to riding camels and horses rather than automobiles and planes the world needs to be cognizant of the environmental impact oil sands production can have and work to minimize the impact to water (which many oil producers have done with water recycling and cleanup efforts) and reduce the CO2 emissions (which many tar sands producers have started to do with carbon capture and storage programs whereby the CO2 emissions from their heavy oil projects are captured and stored underground). Driving a car pollutes the environment more than riding a horse but most people would still prefer to drive their car than ride the horse. As such the public must not blame the oil producers for polluting the environment but must realize that our lifestyle choices make us all collectively responsible and that in a developed society we are all working to achieve the global balance of environmental harmony while satiating the world’s thirst for oil.

The International Energy Agency may not have a solution but no one can accuse them of no longer understanding the gravity of the problem.
In their June report, the IEA warned that unless OPEC could increase production by at least 1.5 million barrels a day, world oil demand is going to surpass available supply during the second half of the year.
It means if there is not enough supply to match the 89 million barrels of oil the global economy is expected to burn every day, world oil prices have only one direction to go.
With no obvious end in sight to the Libyan conflict, and sectarian violence against oil fields and refineries suddenly on the rise in Iraq ahead of the scheduled U.S. troop withdrawal, the prospects are not promising for OPEC to increase supplies. This is even more evident given the region’s largest producer, Saudi Arabia, has little more to offer other than unwanted sour, heavy oil to add to the global supply mix.
At the same time, emerging power shortages sweeping across Asia will boost oil demand even when most major Asian economies are slowing, including the continent’s largest two economies, China and Japan. While an economic slowdown normally tames oil demand, both countries now face acute power shortages that will compel them to burn more diesel fuel to compensate for reductions in other forms of power generation.
In China, widespread drought earlier in the year has constrained hydroelectric power, while nearly two thirds of Japan’s nuclear power plants are currently, and for the foreseeable future, off-line, boosting that country’s appetite for diesel by hundreds of thousands of barrels a day.
With Brent crude prices having crossed into triple digit territory since the beginning of the year, fuel and power shortages are popping up around the world with increasing frequency. And they are beginning to exact a heavy economic toll.
In Pakistan, power shortages have ground the economy to a literal halt. Meanwhile, Japanese companies have already been ordered to cut back their power consumption by 15% this summer. And China is bracing itself for the worst power shortages since 2004, which triggered widespread economic disruption.
With the prospect of even a tighter oil market over the balance of the year, the IEA is warning motorists in member countries to get ready to pay more at the pumps. And the IEA has already suggested it might release additional oil from its strategic reserves to moderate further price increases.
But considering the recent release of 60 million barrels from member countries’ strategic stockpiles could barely hold down Brent world oil prices for more than a week, the IEA may have to come up with something a little more substantial the next time than the fuel equivalent for another 16 hours of world oil demand .

by Jeff Rubin on July 13th, 2011

Nonetheless, the Castro regime’s myopic strategic decision of switching from a fuel-oil fired system to the use of heavy, high-sulfur Cuban crude oil as a fuel source — promoted in order to save hard currency by limiting the import of fuel oil — has proven to be disastrous in the long term. Worn power plants, already in desperate need of modernization, have rapidly deteriorated by the burning of highly corrosive crude oil. The consequences of the Cuban government’s policy finally came to a breaking point in September 2004 when the Matanzas 330 MW plant was shut down due to equipment failure. (4) This policy, if it continues, will eventually collapse the country into total darkness.

International oil trading sources indicate that Cuban state-owned enterprises, Cuba Metales and Cupet, and Venezuela’s PDVSA, are evaluating various alternatives by which they would replace the highly corrosive heavy sour Cuban crude oil as power plant fuel in exchange for medium sulfur residual industrial fuel oil. Among the options being considered are increased runs of heavy Cuban crude oil in a revamped Cienfuegos refinery; a crude oil for residual fuel oil exchange agreement; or a crude oil processing agreement whereby Cuba would export its crude oil from the Matanzas superport to Venezuela’s leased Isla Refinery in Curaçao, and for a fee Cuba would receive in return refined products.

Saudi Arabia’s spare capacity is mostly of sulphurous crude, of little use for simple refiners who need lighter grades to substitute Libya’s high-quality output.

Saudi Arabia’s solo move to boost output is widening the price gap between undersupplied light crude and abundant lower-quality oil, and will force producers to offer their heavy grades to customers at deeper discounts.

Brent, a light sweet crude benchmark, touched a five-week high above $120 a barrel yesterday. The discount for Dubai crude, the Middle East heavy sour oil marker, widened to $7.67 a barrel, the biggest since hitting an almost six-year peak near $8 in April.

Russia’s new Espo crude blend has been a big success since its launch at the end of 2009, but
Moscow’s desire to maintain the new grade’s stable low sulfur content and help promote it as a
possible future Asian market benchmark is beginning to have a negative impact on the quality
of the country’s main export blend, Urals.