The World's Greatest Ever Scramble for Resources
Nigel H Maund, BSc(Hons)Lond., MSc, DIC, MBA, F.Aus.IMM, F.AIG, F.SEG, MIMMM, MSGA, MMSA
October 20th, 2010
1989 - Present
Part I - Petroleum
Living in Extremely Dangerous Times - The War Started in 1989
"One of the weaknesses of our age is our apparent inability to distinguish our need from our greed"
It is a long time since this writer has written on these pages. He was sat on the sidelines watching the Global Financial Crisis unfold, and the largely impotent efforts to come to terms with the aftermath of the world's greatest orgy of greed in the financial markets. An orgy that has made a few of the world's people even more fabulously wealthy at the expense of the majority who are now coming to grips with the protracted hangover of a credit fuelled shopping spree of monstrous proportions.
However, rather than discuss something that has been exhaustively analysed by others, the writer is focussing on some epoch making changes to the Global economy whose impact will affect us all in the years ahead, namely resources. Resources include natural resources such as oil, minerals, water and food. The colossal credit fuelled shopping spree mentioned above has been principally responsible for the hyper development of China, a country of 1.3 billion consumers run with a modified capitalist business model and a command Communist Oligarchy as a Government. The US$ and Euro Bond market funded stunning GDP growth of post 1990 China at an annualised 8 - 11% year on year rate is faster than the growth of any economy in the world's history. From 2001 to today, the world has witnessed the rapid compounded growth of not only China, but Brazil and, lagging somewhat behind, India.
It will have not escaped the reader's attention, that China's demand for mineral resources has been growing at a furious rate, with a slight setback following the October 2008 to March 2009 crash. China has not just been buying up the world's minerals but has been stockpiling inventories of critical minerals and on the world's most aggressive shopping spree for mining companies with the right mineral assets, notably in Australia, South America (outside Brazil) and Africa. Furthermore, China is a significant miner of many of the world's critical minerals and significantly has a current stranglehold on the technologically significant rare earth minerals; more on this in Part II of this series.
No one understands the Global Oil Markets as well as the United States of America, the home of the world's largest public petroleum companies EXXON - MOBIL, CHEVRON and CONOCO - PHILLIPS. The USA has dominated the world oil business since it really became significant some 110 years ago and in terms of their understanding of oil markets, oil reservoir and engineering technology and global petroleum geology the US does not really have an equal. Hence, it has not surprising that US foreign policy has been largely driven by the economics and politics of oil since the beginning of the 20th Century. However, the vast drain on US home oil resources caused by WWII when US oil supplies underpinned the entire Allied war effort, caused the US to focus on the newly discovered major oil fields of the Middle East, in particular, the giant oil pools of Ghawar, Abqaiq, Berri, Safaniya on the Persian Gulf side of Saudi Arabia. These oil pools simply have no equal on the planet, with Ghawar alone equal to many North Seas. Throughout the post war period from 1945 to 1975 the US focused on supplying the bulk of US home needs by essentially ending oil exploration within the lower 48 States of the US. This was done to allow old wells to recover over time and to preserve new resources which could now be discovered with the latest exploration technology. Hence, the writer is confident that the US has wisely conserved its critical oil resources for the future, whilst pumping oil from lower cost sources mostly in the Middle East, Venezuela and Nigeria.
Figure 1: A Map showing the Major Oil Fields of the Middle East (Source: Australia's Online Opinion)
Since 1948 when Palestine was essentially carved up to form the new post Holocaust State of Israel and the Palestinians essentially disenfranchised by sleight of hand, the hitherto good relations between the US and its Allies and the Arab World has steadily worsened, due to the massive influence of the Zionist lobby in the US and the politics and economics of oil. This has been further worsened by US strategic and political initiatives in the region with a "divide and rule policy" employed in the Arab World. The hopelessly corrupt House of Saud, major other beneficiary of the US discovery of oil at Abqaiq in 1933, with its astonishing 7,500 Princes and Princesses, live a life of awesome opulence that would put 17th Century King Louis XIV of France to shame, is backed by a massive CIA and major US military presence that includes neighbouring Qatar, Kuwait and since 2002 Iraq.
The prime objective of this colossal military effort by the US is not the "War on Terror" which is largely a smoke screen to cover the US main objective in the region which is to control the world's key resources of Light Sweet (Arab "A") and Intermediate Crude Oil which is the main feedstock of all US Refineries. The cost and lead time required to re - equip these refineries to take a different crude oil mix from other sources would be immense. Hence the first huge Resource War of the 21st Century broke out when Saddam Hussein's Iraq invaded Kuwait in 1989and has been in progress ever since. It is unlikely to end - hence the "Forever War".
Besides the major Saudi Arabian oil fields, Supergiant oil pools of greater than 1 to 5 Bn barrels exist in the Burgan Field (Kuwait), Rumaylah North and South groups, Halfaya Group, East Baghdad and Mosul and Kirkuk groups. In Iran major fields occur at Masjed - E - Suleiman, Marun, Ahvaz and Gachsaran with a total of seven giant fields and many smaller fields. Iran and Iraq both suffered from serious underinvestment since the Regimes of Saddam Hussein and the Ayatollah Khomeini and from wars that have raged since 1980 to the present day. The US knows full well that the oil fields of both Iraq and Iran are seriously under developed with tremendous potential for expansion of production from poorly equipped well fields and for new discovery utilizing 21st Century state of the art techniques developed by their major petroleum companies and support contractors and consultants such as Schlumberger. Indeed, most estimates put the combined oil resources of Iraq and Iran at double that of Saudi Arabia before it was explored.
Figure 2: The Geography of the Middle East Oil Fields - Battle Ground of "the Great ME Petroleum War"
If the reasons for the "War on Terror" have not really been understood, the reader will be in no doubt now. A glance at Figure 2 spells out the strategic picture of "the Great Middle East Petroleum War". The stakes could hardly be higher, and anyone who believes the US is going to back off due to the cost in "blood and treasure" is fooling no one but themselves. Indeed the writer would advocate that the cost in life lost has been, by WWI and WWII standards, trifling. The US could afford to lose 10 times the number of men for this mission, or perhaps more, and not bat an eyebrow. At stake is control over the global economy and all that that means politically. The Europe, Canada, Australia and Japan also realise this that is why it is a coalition lead by the US.
To bring matters to even greater focus, the only other major oil fields occur in unstable Nigeria, Venezuela, and the newly discovered deep offshore fields of Brazil. In the case of Venezuela and Nigeria, these resources lie in unstable States and largely comprise sulphurous heavy crude not suited to the US major refineries. The major discoveries of the 1970's and 1980's at Prudhoe Bay in Alaska and in the North Sea geologically pale in comparison to their Middle Eastern counterparts, shown above. Furthermore, these relatively smaller fields are approaching exhaustion.
As stated above, US policy post 1945 was to conserve vital US Petroleum Resources by effectively stifling further exploration and development within the US at a time when world oil prices were low. To compensate for the loss of home production the US through the Texaco - Exxon - Mobile controlled ARAMCO controlled the vital supergiant oil fields of the Middle East in Saudi Arabia. These were pumped to meet demand and regulate the oil price, enabling profligate consumption by the US during the post war re - development when it was vital to US policy to rebuild a shattered Europe and Japan. However, the growing conflict between Israel and the Arab States threatened to seriously derail "US Grand Strategy" in the Middle East. Clearly, this problem had to be managed and the powerful Jewish lobby placated. In 1975, matters came to head with the first major oil shock when King Feisal of Saudi Arabia embargoed the US over Palestine and US support for Israel in the Arab - Israeli war, which the Arabs had come close to winning. Following this exercise of Arab Petroleum muscle, and its serious economic consequences and the push for Saudi Arabia to nationalise ARAMCO, the US consortium in ARAMCO were given "the green light" to pump oil out of Saudi Arabia into US Strategic Reserves at full tilt regardless of the consequences for the long term preservation of those reserves. Fortunately, colossal fields like Ghawar stood up to this rapacious pressure remarkably well, prior to the formation of Saudi ARAMCO
The compliant, corrupt, House of Saud, ever fearful of the growing Muslim fundamentalism with two of the world's most holy places on their territory and under their control, Medina and Mecca; and, of their rapidly growing and largely poor and illiterate population and the scope for insurrection, desperately needed US political and military support despite their sympathy with the Palestinian cause. Hence, the US has always been able to bend Saudi will to their strategic ends as they always hold the trump cards. Since the 1975 and 1980 oil shocks, Saudi Arabia has been the world's "swing producer", always countering OPEC calls for higher prices by cranking up supply from their supergiant fields to compensate for any market shortfall in supply. However, this policy, where fields such as Ghawar have been pumped to the maximum, have resulted in increasing incursions of oil field brines into the key reservoirs threatening to cause a shortfall in Saudi production and impact on the global oil price. With many other fields around the world passing "Hubberts peak" (shown below on Figure 3) for their fields, policy makers started to seriously consider the impact of this scenario playing out on the global economy and its implications for the US, Europe and Japan. However, the US was already well ahead of the game and had taken matters into its own hands in an undisclosed preparation for global war.
Figure 3: A 2004 Scenario of Hubbert's famous oil peak in supply
Fully realising the state of the world's, and more importantly, Saudi Arabia's oil reserves, the US rolled out plan "A". Now the reason for building the world's largest and most sophisticated military became apparent. The immense cost and strategic importance of the 15 Super Aircraft Carrier battle groups at last made sense. Without them, US power could not be projected into the Persian Gulf with the same degree of overarching supremacy.
Another major move by the US and Europe in the past 15 years has been the rush to develop the oil resources of the Caspian Sea; shown on Figure 2. These form an extension northwards of the major Iraqi fields into the Caucasus and Caspian Sea, in which Kazakhstan, Azerbaijan and Georgia are of critical importance. Whilst the oil resources of this area are not as great as the main Persian Gulf fields, they are still the geologic equivalent of several North Seas, containing combined reserves of many billions of barrels of oil and trillions of cubic feet of natural gas and gas condensates; as such they comprise a major plank of the overall Middle East Strategy. During the 1920's until the 1950's these deposits comprised the main oil resources of the USSR until the discovery of supergiant oil fields in Siberia and Urals. Once again poor extraction technology and exploration technology under the previous Soviet administration has created major opportunities for the oil majors to capitalise upon.
The destruction of Islamic Fundamentalism in Afghanistan and regime change is a central plank of the overall military, economic and political battle plan. The US cannot afford to waver now whatever the cost. Everything rests on the US achieving success in this mission. That success rests entirely on one thing:
CONTROL OF THE WORLD'S REMAINING RESOURCES OF LIGHT TO INTERMEDIATE CRUDE OIL
Politically, this war would not have been supported by the electorate or the so called Democratic world on such blatant economic grounds. However, remember that Adolf Hitler was desperate in his 1941 "Operation Barbarossa" assault on Russia by Nazi Germany to control the oil fields of the Caspian Sea at Maikop and Baku. The Russians set fire to them all. Hitler understood the Achilles heel of Nazi Germany was resource based. He desperately needed resources to attain his goal of global hegemony. The US is no different. The next instalment of the Battle Plan will be the Invasion of Pakistan and Iran which may lead to a full blown Global War, for which the US is ready as it has canvassed all the options in super computer simulated event modelling at its Military Intelligence Centre. All scenarios have been "dry run". The decisions are a joint military and political one, based on new realities.
The Great 21st Century War for Global Resources has only just begun. It will become greater and wider in its scope embracing a broad range of commodities. It has started with the lifeblood of "the Hydrocarbon Age" - OIL. There is no telling how long this war will last or how far its scope will widen. However, with the rise of China, Brazil and India, and their fast growing demand for critical resources, it is expected that the stakes will mount rapidly.
The impact of "Global Warming" and overexploitation of all resources will create greater imbalances and scarcity of vital food and water resources to a world population of approaching 7 billion. Of one thing we can be sure, the planet is being put under biological stresses it has never had to face since this planet was created from the solar dust cloud some 4.5 billion years ago. These will lead to immense pressures on the human population of the planet. Man has the skills to develop technologies to overcome these huge threats. However, he will have to put aside his greed and selfish nature to attend to these collectively to the benefit and enrichment of all mankind. However, history gives a dismal record of man's ability to be wise under such huge pressures. The wars have already begun lead by a country in which violence and war are very much a part of their culture, like the Romans before them. A country that idolises its military, as the US does in all its films and video games, is a country with a war psychology. This mentality does not auger well for the planet and its human occupants. The Spartans, Greeks, Egyptians, British, French, Spanish, Germans and Japanese have all followed this route to its ultimate demise. Perhaps the US will now join this illustrious band.
THE NEXT INSTALLMENT - PART II - MINERAL RESOURCES
Nigel H Maund, BSc(Hons)Lond., MSc, DIC, MBA, F.Aus.IMM, F.AIG, F.SEG, MIMMM, MSGA, MMSA
October 20th, 2010
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