State of the Blog, Jan 2010

Gas-to-Liquids Production Statistics

Shatha al Musawi

Who is this member of the Iraqi parliament who is suing to stop Dr al-Shahristani in his tracks?

The picture at right is from Troopscoop.  The New York Times covered her in 2005 (worth reading in full):

Tracking al-Shahristani Plan: Iraq Oil Contract Status

It seems worth keeping a regular eye on Dr al-Shahristani's is-he-crazy-or-a-genius plan to develop a sizeable fraction of Iraq's oil reserves all in parallel. Therefore, I've updated the table from my original post with the contract status in each case, and will maintain this periodically in future. Dates that were anticipated are in italics if either they are still in the future, or I haven't been able to confirm yet that they actually happened.

Overall, the final contract negotiation and signing process seems to have gone pretty smoothly and rapidly.

Failed State Index: China in Worsening Economic Decline

Coal-to-Liquids Production Statistics

Most Rapidly Deteriorating Nations

Tar Sands Production Graph

Trends in Failed State Count

There is Method to my Madness

The readership of the blog has been increasing very fast (admittedly from a miniscule base), and it occurs to me that from the perspective of a new reader it must appear that I am exploring a melange of apparently unrelated issues, and it's not clear what I think the connection is to "Risks to Global Civilization".

So let me lay out my hypothesis. I think it's possible that the leading risk to global civilization in the medium term is the following chain of events:

Royal Bank of Scotland on Iraq

According to the London Evening Standard

Royal Bank of Scotland warned that investors expecting the imminent return of China-fuelled oil price rises will be disappointed and that the supply side rather than demand will dominate the oil story in the coming decade.

RBS is still predicting a strong rebound in earnings from the titans of oil, thanks to moderately higher oil prices, however. But Iraq could change the picture entirely. The bank said: “We believe recent news flow from Iraq threatens a paradigm shift in oil markets that could cap oil price expectations and earnings forecasts in the medium term.”

Increases in output from Iraq are likely to be modest until 2013 leaving scope for shares in the sector to rise. But Iraq fears could begin building among investors this year, with the company strategy presentations approaching and the conclusion of Iraq's parliamentary elections in March likely to highlight the potential increase in oil supply.

Well, if you'd been reading this blog, you'd be well informed on both sets of issues :-)

I haven't fully made up my mind here. In particular, I don't yet understand why global oil production has been recovering so fast in the second half of 2009. However, it does seem to me that there is potential for both of the stories above to be true in sequence - there may be enough time for another oil price spike due to OPEC spare capacity getting used up, before an Iraq induced price fall if the al-Shahristani plan succeeds on something like the intended scale.

Where are Chinese Cars in their Oil Consumption?

Jan 2010 OPEC MOMR Out

Saudi Oil Production According to Various Estimates

A Consistency Check on Chinese Vehicle Growth

Iraq Contract Negotiations Proceeding Steadily

Scanning the Iraq news quickly this morning, it looks like the negotiations to finalize the contracts for the al-Shahristani plan are proceeding steadily.  Dow Jones reports:

A consortium led by Exxon Mobil Corp. (XOM) and Royal Dutch Shell PLC (RDSA) Monday accepted amendments made by the Iraqi government to a service contract to develop the West Qurna Phase 1 oil field in southern Iraq, a senior Iraqi oil ministry official said.

"They have accepted the changes, and we are finalizing the deal with them on Jan. 25," Abdul Mahdy al-Ameedi, head of the oil ministry's Petroleum Contracts and Licensing Directorate, told Dow Jones Newswires.

Exxon Mobil, the first U.S. company to gain access to Iraq's oil reserves, and Shell won the right to develop the oil field, which holds proven oil reserves of 8.7 billion barrels, following the country's historic first post-war oil-bidding round held in June 2009.

How Much has OECD Oil Demand Recovered?

The Elephant in the Room

The book reviews I did over the holidays (1, 2) were pretty fun to do, and seemed to be of value to some readers, so I've decided to make a book review a regular weekend feature of this blog.

I'll kick this off with a recent read of mine: The Elephant in the Room: Silence and Denial in Everyday Life by Eviator Zerubavel. I bought this because I think the general topic of denial is very pertinent to any discussion of global risks. When something is scary, people have an incentive to somehow avoid dealing with the facts, and a variety of creative strategies are available to them.

And in the alternative, if you commit yourself in some way to the idea that a particular risk is a big deal, (eg taking a public position, making career choices based on your assessment), you have a psychological incentive to deny evidence that maybe the problem is not so severe after all.

I think it's these dualing incentives that create the structure we so often see around major global risks - one side is busy either ignoring the problem, or if that is no longer working, minimizing it, attacking the integrity of the proponents, etc. Meanwhile, the other side is at risk of exaggerating the seriousness of the problem, ignoring countervailing evidence or important context and of course attacking the integrity of the deniers. Both sides are often sincerely convinced of their own rightness (though there certainly can be scope for cynicism and deliberate dishonesty as well, and both sides will be very quick to point to the evidence for this on the other side, and very slow to examine it on their own side).

New IEA Oil Market Report Out

World Bank Negative on Chinese Bubble

Some people are concerned about the possibility of an asset price bubble in China. I discovered that the World Bank does quarterly reports on China, and the most recent one (4MB PDF) is pretty interesting reading.  The bank does not believe there is a serious bubble:

China's Empty City

Via commenter Gunter, here is the incredible Al-Jazeera report on China's empty city.

Uncertainty Range for Iraqi Production

Urbanization Trends in China

Chinese Transportation Growth

Tariq Shafiq on Iraqi Oil Reserves

Another interesting reference on Iraqi Oil Reserves (besides the al-Mehaidi report I already mentioned) is Iraq Oil Development Policy Options: In Search Of Balance by Tariq Shafiq from December 2003 (ie about 9 months after the US invasion). According to the article,

Tariq Shafiq is a petroleum engineer who was Vice President and Executive Director of the Iraq National Oil Company (INOC). Recently he was the leading researcher and coordinator for a Petrolog & Associates study on Iraq’s exploration and production capacity, in a joint venture with the Centre for Global Energy Studies

Here are a few excerpts of interest

Hubbert's Curve in OilWorld

Jay Park on al-Shahristani Plan

If you are interested in this whole question of the ramp-up of Iraq's production, don't miss Jay Park's comment on my cross-post at The Oil Drum. According to his LinkedIn profile, Jay Park is Partner, and Chair, Global Resources Practice Group at Macleod Dixon LLP in Calgary.  He has been practicing law in the oil and gas area for three decades.

Here's a couple of excerpts of what he had to say (but read the whole thing and the follow-up discussion at the link above).

Iraqi Oil Reserves By Province

I found an interesting report prepared by Kamil al-Mehaidi for the Revenue Watch Institute. It appears to be as of 2006.  Here's what the Institute says of itself:

The Revenue Watch Institute is a non-profit policy institute and grantmaking organization that promotes the responsible management of oil, gas and mineral resources for the public good. With effective revenue management, citizen engagement and real government accountability, natural resource wealth can drive development and national growth. RWI provides the expertise, funding and technical assistance to help countries realize these benefits.

The Revenue Watch Institute is the only organization dedicated exclusively to addressing the special problems of oil, gas and mining-dependent countries—countries where poverty, conflict and corruption too often converge.

RWI is funded through the generous support of the Bill and Melinda Gates Foundation, the William and Flora Hewlett Foundation, and the Open Society Institute, along with several other donors. First launched in 2002 as the Revenue Watch Program of the Open Society Institute, it became an independent organization in June 2006.

Revenue Watch promotes transparent, accountable and effective management of natural resource wealth to help countries avoid the "resource curse." We take a comprehensive approach to improving governance and development across the entire value chain—from the organization of extractive production, revenue generation and revenue management, through the expenditure processes and development outcomes in resource rich countries.

The report has some very interesting detail level tables of reserves and production by province. I don't yet have an independent opinion about the accuracy of these or other Iraqi reserve figures, but thought the information was interesting and worth passing along. This is certainly a level of transparency we would love to have in Saudi Arabia.

Regional Security Perceptions in Iraq

Chinese rare earth exports

I don't know all that much about this issue, but Jamais Cascio has an interesting post up about China placing limits on exports of rare earths that could potentially cause problems for the rest of the world.  The graph is from the Wikipedia article, which is also worth reading.

How Long Do Mega-mega-projects Take?

The al-Shahrastani plan in Iraq raises a number of interesting questions. I think there are generally two directions that scepticism could go in. One is scepticism over the reserves and/or plateaus - is there really enough oil in Iraq and in the auctioned fields specifically, to produce 12mbd at any point in the future?
The second set of questions is around the timing. Is it really realistic that this can be done in six or seven years as the oil minister is claiming?

To me, the second set of questions seems the more urgent to answer. While the exact amount of oil in Iraq is highly debatable, there's not much doubt that there's a heck of a lot of it.

One way to think about the timing issues is that each of these field contracts is basically a huge megaproject. What al-Shahrastani is proposing, and what Big Oil is signing up to deliver, is a huge set of megaprojects, conducted in parallel, in a country that was a war zone until fairly recently. The potential for chaos is considerable. The potential for some folks to make an awful lot of money is also considerable.

Does al-Shahristani Really Think Six Years?

Many people have reacted to Monday's post with disbelief that such an enormous increase in oil production could happen in only six years. I share that scepticism! However, I wanted to document that Dr al-Shahristani really has been saying this. Here's a sampling of news coverage on the point.

The Water Constraint In Iraq

I emailed a few people with links to yesterday's Iraq post. One person who responded (and gave me permission to post his response) was Matt Simmons, who wrote:

At last fall’s Oil and Money conference, the EIG advisory board discussed BP’s just announced service contract. It was the opinion of both Sadad al-Husseini and Issham Chalabi, former Iraq Oil Minister, that the likelihood of these companies ramping up these oil targets is remote at best and if they happen, it will be like Cantarell, doomed for over production and subsequent rapid collapse. A big problem never addressed is the lack of quality water from the shrinking Iraq rivers to due water injection for creating artificial reservoir pressure.

Hope this helps shed some truth into these great hypes.

The other points I'll respond to at some future time, but the water issue I hadn't thought about at all, and seemed quite interesting and important.  Matt is alluding to the fact that it's common practice to inject water into oilfields to help drive the oil through the rock to the producing wells, and this water has to come from somewhere.

Iraq Could Delay Peak Oil a Decade

Historical annual Iraqi oil production, together with linear implementation of Iraqi capacity growth plan announced in 2009. See text for details

Global oil production recovering at 3.7mbd/year

Happy 2010

Best wishes to all for a great 2010!

The picture shows a blue moon* rising over Half Dome, in Yosemite, where we just spent Xmas break.