kendall 2007 ut - aapg exploitation of oil a history of entrepreneurs who made it happen - what does...

Kendall 2007 UT - AAPGKendall 2007 UT - AAPG

Exploitation of Oil Exploitation of Oil A History of EntrepreneursA History of Entrepreneurs

Who Made it HappenWho Made it Happen

Christopher G. St.C. KendallChristopher G. St.C. Kendall

--What does it all mean to What does it all mean to

us all?us all?


Texts on History of Petroleum Texts on History of Petroleum ExploitationExploitation

3 books set Middle East petroleum scene:3 books set Middle East petroleum scene:"The Prize : The Epic Quest for Oil, Money & Power" "The Prize : The Epic Quest for Oil, Money & Power" by Daniel Yergin by Daniel Yergin Records history of petroleum Industry in USA, Records history of petroleum Industry in USA, Baku,Baku, && Middle East. Middle East. "Sowing the Wind: The Seeds of Conflict in the "Sowing the Wind: The Seeds of Conflict in the Middle" by John Keay. Chronicles activities of British Middle" by John Keay. Chronicles activities of British & their allies... & their allies... "A Peace to End All Peace: The Fall of the Ottoman "A Peace to End All Peace: The Fall of the Ottoman Empire and Creation of the Modern Middle East" by Empire and Creation of the Modern Middle East" by David Fromkin. Records why British decided to move David Fromkin. Records why British decided to move on Ottoman Empire and results..... on Ottoman Empire and results.....

These are well written, easy to read informative These are well written, easy to read informative histories!histories!

3 books set Middle East petroleum scene:3 books set Middle East petroleum scene:"The Prize : The Epic Quest for Oil, Money & Power" "The Prize : The Epic Quest for Oil, Money & Power" by Daniel Yergin by Daniel Yergin Records history of petroleum Industry in USA, Records history of petroleum Industry in USA, Baku,Baku, && Middle East. Middle East. "Sowing the Wind: The Seeds of Conflict in the "Sowing the Wind: The Seeds of Conflict in the Middle" by John Keay. Chronicles activities of British Middle" by John Keay. Chronicles activities of British & their allies... & their allies... "A Peace to End All Peace: The Fall of the Ottoman "A Peace to End All Peace: The Fall of the Ottoman Empire and Creation of the Modern Middle East" by Empire and Creation of the Modern Middle East" by David Fromkin. Records why British decided to move David Fromkin. Records why British decided to move on Ottoman Empire and results..... on Ottoman Empire and results.....

These are well written, easy to read informative These are well written, easy to read informative histories!histories!


Current Middle East Current Middle East ReservesReserves

•Saudi Arabia 263.5 bbls 204.5 Tcf – 8 Years– 8 Years•Iraq 112 bbls 109 Tcf•UAE 97.8bbls 212 Tcf•Kuwait 96.5 bbls 52.7Tcf •Iran 89.7 bbls 812.3Tcf•Oman 5.3 bbls 28.4 Tcf•Yemen 4.0 bbls 16.9 Tcf•Qatar 3.7 bbls 300.0 Tcf•Syria 2.5 bbls 8.5 Tcf•Bahrain 0.1 bbls 3.9 Tcf•TOTALTOTAL 675.1 bbls675.1 bbls 1,748.2 Tcf1,748.2 Tcf

Crude Oil(BB) - Natural Gas (TCF)

Most of these countries fields are Most of these countries fields are in carbonatesin carbonatesMost of these countries fields are Most of these countries fields are in carbonatesin carbonates


Non-OPEC countries produced 60% of Non-OPEC countries produced 60% of world's oil in 2005 with a steady increase world's oil in 2005 with a steady increase since 1993 since 1993 Currently only 4 (Saudi Arabia, Iran, UAE, & Currently only 4 (Saudi Arabia, Iran, UAE, & Venezuela) of top 10 oil producers were Venezuela) of top 10 oil producers were OPECOPECMost prolific producers are Most prolific producers are Saudi Arabia 11, Saudi Arabia 11, Russia 9, USA 8, Iran 4, Mexico 4, China 4, Russia 9, USA 8, Iran 4, Mexico 4, China 4, Canada 3, Norway 3, UAE 3, Venezuela 3, Canada 3, Norway 3, UAE 3, Venezuela 3, Kuwait 3, Nigeria 3, Algeria 2, Brazil 2Kuwait 3, Nigeria 3, Algeria 2, Brazil 2Non-OPEC countries have most of world's Non-OPEC countries have most of world's capacity for refining crude oil into gasoline & capacity for refining crude oil into gasoline & heating oilheating oil

Non-OPEC countries produced 60% of Non-OPEC countries produced 60% of world's oil in 2005 with a steady increase world's oil in 2005 with a steady increase since 1993 since 1993 Currently only 4 (Saudi Arabia, Iran, UAE, & Currently only 4 (Saudi Arabia, Iran, UAE, & Venezuela) of top 10 oil producers were Venezuela) of top 10 oil producers were OPECOPECMost prolific producers are Most prolific producers are Saudi Arabia 11, Saudi Arabia 11, Russia 9, USA 8, Iran 4, Mexico 4, China 4, Russia 9, USA 8, Iran 4, Mexico 4, China 4, Canada 3, Norway 3, UAE 3, Venezuela 3, Canada 3, Norway 3, UAE 3, Venezuela 3, Kuwait 3, Nigeria 3, Algeria 2, Brazil 2Kuwait 3, Nigeria 3, Algeria 2, Brazil 2Non-OPEC countries have most of world's Non-OPEC countries have most of world's capacity for refining crude oil into gasoline & capacity for refining crude oil into gasoline & heating oilheating oil

World Petroleum ExploitationWorld Petroleum Exploitation


Iraq's Role?

U.S. War Against Terrorism in a deadly U.S. War Against Terrorism in a deadly phase spreading across Middle East phase spreading across Middle East Middle East a geopolitical cauldron - Middle East a geopolitical cauldron - Caspian States on eastern flank & Caspian States on eastern flank & Mediterranean on western flank; bridge Mediterranean on western flank; bridge between Europe, Africa & Asiabetween Europe, Africa & AsiaImportant current battlefields within region Important current battlefields within region include Iraq & Iran, West Bank, Somalia, include Iraq & Iran, West Bank, Somalia, Sudan & AfghanistanSudan & Afghanistan

U.S. War Against Terrorism in a deadly U.S. War Against Terrorism in a deadly phase spreading across Middle East phase spreading across Middle East Middle East a geopolitical cauldron - Middle East a geopolitical cauldron - Caspian States on eastern flank & Caspian States on eastern flank & Mediterranean on western flank; bridge Mediterranean on western flank; bridge between Europe, Africa & Asiabetween Europe, Africa & AsiaImportant current battlefields within region Important current battlefields within region include Iraq & Iran, West Bank, Somalia, include Iraq & Iran, West Bank, Somalia, Sudan & AfghanistanSudan & Afghanistan

Thomas Homer-Dixon’s ConflictThomas Homer-Dixon’s Conflict ModelModelEnvironmental Scarcity ---> Social Effects ---> Violent ConflictEnvironmental Scarcity ---> Social Effects ---> Violent Conflict


As of January 2004, As of January 2004, OPEC countriesOPEC countries hold 77% of world's proven oil reserves77% of world's proven oil reservesMost major non-OPEC oil producers are Most major non-OPEC oil producers are very large consumers, & low exportersvery large consumers, & low exportersWorld 84 - USA consumesWorld 84 - USA consumes 20.73, imports 20.73, imports 13.15 & exports 1.048 million bbl/day13.15 & exports 1.048 million bbl/dayPersian Gulf OPEC has the world's lowest Persian Gulf OPEC has the world's lowest oil finding & lifting costsoil finding & lifting costsNon OPEC oil liable to price collapse e.g. Non OPEC oil liable to price collapse e.g. Russia etcRussia etcConsumption grows 3% annually Consumption grows 3% annually

As of January 2004, As of January 2004, OPEC countriesOPEC countries hold 77% of world's proven oil reserves77% of world's proven oil reservesMost major non-OPEC oil producers are Most major non-OPEC oil producers are very large consumers, & low exportersvery large consumers, & low exportersWorld 84 - USA consumesWorld 84 - USA consumes 20.73, imports 20.73, imports 13.15 & exports 1.048 million bbl/day13.15 & exports 1.048 million bbl/dayPersian Gulf OPEC has the world's lowest Persian Gulf OPEC has the world's lowest oil finding & lifting costsoil finding & lifting costsNon OPEC oil liable to price collapse e.g. Non OPEC oil liable to price collapse e.g. Russia etcRussia etcConsumption grows 3% annually Consumption grows 3% annually

World Petroleum ExploitationWorld Petroleum Exploitation World Petroleum ExploitationWorld Petroleum Exploitation


Commodity ScarcityCommodity Scarcity• Exploration potentialExploration potential

• Gulf coast & West Texas Gulf coast & West Texas for small for small USUS companies companies

• Oil shales of Western USA & Athabaska Oil shales of Western USA & Athabaska tar sandstar sands

• Employment in exploration & builders of Employment in exploration & builders of exploitation models of current oil fields in exploitation models of current oil fields in Secondary & Tertiary recovery mode!Secondary & Tertiary recovery mode!

• At least 1% of you in this room should be At least 1% of you in this room should be millionaires before you retire!millionaires before you retire!

• Exploration potentialExploration potential• Gulf coast & West Texas Gulf coast & West Texas for small for small USUS

companies companies • Oil shales of Western USA & Athabaska Oil shales of Western USA & Athabaska

tar sandstar sands• Employment in exploration & builders of Employment in exploration & builders of

exploitation models of current oil fields in exploitation models of current oil fields in Secondary & Tertiary recovery mode!Secondary & Tertiary recovery mode!

• At least 1% of you in this room should be At least 1% of you in this room should be millionaires before you retire!millionaires before you retire!


1850 - 1910:1850 - 1910: Kerosene Kerosene the fuel of choicethe fuel of choice

1869:1869: Suez Canal opens Suez Canal opens

1878:1878: Electric Light Electric Light

1908:1908: Auto Boom starts Auto Boom starts

1912:1912: UK Navy uses Oil UK Navy uses Oil

1914 – 1918:1914 – 1918: WWI WWI1920:1920: 9 million vehicles 9 million vehicles U.SU.S

1938 – 1945:1938 – 1945: WWII WWII

1948:1948: Israel born Israel born

1948:1948: 1 1stst Arab Israeli War Arab Israeli War

1948:1948: US Net Oil Importer US Net Oil Importer

1952:1952: Iran Oil Nationalized Iran Oil Nationalized

1956:1956: Suez Nationalized Suez Nationalized

1956:1956: 2 2ndnd Arab - Israeli War Arab - Israeli War

1960:1960: OPEC founded OPEC founded

1967:1967: 3 3rdrd Arab - Israeli War Arab - Israeli War

1969:1969: Qaddafi coup Qaddafi coup

1978:1978: Khomeini coup Khomeini coup

1980:1980: Iraq – Iran War Iraq – Iran War

1990-91:1990-91: 1 1stst US - Iraq War US - Iraq War

2003 - :2003 - : 2 2ndnd US - Iraq War US - Iraq War

Oil Time Line – Important Oil Time Line – Important Events Events


How:How: Seeps (Oil Springs), & Wells - Hand Seeps (Oil Springs), & Wells - Hand Dug & Drilled (Percussion & Rotary)Dug & Drilled (Percussion & Rotary)Where:Where: Asia, Middle East, Europe & Asia, Middle East, Europe & AmericaAmericaUse:Use: Heat, Paving, Light, Kerosene, Heat, Paving, Light, Kerosene, Transport (Ships and Automobiles)Transport (Ships and Automobiles)Entrepreneurs:Entrepreneurs: John Rockefeller, Nobels, John Rockefeller, Nobels, Rothschilds, Marcus Samuel, William Rothschilds, Marcus Samuel, William D’Arcy, Henri Deterding, Calouste Sarkis D’Arcy, Henri Deterding, Calouste Sarkis GulbenkianGulbenkianMovers:Movers: Stalin, Ford, Fisher, Churchill, Stalin, Ford, Fisher, Churchill, Ibn Saud, Mossadegh, Shah Reza Ibn Saud, Mossadegh, Shah Reza Pahlavi, Nasser, Khomeini, Mohammar Pahlavi, Nasser, Khomeini, Mohammar Qaddafi, Saddam HusseinQaddafi, Saddam Hussein

History of Petroleum ExploitationHistory of Petroleum Exploitation


The PlayersThe PlayersJohn RockefellerJohn Rockefeller

RothschildRothschild

Nobles Robert, Ludwig, & Alfred Nobles Robert, Ludwig, & Alfred

Marcus SamuelMarcus Samuel

William D’ArcyWilliam D’Arcy

Henri DeterdingHenri Deterding

Calouste GulbenkianCalouste Gulbenkian

StandardStandardOilOil

Baku OilBaku OilNobel Brothers OilNobel Brothers Oil

ShellShellTransportationTransportation

PersianPersianOilOil

RoyalRoyalDutchDutchShellShell

5% Arabian5% ArabianOilOil


Movers &Movers & Shakers ShakersHenry FordHenry Ford

Jackie FisherJackie Fisher

Winston ChurchillWinston Churchill

Ibn SaudIbn Saud

Dr. Mohammad MossadeghDr. Mohammad Mossadegh

Shah Reza PahlaviShah Reza Pahlavi

Gamal Abdel NasserGamal Abdel Nasser

Ayatollah Ruhollah Khomeini Ayatollah Ruhollah Khomeini

Mohammar QaddafiMohammar Qaddafi

Saddam HusseinSaddam Hussein

Admiral Admiral FisherFisher

WinstonWinstonChurchillChurchill

Ibn SaudIbn SaudMossadeghMossadegh

Gamal AbdelGamal AbdelNasserNasser

KhomeiniKhomeini

QaddafiQaddafi

ShahShah

Henry FordHenry Ford

Saddam Saddam HusseinHussein


Appalachians: Appalachians: Key Elements Key Elements Rail Boom of US (1830-1860)Rail Boom of US (1830-1860)Refining of Oil for Kerosene (1850)Refining of Oil for Kerosene (1850)Oil Boom after Drake’s well (1859)Oil Boom after Drake’s well (1859)Standard Oil Incorporated (1870)Standard Oil Incorporated (1870)Light bulb of Thomas Edison (1878) Light bulb of Thomas Edison (1878)

Baku:Baku: Key Elements Key ElementsRail Boom of Russia (1830-1917)Rail Boom of Russia (1830-1917)Refining of Oil for Kerosene (1830)Refining of Oil for Kerosene (1830)Oil Boom with Nobel Brothers Incorporation (Oil Boom with Nobel Brothers Incorporation (1875)1875)Tanker "Zoroaster" (1877) & Pipeline (1897-1907) Tanker "Zoroaster" (1877) & Pipeline (1897-1907)

World Wide:World Wide: Key Elements – Spindletop (1901) Key Elements – Spindletop (1901)Suez Canal Built (Suez Canal Built (18691869))Henry Ford Mass Produces Cars (1908) 9m – (1922) Henry Ford Mass Produces Cars (1908) 9m – (1922) Royal Navy Converts to Oil (1912)Royal Navy Converts to Oil (1912)

Early History of Oil Early History of Oil MonopoliesMonopolies


Early History - AppalachiansEarly History - Appalachians

Dr. Abraham Gesner – Dr. Abraham Gesner – 1849 Distills Kerosene1849 Distills Kerosene

from Oil - Whale Oil from Oil - Whale Oil EndsEnds Drake’s well (1859Drake’s well (1859)

1860 – 1875 Oil Boom 1860 – 1875 Oil Boom 1830-1860 US Rail 1830-1860 US Rail

Lines boom Lines boom

1855 assist 1855 assist bookkeeper bookkeeper

Hewitt & Tuttle, Hewitt & Tuttle, quicklyquickly

cashier & bookkeepercashier & bookkeeper

1862 - Clark & 1862 - Clark & RockefellerRockefeller

Invest in RefineryInvest in Refinery


Standard Oil Monopoly Standard Oil Monopoly GrowsGrows

1867: 1867: Rockefeller & Andrews absorbed William Rockefeller's refinery, Rockefeller & Andrews absorbed William Rockefeller's refinery, & Henry M. Flagler joins partnership& Henry M. Flagler joins partnership

1870: 1870: Standard Oil Company forms - John D. Rockefeller president, Standard Oil Company forms - John D. Rockefeller president, William Rockefeller, Flagler, Andrews & Stephen Harkness William Rockefeller, Flagler, Andrews & Stephen Harkness

1870: 1870: Uses South Improvement Company secret rebates for better Uses South Improvement Company secret rebates for better rates with Pennsylvania Railroad (PRR), Eire, & New York Centralrates with Pennsylvania Railroad (PRR), Eire, & New York Central

Standard Oil organization buys-up opposing interests, or guarantees Standard Oil organization buys-up opposing interests, or guarantees financial security & jobs as partners gaining a monopoly on oil financial security & jobs as partners gaining a monopoly on oil production in USproduction in US

1882: 1882: Separate companies organized in each stateSeparate companies organized in each state

1890: 1890: Standard Oil controlled over 90% of refined oil in USAStandard Oil controlled over 90% of refined oil in USA

1895: 1895: Rockefeller retires from active business but keeps his title as Rockefeller retires from active business but keeps his title as president till 1911president till 1911

John Rockefeller - TimelineJohn Rockefeller - Timeline


Standard Oil Monopoly EndsStandard Oil Monopoly Ends

1900: 1900: Mergers made Standard Oil the largest company in U.S. with Mergers made Standard Oil the largest company in U.S. with fields located in U.S. Began exporting products to Europe & Far East fields located in U.S. Began exporting products to Europe & Far East competing with "Shell" Transport & Trading Company & Royal Dutch competing with "Shell" Transport & Trading Company & Royal Dutch Petroleum Co.Petroleum Co.

1901: 1901: Jan 10 Spindletop's discovery & uncontrolled exploitation Jan 10 Spindletop's discovery & uncontrolled exploitation busted Standard Oil) monopoly in U.S. so now it competed with Shell busted Standard Oil) monopoly in U.S. so now it competed with Shell Transport & Trading, (begun life ferrying oil produced by Rothschilds Transport & Trading, (begun life ferrying oil produced by Rothschilds and Nobles in Baku to Far East and Western Europe) and Royal Dutchand Nobles in Baku to Far East and Western Europe) and Royal Dutch

1903: 1903: Royal Dutch & Shell Oil established the jointly owned Asiatic Royal Dutch & Shell Oil established the jointly owned Asiatic Petroleum Company Limited to combat Standard Oil.Petroleum Company Limited to combat Standard Oil.

1911: 1911: May 15 Supreme Court US sees Standard Oil, now holding 64% May 15 Supreme Court US sees Standard Oil, now holding 64% of oil market, as a monopoly & orders form some 37 new companiesof oil market, as a monopoly & orders form some 37 new companies

John Rockefeller - TimelineJohn Rockefeller - Timeline




World Wide:World Wide: Key Elements – Spindletop (1901) Key Elements – Spindletop (1901)Suez Canal Built (Suez Canal Built (18691869))Henry Ford Mass Produces Cars (1908) 9m – (1922)Henry Ford Mass Produces Cars (1908) 9m – (1922)Royal Navy Converts to Oil (1912)Royal Navy Converts to Oil (1912)



Caspian Caspian Sea Sea

Baku Baku

Volga Delta

Volga Delta

Abseron Peninsula

Abseron Peninsula

Zagros MountainsZagros Mountains

Arab ScholarsArab Scholars& Marco Polo& Marco Polo

report civilized report civilized man using oil man using oil

seeps onseeps onAbseron Abseron

Peninsula Peninsula as source of light as source of light

& fuel& fuel With industrializationWith industrialization1830-19011830-1901 became became

world’s largestworld’s largestsource ofsource of

kerosene & oilkerosene & oil


Early History - BakuEarly History - BakuRothchildRothchild

Nobel Brothers OilNobel Brothers Oil

1830-1917 Rail 1830-1917 Rail Boom of RussiaBoom of Russia

Tsars Alex II & IIITsars Alex II & III

1875 – Nobels Invest in 1875 – Nobels Invest in Oil, Exploration & Oil, Exploration &

Refineries, Refineries,

1897 - 1907: 1897 - 1907: Nobel’s Kerosene Nobel’s Kerosene

PipelinePipeline

1883: Rothchild’s 1883: Rothchild’s RailwayRailway

1880’s Invests in Oil 1880’s Invests in Oil Exploration, Refineries, Exploration, Refineries,

Rail & ShipsRail & Ships

Invest in Oil & Invest in Oil & Rail Rail

1878 - Bibi-Heybat?1878 - Bibi-Heybat?

1877 – Nobels 1877 – Nobels Invest TankersInvest Tankers

1875 – Invest in1875 – Invest inKerosene Flimsies Kerosene Flimsies


Baku Oil Monopoly GrowsBaku Oil Monopoly Grows

1873: 1873: Russia used Nobel’s guns which needed a supply of walnut wood Russia used Nobel’s guns which needed a supply of walnut wood for gunstocks from Caucasus region. Oil fever just began in Baku & for gunstocks from Caucasus region. Oil fever just began in Baku & Robert saw profit & brought a small refinery & kerosene plant with Robert saw profit & brought a small refinery & kerosene plant with "walnut money""walnut money"1879: 1879: With his younger smarter brother Ludwig founded Nobel Brothers' With his younger smarter brother Ludwig founded Nobel Brothers' Oil Producing & Extracting Company. Oil Producing & Extracting Company. Ludwig, organized & engineered modern technology related to oil Ludwig, organized & engineered modern technology related to oil production. Built 1production. Built 1stst tanker, Zoroaster, in Caspian Sea reducing tanker, Zoroaster, in Caspian Sea reducing transport expenses. Success led to tanker fleet (including Moses, transport expenses. Success led to tanker fleet (including Moses, Spinoza, & Darwin) further increasing turnover with Nobel’s supplying Spinoza, & Darwin) further increasing turnover with Nobel’s supplying Russia with Baku oil via rivers & Caspian Sea. Ludwig 1Russia with Baku oil via rivers & Caspian Sea. Ludwig 1stst to introduce to introduce railway tanks for oil transport.railway tanks for oil transport.1879: 1879: Built a pipeline reducing transport expenses by five, paying for Built a pipeline reducing transport expenses by five, paying for itself in a year. Built iron oil reservoirs with tank parks in Baku & other itself in a year. Built iron oil reservoirs with tank parks in Baku & other cities. cities. 18801880's Rothschild's interests in Baku supply their refinery on Adriatic 's Rothschild's interests in Baku supply their refinery on Adriatic with Russian oil. In exchange built a railroad from Baku to Black Sea with Russian oil. In exchange built a railroad from Baku to Black Sea port of Batum. Baku oil now major world supplier & new railroad meant port of Batum. Baku oil now major world supplier & new railroad meant Rothschilds had more oil than they could sell & now competing with Rothschilds had more oil than they could sell & now competing with Standard oil, sought markets east of Suez.Standard oil, sought markets east of Suez.1890: 1890: Baku now busiest port in world.Baku now busiest port in world.

Nobels & Rothchilds - TimelineNobels & Rothchilds - Timeline


Baku Oil Monopoly LivesBaku Oil Monopoly Lives1878: 1878: Marcus Samuel expanded from antiques, curios, bric-a-brac, & Marcus Samuel expanded from antiques, curios, bric-a-brac, & exotic sea shells to selling cased Russian kerosene in Far East, top-exotic sea shells to selling cased Russian kerosene in Far East, top-selling fuel in world & used for lamps and stoves selling fuel in world & used for lamps and stoves Standard Oil under priced competitors to defend its Asian markets Standard Oil under priced competitors to defend its Asian markets & controlled almost all world’s supplies. & controlled almost all world’s supplies. 12 years later Samuel visited Baku with Rothschilds & thought to 12 years later Samuel visited Baku with Rothschilds & thought to export oil to Far East via Suez Canal (export oil to Far East via Suez Canal (opened in 1869opened in 1869), countering ), countering Standard Oil competition in region. Built eight tankers that met Standard Oil competition in region. Built eight tankers that met safety regs. of canal to Singapore & Bangkok after noticed harbor safety regs. of canal to Singapore & Bangkok after noticed harbor in Constantinople jammed with tankers loading Russian oil. in Constantinople jammed with tankers loading Russian oil. Rejected Standard's acquisition overtures, Samuel created "Shell" Rejected Standard's acquisition overtures, Samuel created "Shell" Transport & Trading in 1897. Transport & Trading in 1897. 1898: 1898: Rothschild brothers formed Mazut Transportation Society & Rothschild brothers formed Mazut Transportation Society & by 1912 owned 13 large tankers in Caspian with auxiliary ships; by 1912 owned 13 large tankers in Caspian with auxiliary ships; partnered with Shell to transport excess kerosene to Far East.partnered with Shell to transport excess kerosene to Far East.1900: 1900: Nobel Brothers & Rothchild's have oil production exceeding Nobel Brothers & Rothchild's have oil production exceeding USUS1901: 1901: Jan 10 Spindletop's discovery meant that Shell Transport & Jan 10 Spindletop's discovery meant that Shell Transport & Trading, that had been ferrying oil produced by the Rothschilds Trading, that had been ferrying oil produced by the Rothschilds and Nobles in Baku to the Far East & Western Europe could and Nobles in Baku to the Far East & Western Europe could compete directly Standard Oil at a favorable ratecompete directly Standard Oil at a favorable rate1903: 1903: Royal Dutch & Shell established jointly owned Asiatic Royal Dutch & Shell established jointly owned Asiatic Petroleum Company LimitedPetroleum Company Limited

Nobels, Rothchilds, Shell & Standard OilNobels, Rothchilds, Shell & Standard Oil


Joseph StalinJoseph Stalin

1879:1879: December 9 - Joseph Vissarionovich Djugashvili (Stalin) was December 9 - Joseph Vissarionovich Djugashvili (Stalin) was born in Gori, Georgia. born in Gori, Georgia. 1888-94:1888-94: Elementary clerical school in Gori. Elementary clerical school in Gori. 1894:1894: Begins studies at Tiflis Theological Seminary. Begins studies at Tiflis Theological Seminary. 1895:1895: Contacts groups of Russian Marxists exiled to Transcaucasia Contacts groups of Russian Marxists exiled to Transcaucasia by tsarist government.by tsarist government.1896-1898:1896-1898: At Theological Seminary in Tiflis gathers Marxist At Theological Seminary in Tiflis gathers Marxist students & studies Marx, Engels, & Lenin.students & studies Marx, Engels, & Lenin.1898:1898: January formed workers' Marxist circle in Central Railway January formed workers' Marxist circle in Central Railway Workshops of Tiflis.Workshops of Tiflis.1899:1899: May 29 Stalin expelled from Tiflis Theological Seminary for May 29 Stalin expelled from Tiflis Theological Seminary for propagating Marxism.propagating Marxism.1898-1904:1898-1904: Organized, directed revolutionary activities, writes Organized, directed revolutionary activities, writes leaflets, lead strikes & sent to Siberia; received letter from Lenin & leaflets, lead strikes & sent to Siberia; received letter from Lenin & escaped back to Baku to lead general strike of Baku workers.escaped back to Baku to lead general strike of Baku workers.

18931893 19031903


Baku Oil Monopoly DiesBaku Oil Monopoly Dies1903 & 1904:1903 & 1904: Oil worker strikes common against Tsar Oil worker strikes common against Tsar1904:1904: Baku kerosene supplied 47% of needs of UK & 71 % of France Baku kerosene supplied 47% of needs of UK & 71 % of France1905:1905: Revolution halts production at Baku by oil worker strikes; Josef Revolution halts production at Baku by oil worker strikes; Josef Dzhugashvili (Josef Stalin) exiled to SiberiaDzhugashvili (Josef Stalin) exiled to Siberia1911:1911: Musavat party urges a Muslim state with Azerbaijan under Turkey Musavat party urges a Muslim state with Azerbaijan under Turkey1914-18:1914-18: Baku oilfields & oil refineries control by Shell & Nobel Baku oilfields & oil refineries control by Shell & Nobel Brothers, supply Russian Army. UK interest in Transcaucasia & oil-rich Brothers, supply Russian Army. UK interest in Transcaucasia & oil-rich area area 1917:1917: Armed intervention, aimed at Bolsheviks in Transcaucasia & East Armed intervention, aimed at Bolsheviks in Transcaucasia & East to gain control of Baku's oil, discussed in London. Henri Deterding, to gain control of Baku's oil, discussed in London. Henri Deterding, Shell president, buys shares of largest oil producers who fled Baku after Shell president, buys shares of largest oil producers who fled Baku after Oct revolution. Sets up military-political mission in Iran with General Oct revolution. Sets up military-political mission in Iran with General DunstervilleDunsterville1918:1918: March pogroms against Azerbaijanis by Armenians & Bolsheviks March pogroms against Azerbaijanis by Armenians & Bolsheviks in Baku. Declaration of Baku Commune establishes links with Moscow in Baku. Declaration of Baku Commune establishes links with Moscow & recognizes role of Russian Federation . & recognizes role of Russian Federation . 1920:1920: April 28, Bolsheviks seize power in Baku & Nobels sell most of April 28, Bolsheviks seize power in Baku & Nobels sell most of Russian holdings to Standard Oil (NJ). Standard Oil protests Russian holdings to Standard Oil (NJ). Standard Oil protests nationalization refuses cooperation with Soviet government. Mobil, nationalization refuses cooperation with Soviet government. Mobil, invests in Russia. Continued inflow of Western funds help Russian oil invests in Russia. Continued inflow of Western funds help Russian oil production to recover, & by 1923 oil exports climb back to pre-production to recover, & by 1923 oil exports climb back to pre-revolutionary levels.revolutionary levels.1920:1920: Roughly 9 million gas-burning vehicles now in the U.S Roughly 9 million gas-burning vehicles now in the U.S




World Wide:World Wide: Key Elements – Spindletop (1901) Key Elements – Spindletop (1901)Suez Canal Built (Suez Canal Built (18691869))Henry Ford Mass Produces Cars (1908) 9m – (1922)Henry Ford Mass Produces Cars (1908) 9m – (1922)Royal Navy Converts to Oil (1912)Royal Navy Converts to Oil (1912)



Central Asian & Middle Central Asian & Middle East OilEast Oil

BakuBakuBatumBatum

SuezSuezMISMIS

KirkukKirkuk


John Arbuthnot “Jackie” Fisher:John Arbuthnot “Jackie” Fisher: 1st Baron Fisher (Jan 1st Baron Fisher (Jan 25, 1841 – July 10, 1920), joined Navy in 1854 & as 325, 1841 – July 10, 1920), joined Navy in 1854 & as 3rdrd Sea Sea Lord built 1Lord built 1st st destroyers, 1902 2destroyers, 1902 2ndnd Sea Lord, in 1905 1 Sea Lord, in 1905 1stst Sea Lord when Germany & Britain in naval arms race. Sea Lord when Germany & Britain in naval arms race. Preferred battlecruiser with speed not amour, introduced Preferred battlecruiser with speed not amour, introduced submarines & converted from coal to oil fuelingsubmarines & converted from coal to oil fuelingWinston Churchill:Winston Churchill: After career as journalist, in army and After career as journalist, in army and then parliament, in 1912 became 1then parliament, in 1912 became 1stst Lord of Admiralty & Lord of Admiralty & ordered conversion from coal to oilordered conversion from coal to oil1901: 1901: Spindletop's discovery lead to Shell Transport & Spindletop's discovery lead to Shell Transport & Trading needing salesTrading needing sales

British Navy British Navy

& Petroleum& PetroleumFisherFisher ChurchillChurchill


Oil & FordsOil & FordsAutomobileAutomobile

1896:1896: Ford had constructed his first Ford had constructed his first horseless carriage which he sold in horseless carriage which he sold in order to finance work on an improved order to finance work on an improved model.model. 1908:1908: Ford T in production, price as low Ford T in production, price as low as $280. Nearly 15,500,000 sold in the as $280. Nearly 15,500,000 sold in the United States. The Model T heralds United States. The Model T heralds beginning of Motor Age and the car has beginning of Motor Age and the car has evolved from luxury item for the well-to-evolved from luxury item for the well-to-do to essential transportation for the do to essential transportation for the ordinary manordinary man1920:1920: Roughly 9 million gas-burning Roughly 9 million gas-burning vehicles now in the U.Svehicles now in the U.S


Zagros MountainsZagros Mountains

Abundant Oil Abundant Oil Seeps Seeps

Abundant Abundant AnticlinesAnticlines


Iranian Negotiations BeginIranian Negotiations BeginJacques de Morgan:Jacques de Morgan: An archeologist noted oil An archeologist noted oil seeps in western & SW Persia.seeps in western & SW Persia.

1901:1901: A friend of Persian grand vizier, Antoine A friend of Persian grand vizier, Antoine Kitabgi, Persian commissioner-general of Paris Kitabgi, Persian commissioner-general of Paris Exposition 1900, thinks local oil industry will Exposition 1900, thinks local oil industry will develop. Helped Baron Julius de Reuter with develop. Helped Baron Julius de Reuter with Iranian government concessions that failed.Iranian government concessions that failed.

1901:1901: Asked Sir Henry Drumond Wolff, once Asked Sir Henry Drumond Wolff, once UK minister in Tehran, locate UK investor for UK minister in Tehran, locate UK investor for oil concession.oil concession.

1901:1901: UK William Knox D'Arcy (with Australian UK William Knox D'Arcy (with Australian gold mining fortune) acquires 60 year oil gold mining fortune) acquires 60 year oil concession for all Persian Empire except concession for all Persian Empire except Russian border.Russian border.


1905:1905: Burma Oil Comp supplies D'Arcy with more finance Burma Oil Comp supplies D'Arcy with more finance1908:1908: Oil at Masjid-i-Suleiman Oil at Masjid-i-Suleiman1907: 1907: Royal Dutch Shell incorporated Royal Dutch Shell incorporated (60%RD - 40%Sh)(60%RD - 40%Sh)1909:1909: Anglo-Persian Oil Company” forms to develop field Anglo-Persian Oil Company” forms to develop field1911:1911: 138 mile pipe Masjid-I-Suleiman - Abadan refinery 138 mile pipe Masjid-I-Suleiman - Abadan refinery1912:1912: Anglo-Persian 10-year contract with Royal Dutch- Anglo-Persian 10-year contract with Royal Dutch-Shell as outlet for crude & oil productsShell as outlet for crude & oil products1914:1914: Anglo-Persian contract to supply Navy’s ships & UK Anglo-Persian contract to supply Navy’s ships & UK government invest £2 million becomes major shareholdergovernment invest £2 million becomes major shareholder1915:1915: Anglo-Persian forms British Tanker Company & at Anglo-Persian forms British Tanker Company & at end of WW I owns a shipping fleetend of WW I owns a shipping fleet1917:1917: Anglo-Persian buys British Petroleum Company, Anglo-Persian buys British Petroleum Company, acquiring a marketing organization for products & founds acquiring a marketing organization for products & founds a research centre at Sunbury-on-Thames in UKa research centre at Sunbury-on-Thames in UK

Masjid-i-Masjid-i-SuleimanSuleiman D’ArcyD’Arcy


Calouste Calouste Sarkis 5% Sarkis 5%

GulbenkianGulbenkian1869. March 29th:1869. March 29th: Wealthy Armenian family in Istanbul, Wealthy Armenian family in Istanbul, Banker father imported Russian kerosene to Ottoman Banker father imported Russian kerosene to Ottoman empire. Educated in Turkey, & France empire. Educated in Turkey, & France 1897: 1897: Engineering degree, London Kings's CollegeEngineering degree, London Kings's College1898: 1898: Financial & oil advisor to Turkish embassies Paris & Financial & oil advisor to Turkish embassies Paris & LondonLondon1902:1902: Becomes British Citizen Becomes British Citizen1907: 1907: Helped form Royal Dutch Shell Helped form Royal Dutch Shell (60%RD - 40%Sh)(60%RD - 40%Sh)1908: 1908: Organized UK & Dutch Oil Co’s as Turkish Organized UK & Dutch Oil Co’s as Turkish Petroleum Co. Called Mr. 5% from holdingsPetroleum Co. Called Mr. 5% from holdings1910:1910: Consultant to Turkish National Bank pushing Oil Consultant to Turkish National Bank pushing Oil exploration in Iraq & opening up Middle Eastexploration in Iraq & opening up Middle East


Calouste Calouste SarkisSarkis

5% Gulbenkian5% Gulbenkian1928: 1928: Post WWI architect of Red Line Agreement Post WWI architect of Red Line Agreement with British (Persian Oil), Anglo-Dutch (Shell), with British (Persian Oil), Anglo-Dutch (Shell), French (CFP) & US (Exxon & Mobil) joint venture in French (CFP) & US (Exxon & Mobil) joint venture in former Ottoman empire producing areas except former Ottoman empire producing areas except Kuwait & Iran for 5% of all oil found.Kuwait & Iran for 5% of all oil found.Oil in Iraq & Saudi Arabia made him one of world's Oil in Iraq & Saudi Arabia made him one of world's richest men.richest men.Avoided taxes by shuttling between Ritz Hotel in Avoided taxes by shuttling between Ritz Hotel in London & Ritz in Paris.London & Ritz in Paris.Diplomatic status as accredited to Iraqi embassy of Diplomatic status as accredited to Iraqi embassy of London exempting from taxationLondon exempting from taxationFormed Gulbenkian Foundation in Portugal and Formed Gulbenkian Foundation in Portugal and supported the Artssupported the Arts


Red Line Map of GulbenkianRed Line Map of Gulbenkian


The Gulbenkian TPC The Gulbenkian TPC AgreementAgreement


Oil & BritishOil & BritishFleet - IraqFleet - Iraq

1908:1908: discovery of giant Masjid-I-Suleiman by discovery of giant Masjid-I-Suleiman by Anglo-Persian Oil Co reinforces potential of Anglo-Persian Oil Co reinforces potential of Mosul VilayetMosul Vilayet1909:1909: Sultan deposed within 24 hours of Sultan deposed within 24 hours of Anglo-Anglo-PersianPersian signing concession for Mosul Vilayetsigning concession for Mosul Vilayet1912-1913:1912-1913: UK Government proposes Royal UK Government proposes Royal Navy be oil powered & so needs own sourceNavy be oil powered & so needs own source1914:1914: Government has Anglo-Persian join TPC Government has Anglo-Persian join TPC with 50% interest while buying controlling with 50% interest while buying controlling interest of Anglo-Persianinterest of Anglo-Persian


Iraq Exploration - EventsIraq Exploration - Events28 June 1914:28 June 1914: Grand Vizier sends letter to UK & Grand Vizier sends letter to UK & German Governments proposing to issue German Governments proposing to issue concession to TPCconcession to TPC1920:1920: Treaty Of Sevres Treaty Of Sevres

German interests in TPC assigned to FranceGerman interests in TPC assigned to FranceGovernment of Iraq promised 20% of TPCGovernment of Iraq promised 20% of TPCUS Government objects to exclusion of US Government objects to exclusion of American CompaniesAmerican Companies

1923:1923: Treaty of Lausanne – Iraq becomes British Treaty of Lausanne – Iraq becomes British Mandate but status of Mosul Vilayet unresolved Mandate but status of Mosul Vilayet unresolved 1923:1923: TPC Starts Negotiations with Government TPC Starts Negotiations with GovernmentMarch 1925:March 1925: Signing of Concession with TPC, Signing of Concession with TPC, later Iraq Petroleum Company but with later Iraq Petroleum Company but with no Iraqi no Iraqi direct interestdirect interest


Iraq Petroleum Company Iraq Petroleum Company (IPC) Shareholders(IPC) Shareholders

Shell (Anglo-Dutch)Shell (Anglo-Dutch) 23.75% 23.75%BP (British)BP (British) 23.75% (Anglo-Per & Anglo- 23.75% (Anglo-Per & Anglo-

Iranian)Iranian)CFP (French)CFP (French) 23.75% (now Total Fina Elf) 23.75% (now Total Fina Elf)Exxon (US)Exxon (US) 11.875% (now Exxon-Mobil) 11.875% (now Exxon-Mobil)Mobil (US)Mobil (US) 11.875% (now Exxon-Mobil) 11.875% (now Exxon-Mobil)Gulbenkian Gulbenkian (Independent) (Independent) 5% 5%

Companies also agreed not to compete with each Companies also agreed not to compete with each other through most of previous Turkish Empire, other through most of previous Turkish Empire, including Saudi Arabia : Exxon & Mobil including Saudi Arabia : Exxon & Mobil reneging on agreement when they formed reneging on agreement when they formed Aramco in Saudi Arabia in 1930’s.Aramco in Saudi Arabia in 1930’s.


TheThe Way it Way it was!was!

ResultsResultsofof

TreatyTreatyofof

SevresSevres


The 6th Exploration Well The 6th Exploration Well Spudded after Concession Spudded after Concession

was granted in 1925was granted in 1925

Well blew wild at 90,000 Well blew wild at 90,000 bbls/Daybbls/Day

Reserves of some 17 Billion Reserves of some 17 Billion barrels in Tertiary & barrels in Tertiary &

CretaceousCretaceous

1313thth October 1927, Qaiyarah-1, October 1927, Qaiyarah-1, 4000 Bopd, 124000 Bopd, 120 0 APIAPI

Iraq – FirstIraq – FirstMajor DiscoveryMajor Discovery

14th October 1927 14th October 1927 Baba Gurgur 1Baba Gurgur 1

(Kirkuk #1)(Kirkuk #1)

Kendall 2007 UT - AAPGKendall 2007 UT - AAPGMax SteinekeMax Steineke

History of Petroleum ExplorationHistory of Petroleum Exploration 1933:1933: Chevron acquired a lease to explore Chevron acquired a lease to explore in Saudi Arabiain Saudi Arabia1938:1938: Steineke found oil at the Dammam Steineke found oil at the Dammam domedome1938:1938: Oil was first discovered in KuwaitOil was first discovered in Kuwait1939:1939: Chevron had production & exported Chevron had production & exported the first oilthe first oil1939:1939: Oil is discovered in QatarOil is discovered in Qatar

The start of the golden age of US The start of the golden age of US involvement with explorationinvolvement with exploration forfor foreign cheap oilforeign cheap oil


1850 - 1910:1850 - 1910: Kerosene Kerosene the fuel of choicethe fuel of choice

1869:1869: Suez Canal opens Suez Canal opens

1878:1878: Electric Light Electric Light

1908:1908: Auto Boom starts Auto Boom starts

1912:1912: UK Navy uses Oil UK Navy uses Oil

1914 – 1918:1914 – 1918: WWI WWI1920:1920: 9 million vehicles 9 million vehicles U.SU.S

1938 – 1945:1938 – 1945: WWII WWII

1948:1948: Israel born Israel born

1948:1948: 1 1stst Arab Israeli War Arab Israeli War

1948:1948: US Net Oil Importer US Net Oil Importer

1952:1952: Iran Oil Nationalized Iran Oil Nationalized

1956:1956: Suez Nationalized Suez Nationalized

1956:1956: 2 2ndnd Arab - Israeli War Arab - Israeli War

1960:1960: OPEC founded OPEC founded

1967:1967: 3 3rdrd Arab - Israeli War Arab - Israeli War

1969:1969: Qaddafi coup Qaddafi coup

1978:1978: Khomeini coup Khomeini coup

1980:1980: Iraq – Iran War Iraq – Iran War

1990-91:1990-91: 1 1stst US - Iraq War US - Iraq War

2003 - :2003 - : 2 2ndnd US - Iraq War US - Iraq War

Oil Time Line – Important Oil Time Line – Important Events Events


History of Petroleum ExplorationHistory of Petroleum Exploration Oil became commodity of military Oil became commodity of military success success In Second World War Germany In Second World War Germany controlled the oil of Romania controlled the oil of Romania Wanted to acquire Baku (Russian) & Wanted to acquire Baku (Russian) & Persian Gulf (British Empire)Persian Gulf (British Empire)BP was active in Middle East & retained BP was active in Middle East & retained control of Persian Gulf until the USA control of Persian Gulf until the USA acquired exploration concessions in acquired exploration concessions in Saudi Arabia (5%)Saudi Arabia (5%)Cheaper oil for all!!!Cheaper oil for all!!!

De Golyer:De Golyer:

““The center of gravity of world oil production The center of gravity of world oil production is shifting to the Middle East”is shifting to the Middle East”

1945 - Ras Tanura Refinery begins operations 1945 - Ras Tanura Refinery begins operations eventually becomes largest refinery in world eventually becomes largest refinery in world

1944

Center of GravityCenter of Gravity

• US government to acquire direct ownershipUS government to acquire direct ownership• US government to negotiate an agreement with BritishUS government to negotiate an agreement with British• Allow private companies to conduct the businessAllow private companies to conduct the business

“Petroleum”What to do in

the Middle East?

“Petroleum”What to do in

the Middle East?

11stst Option: Ruled out Option: Ruled out22ndnd Option: Before going to Yalta, Roosevelt withdrew it Option: Before going to Yalta, Roosevelt withdrew it from Senatefrom Senate33rdrd Option: Won Option: Won

YaltaYalta

1945: 26 million cars1945: 26 million cars1950: 40 million cars1950: 40 million cars

19481948

Net exporterNet exporter Net importerNet importer

USAUSA

Many new discoveriesMany new discoveries

Growing Demand &Rising ProductionGrowing Demand &Rising Production


History of the Oil PriceHistory of the Oil Price

1.1. New Aramco: Socol, Standard Oil of NJ, Texaco, SoconyNew Aramco: Socol, Standard Oil of NJ, Texaco, Socony2.2. Gulf Oil – Shell in KuwaitGulf Oil – Shell in Kuwait3.3. Iranian contract between Anglo Iranian & Standard Oil, Iranian contract between Anglo Iranian & Standard Oil, SoconySocony

March 12th, 1947Truman DoctrineMarch 12th, 1947Truman Doctrine

Europe in crisisMarshall PlanEurope in crisisMarshall Plan

1948 May 141948 May 14 - First Arab - Israeli war - First Arab - Israeli war

Birth of IsraelBirth of Israel

1946 June1946 June - Oil giant Burgan field - Oil giant Burgan field discovereddiscovered

1951 May1951 May - 1st shipment of Kuwait - 1st shipment of Kuwait crude oilcrude oil

Ibn Saud’s Dilemmas: -Ibn Saud’s Dilemmas: -

• Birth of IsraelBirth of Israel• US guarantee of Saudi Arabian independenceUS guarantee of Saudi Arabian independence• Soviet threatSoviet threat

King Ibn SaudKing Ibn Saud

Post-war petroleum orderPost-war petroleum orderCenterCenter : Middle East: Middle EastMarketMarket : USA, Western Europe, Japan: USA, Western Europe, JapanTechnologyTechnology : Huge development: Huge developmentProblemProblem : Large surplus of oil: Large surplus of oil How to divide profit?How to divide profit?

Advancement inTechnology

Advancement inTechnology

50-50 Deal, December 195050-50 Deal, December 1950

But the producing countries wantedBut the producing countries wantedmore money and power!more money and power!

Stress on Seven Sisters or Big OilStress on Seven Sisters or Big Oil

Iran: 40 % of Middle Eastern oilIran: 40 % of Middle Eastern oilWeak ShahWeak ShahUS interestUS interestKorean warKorean warBritish hatredBritish hatredNationalization, May 1951, Mossadegh (Mossy)Nationalization, May 1951, Mossadegh (Mossy)

Korean War-

“Iranian Card”

Korean War-

“Iranian Card”


World events, 1947-1973World events, 1947-1973


Expropriation vs. economic warfare, 1952Expropriation vs. economic warfare, 1952No oil export, no money, economic troubleNo oil export, no money, economic troubleLaw and order collapsingLaw and order collapsingMossadegh turned to MoscowMossadegh turned to MoscowU.S. and British assisted coupU.S. and British assisted coupShah regained powerShah regained powerOil consortium: Jersey, Socony, Texaco, Oil consortium: Jersey, Socony, Texaco, Standard of California, Gulf; Shell; CFP;Standard of California, Gulf; Shell; CFP; Anglo IranianAnglo IranianResult: USA becomes major player in Middle East, 1954Result: USA becomes major player in Middle East, 1954

Dr. Mohammad Mossadegh

Dr. Mohammad Mossadegh

King Reza Pahlavi

King Reza Pahlavi

Suez represented the post-war petroleum order:Suez represented the post-war petroleum order:2/3 of Europe’s oil passed through Suez2/3 of Europe’s oil passed through Suez2/3 of traffic in Suez was oil2/3 of traffic in Suez was oil

SuezSuez

1952:1952: A coup removed King Farouk A coup removed King Farouk1954:1954: Colonel Gamal Abdel Nasser became dictator Colonel Gamal Abdel Nasser became dictator

Rejected Western involvementRejected Western involvementPan-ArabismPan-Arabism““Greatest international crime” – the creation of IsraelGreatest international crime” – the creation of IsraelAcquired weapons from the Soviet blockAcquired weapons from the Soviet block

Gamal Abdel-NasserGamal Abdel-Nasser

Whether to build the Aswan dam?Whether to build the Aswan dam?

US rejectedUS rejectedRevenge: expropriation of Suez Canal, July 26, 1956Revenge: expropriation of Suez Canal, July 26, 1956

The French and British wanted military action! The French and British wanted military action! Eisenhower did not want war!Eisenhower did not want war!

AswanAswan

War plot against Egypt: France, UK, & IsraelWar plot against Egypt: France, UK, & Israel

October 29, 1956October 29, 1956

Eisenhower was furiousEisenhower was furious

Soviet Union threatened by rocket attacksSoviet Union threatened by rocket attacks

Revolution in HungaryRevolution in Hungary

Result: Nasser became a hero and leader of ArabsResult: Nasser became a hero and leader of Arabs

2nd Arab Israeli War2nd Arab Israeli War

1958 - Oil found in the Abu Dhabii1958 - Oil found in the Abu Dhabii

1956 - Aramco confirms scale of Ghawar and Safaniya1956 - Aramco confirms scale of Ghawar and Safaniya

World oil production

8.7 million barrels 42 million barrels

Middle East

1.1 million barrels 18.2 million barrels

U.S. production share

64% 22%

U.S. reserves share

34% 7%

1948 1972

50-50% is not enough any more50-50% is not enough any more

Nasser ascendantNasser ascendant Soviets build AswanSoviets build Aswan Syria joins Egypt: United Arab RepublicSyria joins Egypt: United Arab Republic Nasser controls oil: Suez and pipelinesNasser controls oil: Suez and pipelines

Producer countries wanted more money and powerProducer countries wanted more money and power

Stress on Seven Sisters or Big OilStress on Seven Sisters or Big Oil


Middle East and OPEC events, 1947-1973Middle East and OPEC events, 1947-1973



History of Petroleum ExplorationHistory of Petroleum Exploration September 1960September 1960, Organization of Organization of Petroleum Exporting Countries (OPEC) Petroleum Exporting Countries (OPEC) founded in Baghdad, Iraqfounded in Baghdad, IraqOPEC’s proposed to unify & OPEC’s proposed to unify & coordinate members' petroleum coordinate members' petroleum policiespoliciesOPEC members' national oil ministers OPEC members' national oil ministers meet regularly to discuss pricesmeet regularly to discuss pricesSince 1982 set crude oil production Since 1982 set crude oil production quotasquotas


Original OPEC members include Iran, Iraq, Original OPEC members include Iran, Iraq, Kuwait, Saudi Arabia, & VenezuelaKuwait, Saudi Arabia, & VenezuelaBetween 1960 & 1975, expanded to Between 1960 & 1975, expanded to include Qatar (1961), Indonesia (1962), include Qatar (1961), Indonesia (1962), Libya (1962), United Arab Emirates (1967), Libya (1962), United Arab Emirates (1967), Algeria (1969), & Nigeria (1971) Algeria (1969), & Nigeria (1971) Ecuador & Gabon were members of Ecuador & Gabon were members of OPEC, but Ecuador withdrew in December OPEC, but Ecuador withdrew in December 1992, & Gabon followed suit in January 1992, & Gabon followed suit in January 19951995

History of Petroleum ExplorationHistory of Petroleum Exploration



Current 11 OPEC members are Algeria, Current 11 OPEC members are Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Nigeria, Qatar, Saudi Arabia, United Arab Emirates, & Venezuela Emirates, & Venezuela Produce some 40% world's oil Produce some 40% world's oil Have more than 77% world's proven oil Have more than 77% world's proven oil reservesreservesOPEC also holds most of world's excess OPEC also holds most of world's excess oil production capacityoil production capacity

End of 1950s: Soviet Union second largest oil producerEnd of 1950s: Soviet Union second largest oil producer

Oil companies cut pricesOil companies cut prices

• Build national refineriesBuild national refineries• National integrated oil companiesNational integrated oil companies• Stabilize market for themselves, 60-40 % shareStabilize market for themselves, 60-40 % share

OPEC’s aim in 1960:OPEC’s aim in 1960:

OPECOPEC

1960s: more discoveries in Africa, large oil surplus1960s: more discoveries in Africa, large oil surplus

Nasser’s prestige decliningNasser’s prestige decliningHe wanted to gain recognition: liquidation of IsraelHe wanted to gain recognition: liquidation of IsraelBlockade against Israeli shipping,Blockade against Israeli shipping,Military buildup with Syria, Jordan, IraqMilitary buildup with Syria, Jordan, Iraq

June 5, 1967: 3June 5, 1967: 3rdrd Arab-Israeli war, 6 day war Arab-Israeli war, 6 day warOccupation of Sinai, Gaza, West Bank, East JerusalemOccupation of Sinai, Gaza, West Bank, East Jerusalem

Six Day WarSix Day War

Oil embargo against Israel’s friendsOil embargo against Israel’s friends

Arab oil decreased by 60%Arab oil decreased by 60%No effect – oil is abundant, cheapNo effect – oil is abundant, cheapEmbargo lifted in SeptemberEmbargo lifted in September

End of 1960s, early 1970s

Recession in US and British powerRecession in US and British power

Vietnam warVietnam warAnti-Americanism becomes a great fashionAnti-Americanism becomes a great fashionNixon-doctrineNixon-doctrine

Demand in oil was catching up with supply – end of surplusDemand in oil was catching up with supply – end of surplus

Huge economic growth fueled by oilHuge economic growth fueled by oil

US oil production: 11.3 million barrels per day, the peakUS oil production: 11.3 million barrels per day, the peakMore dependency on Middle Eastern oilMore dependency on Middle Eastern oil

1971: collapse of Bretton Woods, replaced 1971: collapse of Bretton Woods, replaced by floating exchange ratesby floating exchange rates

RichardNixon

RichardNixon

Occidental Petroleum discovered oil in Libya in 1966Occidental Petroleum discovered oil in Libya in 1966

Qaddafi coup, 1969Qaddafi coup, 1969Increase in oil priceIncrease in oil priceAll the countries increased their profit shareAll the countries increased their profit share

Muhammar Qaddafi

Muhammar Qaddafi

Egypt was bankrupt when Nasserism endedEgypt was bankrupt when Nasserism endedSadat wanted to restore order & make peace with IsraelSadat wanted to restore order & make peace with IsraelIsrael disinterested because of its 1967 successIsrael disinterested because of its 1967 success

1973 Yom Kippur war1973 Yom Kippur war

Anwar Sadat

Yom Kippur War

Anwar Sadat

Yom Kippur War

The Soviet Union supported Egypt and SyriaThe Soviet Union supported Egypt and SyriaThe USA supported IsraelThe USA supported IsraelWorld War conflict was imminentWorld War conflict was imminentOil exporters increased oil prices 100%Oil exporters increased oil prices 100%Arabs cut oil supply and eventually stopped exporting to USAArabs cut oil supply and eventually stopped exporting to USAA weak president in the Watergate agony contributed to the A weak president in the Watergate agony contributed to the oil crisisoil crisis

WatergateWatergate

Boom timesBoom times

Alaska, Mexico discoveriesAlaska, Mexico discoveriesNorth Sea: the biggest play of allNorth Sea: the biggest play of all

No Stress on Seven Sisters or Big OilNo Stress on Seven Sisters or Big Oil

Iran: too much money – corruption, chaos, politicalIran: too much money – corruption, chaos, political tensionstensionsShah represented modernizationShah represented modernizationShiite fundamentalists hated US as main ally of ShahShiite fundamentalists hated US as main ally of ShahEscalating chaos in oil industryEscalating chaos in oil industryBy December 1978 no oil exports from IranBy December 1978 no oil exports from IranShah escapesShah escapesFebruary 1, Khomeini returns to TehranFebruary 1, Khomeini returns to Tehran

Ayatollah Ruhollah KhomeiniAyatollah Ruhollah KhomeiniAyatollah Ruhollah KhomeiniAyatollah Ruhollah Khomeini

Second Shock

Panic in the world market: price went up from $13 to $34Panic in the world market: price went up from $13 to $34

From March 1979, Iranian export started to come backFrom March 1979, Iranian export started to come back

Shortage in oil: long lines at gas stationsShortage in oil: long lines at gas stations

Peace accord: Camp DavidPeace accord: Camp David

Jimmy CarterJimmy Carter

November 4, 1979November 4, 1979: Hostage crisis: Hostage crisis Shah allowed into USA for medical treatmentShah allowed into USA for medical treatment

West, especially USA seemed very weakWest, especially USA seemed very weak

Soviets invaded Afghanistan Soviets invaded Afghanistan

Price: $45Price: $45

HostagesHostages

September 22, 1980: Iraq attacks Iran

Early 80’s:Early 80’s:Two drastic changes: Huge investment in explorationTwo drastic changes: Huge investment in explorationDecreasing demandDecreasing demandResult: oil surplusResult: oil surplus

June 1982: Lebanon warJune 1982: Lebanon war

Golden age for oil geologistsGolden age for oil geologists

Saddam Husseinof Iraq

Saddam Husseinof Iraq

Cheap oil: financial crisis in some oil exportersCheap oil: financial crisis in some oil exportersMukluk dry hole: end of exploration boomMukluk dry hole: end of exploration boom

End of pessimism of the 70sEnd of pessimism of the 70sEconomy is booming, but not because of oil fuelEconomy is booming, but not because of oil fuelOil is not that dangerous as beforeOil is not that dangerous as before

August 2, 1990: Iraqi invasion of KuwaitAugust 2, 1990: Iraqi invasion of KuwaitNew oil shock, supply decreasedNew oil shock, supply decreasedLoss had been compensated by December fromLoss had been compensated by December fromother sourcesother sources

January 17, 1991: Desert StormJanuary 17, 1991: Desert StormFebruary 28 cease fireFebruary 28 cease fire

Desert StormDesert Storm


OPEC suspended price band after Sept 11 believing OPEC suspended price band after Sept 11 believing stability of market more important than OPEC price target. stability of market more important than OPEC price target. Officially suspended Jan 2002 but basket price again within Officially suspended Jan 2002 but basket price again within band, & OPEC members speak again of keeping prices band, & OPEC members speak again of keeping prices within $22-$28/barrel rangewithin $22-$28/barrel range



Non-OPEC countries produced 60% of Non-OPEC countries produced 60% of world's oil in 2005 with a steady increase world's oil in 2005 with a steady increase since 1993 since 1993 Currently only 4 (Saudi Arabia, Iran, UAE, & Currently only 4 (Saudi Arabia, Iran, UAE, & Venezuela) in top 10 oil producers were Venezuela) in top 10 oil producers were OPECOPECMost prolific producers are Most prolific producers are Saudi Arabia 11, Saudi Arabia 11, Russia 9, USA 8, Iran 4, Mexico 4, China 4, Russia 9, USA 8, Iran 4, Mexico 4, China 4, Canada 3, Norway 3, UAE 3, Venezuela 3, Canada 3, Norway 3, UAE 3, Venezuela 3, Kuwait 3, Nigeria 3, Algeria 2, Brazil 2Kuwait 3, Nigeria 3, Algeria 2, Brazil 2Non-OPEC countries have most of world's Non-OPEC countries have most of world's capacity for refining crude oil into gasoline & capacity for refining crude oil into gasoline & heating oilheating oil

Non-OPEC countries produced 60% of Non-OPEC countries produced 60% of world's oil in 2005 with a steady increase world's oil in 2005 with a steady increase since 1993 since 1993 Currently only 4 (Saudi Arabia, Iran, UAE, & Currently only 4 (Saudi Arabia, Iran, UAE, & Venezuela) in top 10 oil producers were Venezuela) in top 10 oil producers were OPECOPECMost prolific producers are Most prolific producers are Saudi Arabia 11, Saudi Arabia 11, Russia 9, USA 8, Iran 4, Mexico 4, China 4, Russia 9, USA 8, Iran 4, Mexico 4, China 4, Canada 3, Norway 3, UAE 3, Venezuela 3, Canada 3, Norway 3, UAE 3, Venezuela 3, Kuwait 3, Nigeria 3, Algeria 2, Brazil 2Kuwait 3, Nigeria 3, Algeria 2, Brazil 2Non-OPEC countries have most of world's Non-OPEC countries have most of world's capacity for refining crude oil into gasoline & capacity for refining crude oil into gasoline & heating oilheating oil

World Petroleum ExploitationWorld Petroleum Exploitation

Kendall 2007 UT - AAPGKendall 2007 UT - AAPGCheap transportation in USA essential to maintain even the Cheap transportation in USA essential to maintain even the most rural subsistence economy!most rural subsistence economy!



““World Petroleum Reserves”World Petroleum Reserves”


Iraq's RoleIraq's Role



"By 2010 we will need [a further] 50 million "By 2010 we will need [a further] 50 million barrels a day. The Middle East, with two-barrels a day. The Middle East, with two-thirds of the oil and the lowest cost, is still thirds of the oil and the lowest cost, is still where the prize lies." - US Vice President where the prize lies." - US Vice President Dick Cheney, as Halliburton chief executive Dick Cheney, as Halliburton chief executive officer, London, fall 1999officer, London, fall 1999From cynic’s perspective Bush & Cheney's From cynic’s perspective Bush & Cheney's Iraq war may be over & its “Mission Iraq war may be over & its “Mission Accomplished”Accomplished”Costs of over trillion dollars spent, & Costs of over trillion dollars spent, & anywhere from 50,000 to 500,000 Iraqis & anywhere from 50,000 to 500,000 Iraqis & 3,161 US military dead3,161 US military dead


Iraq's New Petroleum LawsIraq's New Petroleum LawsFrom 1972 to 1975 Iraqi resources Nationalized. Replaced by From 1972 to 1975 Iraqi resources Nationalized. Replaced by

production sharing agreements (PSAs) - Operating production sharing agreements (PSAs) - Operating Companies get up to 75%. Sixty-five of Iraq's roughly 80 Companies get up to 75%. Sixty-five of Iraq's roughly 80 oilfields open for bid. National revenue distribution Kurds oilfields open for bid. National revenue distribution Kurds in north, Shi'ites in south and Sunnis in center. Most of in north, Shi'ites in south and Sunnis in center. Most of reserves are in Shi'ite-dominated south, Kurdish north reserves are in Shi'ite-dominated south, Kurdish north holds the best explartion prospectsholds the best explartion prospects

New “Law” drafted by US consultants hired by USA New “Law” drafted by US consultants hired by USA administration; vetted US Oil, International Monetary Fund, administration; vetted US Oil, International Monetary Fund, former US deputy defense secretary Paul Wolfowitz' World former US deputy defense secretary Paul Wolfowitz' World Bank, & US Agency for International Development. Bank, & US Agency for International Development.

Original language English, not Arabic.Original language English, not Arabic.Iraqi oil to be controlled by "Federal Oil and Gas Council", oil Iraqi oil to be controlled by "Federal Oil and Gas Council", oil

experts from inside & outside Iraq, includes US executives. experts from inside & outside Iraq, includes US executives.

Iraqi public & overwhelming majority of Parliament members Iraqi public & overwhelming majority of Parliament members out of loop.out of loop.



U.S. War Against Terrorism enters second U.S. War Against Terrorism enters second deadly phase spreading to other regions of deadly phase spreading to other regions of Middle East this yearMiddle East this yearMiddle East a geopolitical cauldron - Middle East a geopolitical cauldron - Caspian States on eastern flank & Caspian States on eastern flank & Mediterranean on western flank; bridge Mediterranean on western flank; bridge between Europe, Africa & Asiabetween Europe, Africa & AsiaImportant current battlefields are located Important current battlefields are located within this region:- Iraq & Iran, the West within this region:- Iraq & Iran, the West Bank, Somalia, Sudan & Afghanistan Bank, Somalia, Sudan & Afghanistan

Thomas Homer-Dixon’s Model For ConflictEnvironmental Scarcity ---> Social Effects --->

Violent Conflict


Iraq's RoleIraq's RoleU.S. hoped to pursue military objectives without U.S. hoped to pursue military objectives without threat of interrupted oil supplythreat of interrupted oil supplyBush secured agreement with Putin to access Bush secured agreement with Putin to access oil from Russia against threats of another OPEC oil from Russia against threats of another OPEC oil embargooil embargoExploration & production booming in Russia as Exploration & production booming in Russia as new pipelines developnew pipelines developChevronTexaco, BP Amoco, ExxonMobil, ChevronTexaco, BP Amoco, ExxonMobil, Conoco, & Royal Dutch Shell work with Russia Conoco, & Royal Dutch Shell work with Russia to develop oil fields with investment & to develop oil fields with investment & technologytechnologySaudi relations with USA, world’s largest oil Saudi relations with USA, world’s largest oil importer, strong despite war on terrorism, importer, strong despite war on terrorism, continued problems with Iraq & renewed continued problems with Iraq & renewed violence in Israel & Palestineviolence in Israel & Palestine


ChokepointsChokepoints Over 30 million barrels/day pass through narrow Over 30 million barrels/day pass through narrow shipping lanes & pipelinesshipping lanes & pipelinesStrait of Hormuz between Oman/Iran - 15.4 Strait of Hormuz between Oman/Iran - 15.4 mbbs/daymbbs/dayStrait of Malacca between Malaysia/Singapore - 9.5 Strait of Malacca between Malaysia/Singapore - 9.5 mbbs/day mbbs/day Bab el-Mandab between Djibouti/Eritrea/Yemen 3.3 Bab el-Mandab between Djibouti/Eritrea/Yemen 3.3 mbbs/day mbbs/day Suez Canal & Sumed Pipeline Egypt; connects the Suez Canal & Sumed Pipeline Egypt; connects the Red Sea & Gulf of Suez - 3.1 mbbs/day Red Sea & Gulf of Suez - 3.1 mbbs/day Bosphorus Turkey - 1.7 mbbs/day Bosphorus Turkey - 1.7 mbbs/day Russian Pipelines/Ports, e.g. Druzhba - 1.25 Russian Pipelines/Ports, e.g. Druzhba - 1.25 mbbs/day mbbs/day Panama Canal & Pipeline - 0.6 million mbbs/day Panama Canal & Pipeline - 0.6 million mbbs/day


IRAQ’s RoleIRAQ’s Role

Washington forecasts a drop in IraqWashington forecasts a drop in Iraq output to 1.3 output to 1.3 million barrels a day by year end from just under million barrels a day by year end from just under 2 million in January. Before war 2.6 million 2 million in January. Before war 2.6 million As military confrontation interrupts Iraqi exports, As military confrontation interrupts Iraqi exports, Saudi Arabia & other OPEC members provide Saudi Arabia & other OPEC members provide spare capacity to cover shortfallsspare capacity to cover shortfalls

Saudi Arabia Saudi Arabia 264.3 bbls 264.3 bbls 204 Tcf204 TcfIran Iran 132.5 bbls 132.5 bbls 94.5 Tcf94.5 TcfIraq Iraq 115 bbls 110 Tcf115 bbls 110 TcfKuwait Kuwait 101.5 bbls 101.5 bbls 55 Tcf 55 Tcf

Crude Oil(BB) - Natural Gas (TCF)Crude Oil(BB) - Natural Gas (TCF)


ConclusionsConclusionsAs in 1986 & 1998 Gulf War, OilAs in 1986 & 1998 Gulf War, Oil prices have risen prices have risen with current US - Iraq Warwith current US - Iraq WarOPEC responding by countering Russian moves OPEC responding by countering Russian moves to take market share from Saudi Arabia & other to take market share from Saudi Arabia & other Middle East producers Middle East producers Russia is stronger today than it was in 1986 & Russia is stronger today than it was in 1986 & more powerful ally but it is depleting its reservesmore powerful ally but it is depleting its reservesIslamic world fighting back, namely the terrorist Islamic world fighting back, namely the terrorist element:element:

e.g. Strait of Hormuz could be blocked by e.g. Strait of Hormuz could be blocked by sinking of major oil tankers as threatened by sinking of major oil tankers as threatened by Osama bin Laden; no longer fiction of Osama bin Laden; no longer fiction of geopolitical thriller, as Osama dreams of oil geopolitical thriller, as Osama dreams of oil prices of over $100 a barrel!prices of over $100 a barrel!


Long-term ConclusionsLong-term ConclusionsOilOil industry unable to protect against commodity industry unable to protect against commodity market’s speculators benefiting from warmarket’s speculators benefiting from warOil markets influenced by short-term events of Oil markets influenced by short-term events of war & weather, & trading tactics of speculators war & weather, & trading tactics of speculators Other political & geological factors also in playOther political & geological factors also in playOil is a depleting & finite resourceOil is a depleting & finite resourceNon-OPEC oil producers could have huge, long-Non-OPEC oil producers could have huge, long-life reserves paralleling production declines life reserves paralleling production declines Small oil companies in USA uniquely positioned Small oil companies in USA uniquely positioned to make more profit from their assetsto make more profit from their assetsNever the less without care, production of cheap Never the less without care, production of cheap oil of West will continue to peak & go into declineoil of West will continue to peak & go into decline


National integrated oil companiesNational integrated oil companiesNational refineriesNational refineries

StandardStandardOilOil

Baku OilBaku Oil

Nobel Brothers OilNobel Brothers Oil ShellShellTransportationTransportation

PersianPersianOilOil

RoyalRoyalDutchDutchShellShell

5% Arabian5% ArabianOilOil

Long-termLong-termConclusionsConclusions

As entrepreneurs of 19th century so OPEC, As entrepreneurs of 19th century so OPEC, other producing countries & consuming other producing countries & consuming countries all aim to stabilize the energy countries all aim to stabilize the energy market for themselves from:market for themselves from:


ConclusionsConclusions

Now to Now to Supper!Supper!

kendall 2007 ut - aapg exploitation of oil a history of entrepreneurs who made it happen - what does...

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