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Mr.
President, Tell the Truth
March 20, 2002
By Michael Shannon
This is at once the easiest column I have ever written and
at the same time, the most perplexing. Easy, because I actually
wrote very little of what will follow. All the quotations
below were lifted directly from the website (www.eia.doe.gov)
of the Energy Information Administration -- a division of
the United States Department of Energy -- which bills itself
as the source of the Official Energy Statistics of the U.S.
Government. It is what these passages say that is so difficult
to understand. More to the point, what they say is in direct
contradiction with the oft stated policy of the present Government
of the United States.
"The Persian Gulf contains around 679 billion barrels of
proven oil reserves, representing approximately 66% of total
world oil reserves, and 1,918 Tcf of natural gas reserves
(35% of the world total).
Also, as of early 2002, the Persian Gulf maintains about
22.7 million bbl/d of oil production capacity, or about 31%
of the world total, and accounts for 27% of world total oil
production. Perhaps even more significantly, the Persian Gulf
countries maintain a significant percentage (about 91%) of
the world's excess oil production capacity (note: as of early
2002, world excess oil production capacity had increased to
around 7.3-7.8 million bbl/d from about 4.4 million bbl/d
in 2001). Excess production capacity is important because,
in the event of an oil supply disruption, this capacity can
be brought online to compensate. If such a disruption were
to occur in the Persian Gulf, it would leave the world with
relatively limited options for making up the lost oil production.
In 2001, Persian Gulf countries had estimated net oil exports
of 16.8 million bbl/d of oil. Saudi Arabia exported the most
oil of any Persian Gulf country in 2001, with an estimated
7.4 million bbl/d (44% of the total). Also in 2001, Iran had
estimated net exports of around 2.6 million bbl/d (15%), followed
by the United Arab Emirates (2.1 million bbl/d -- 12%); Iraq
(2.0 million bbl/d -- 12%), Kuwait (2.0 million bbl/d -- 12%),
Qatar (0.8 million bbl/d -- 5%), and Bahrain (0.02 million
bbl/d -- 0.1%).
U.S. gross oil imports from the Persian Gulf increased during
2001, to around 2.7 million bbl/d (of which 2.6 million bbl/d
was crude), from 2.5 million bbl/d (of which 2.4 million bbl/d
was crude) in 2000. The vast majority of Persian Gulf oil
imported by the United States came from Saudi Arabia (63%),
with significant amounts also coming from Iraq (25%) and Kuwait
(11%), and small amounts from Qatar and the United Arab Emirates.
Iraqi oil exports to the United States increased by about
160,000 bbl/d in 2001 compared to 2000, to around 780,000
bbl/d, while Saudi exports increased by about 80,000 bbl/d,
to 1.66 million bbl/d. In 2001, the United States imported
more oil on a daily basis from the Persian Gulf than in any
previous year. The Persian Gulf accounted for about 25% of
U.S. net oil imports, and 14% of U.S. oil demand, in 2001.
Iraq contains 112 billion barrels of proven oil reserves,
the second largest in the world (behind Saudi Arabia) along
with roughly 215 billion barrels of probable and possible
resources. Iraq's true resource potential may be understated,
as deeper oil-bearing formations located mainly in the Western
Desert region could yield additional resources, but have not
been explored. During the first six months of 2001, Iraq averaged
oil production of 2.29 million barrels per day, with large
weekly and monthly fluctuations. For the last full year (2000),
Iraq averaged net oil exports of around 2 MMBD. Besides the
70,000-90,000 bbl/d or so going to Jordan legally (i.e., with
UN permission), and the 450,000-500,000 bbl/d or so consumed
domestically, the rest (not counting illegally smuggled oil
and oil products) was exported either through the Iraq-Turkey
pipeline or the Persian Gulf port of Mina al-Bakr. Although
U.N. Resolution 986 mandates that at least half of the "oil-for-food"
exports must transit through Turkey, it appears that in recent
months more Iraqi oil (close to three-quarters) has been exported
via Mina al-Bakr than via Ceyhan. Iraqi oil commonly is sold
initially to Russian firms (i.e., Machinoimport, Rosneftegasexport,
Sidanco, Slavneft, Zarubzhneft), with other large purchasers
including Italian (Italtech), Malaysian (Mastek), French and
Chinese companies. Oil is then resold to a variety of oil
companies, including over 600,000 bbl/d to the United States
(overwhelmingly Basra Light oil) through third parties. During
2000, US importers of Iraqi crude oil included ExxonMobil,
Chevron, Premcor, Valero, Koch, Phillips, Tosco, Lyondell/Citgo,
BP, Clark, Fina, Marathon Ashland, and others.
Following the lifting of UN sanctions, Iraq hopes to increase
its oil production capacity to over 6 million bbl/d or higher
(in August 2001, Oil Minister Rashid boasted that Iraq could
reach 10 million bbl/d). As of May 2001, Iraq reportedly had
signed several multi-billion dollar deals with foreign oil
companies, mainly from China, France, and Russia (U.S., Canadian,
and Vietnamese firms also reportedly have held discussions).
Iraq reportedly has become increasingly frustrated, however,
at the failure of these companies actually to begin work on
the ground, and has threatened to no longer sign deals unless
firms agreed to do so without delay. Iraqi upstream oil contracts
generally require that companies start work immediately, but
UN sanctions overwhelmingly have dissuaded companies from
doing so."
Mr President, if you are so concerned that Iraq diverts a
sizable portion of the proceeds of its sale of oil to the
production of weapons of mass destruction, why do you permit
US corporations to continue to be such a major source of those
funds? And even more importantly; Mr President, do you intend
to send American servicemen and women into combat against
the regime of Saddam Hussein because he is a clear and present
danger or will you do so to get on with the business at hand?
Contact Mike Shannon at shnnn613@cs.com
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