The Oil Card

[Joanne98]

Finally, someone makes sense of the crazy rise in oil prices.


The Oil Card: Global economic warfare in the 21st Century




Veteran business and energy journalist James R. Norman takes an unconventional look at why the price of oil has soared more than 10-fold in less than 10 years, and why it could continue to $200 a barrel. No, the earth's crust is not running out of hydrocarbons any time soon. Rather, oil and other commodity prices are being used as an economic bludgeon, again. The historical record is now clear that the US national security establishment, with Saudi help, manipulated oil prices dramatically lower in the 1980s in what proved to be a spectacularly successful and bloodless way to wreck the Soviet Union. Now, with the help of Russia, the Saudis, the oil majors and the futures market, high oil prices may be used to pose a serious threat to the People's Republic of China. Don't like economic war? Consider the alternative.


“Jim Norman has brilliantly detailed a powerful and frightening explanation for why oil prices keep rising to new highs. His outstanding analysis of politics and markets may have unveiled the missing link between supply and demand fundamentals and the relentless surge in oil prices.”

"This book is a must read for consumers and investors alike. After reading The Oil Card, you will never feel the same about ‘free’ markets again. Once you start reading, you won’t be able to put it down.”




–– Frederick Leuffer, top-rated oil analyst and president of New York-based money management firm FPL. Inc.

"I thoroughly enjoyed reading 'The Oil Card' by veteran oil industry reporter Jim Norman. He brilliantly used his extensive knowledge of the industry and many years of reporting experience to establish a strong link between oil price cycles and past geopolitical events. He has done an excellent job in providing the reader with well documented and referenced findings supported by historical facts. His unique conclusions may be controversial, but they are certainly compelling. The Oil Card proves that oil and politics are closely linked."



–– Fadel Gheit
Managing Director
Oil & Gas Research
Oppenheimer & Co.



Jim Norman is a contributing writer for Platts Oilgram News, McGraw-Hill's daily newsletter for the oil and energy industry, where he was a senior writer for 10 years before retiring in mid-2007. There he has been noted for his coverage of oil industry finance, economics, deal-making and chicanery. Previously, he was a senior editor for Forbes Magazine. For 10 years, until 1989, he was with BusinessWeek, including four years as the magazine's Houston bureau manager.

Norman's "prophetic press reports," as early as 1998, were cited by Paul Volcker's UN Independent Inquiry Committee for laying bare the likelihood of kickbacks and money laundering involving the Iraq Oil-For-Food program. His critical analysis of Enron accounting and governance issues in mid-2001 helped trigger the SEC investigation which led to Enron's downfall.


The Oil Card Blog



Saturday, August 30, 2008

China's Iraq Oil Deal
Press reports Aug. 29 declared China and Iraq have finally agreed on a long-pending deal to let Chinese interests develop the fallow al-Ahdab oil field in southeastern Iraq. It would be the first such major oil field redevelopment deal granted to foreign interests by the new Iraqi government and on the surface appears to be a coup for the People's Republic of China.

Readers of "The Oil Card" will note a key assertion of the book is that the main reason behind the US-led invasion and occupation of Iraq in early 2003 was to prevent China's CNPC, partnered with PRC armsmaker Norinco, from moving in to effectively garrison Ahdab and possibly other Iraq fields upon the expected lifting of UN sanctions at the end of 2003. That could have created an Iraq-China client state relationship around oil dwarfing in strategic significance the Chinese presence in The Sudan.

Does this deal undo the hard efforts of the past five years by the US and its allies to block foreign control of strategic Middle-East oil reserves, under the aegis of the 1980 Carter Doctrine? Probably not. Here's why:

1.) The deal is only a service contract, spanning 22 years but possibly having to be renewed yearly. There is no equity ownership of the Ahdab reserves granted to CNPC. The Chinese will get merely a fee for their services with no share of the oil profits and no claim on the oil in the ground.

2.) Norinco is not in the deal. Instead, CNPC will be partnered 75:25 with Iraq's Northern Oil Co., and will apparently have to fund all the investment. Norinco (China North Industries Group) had been sanctioned by the Bush Administration in May 2003 for providing possible dual-use high-strength steel to Iran for that country's missile program. Norinco is also a major arms supplier to the PRC's Peoples Liberation Army.

3.) CNPC is reportedly committing to invest a whopping $3 billion to develop Ahdab, which is more than double the $1.3 billion CNPC and Norinco had agreed to invest over 23 years at al-Ahdab in their 1997 deal with the Saddam Hussein regime.

4.) In the 1997 deal, CNPC and Norinco (forming what was called the al-Waha venture), were to have a 50% equity stake in what was expected to be an eventual 100,000 barrels/day from what was then considered to be 1.4 billion barrels of recoverable reserves underlying a 250 sq km field area. Now the reserves there are estimated at 1.2 billion barrels, according to press reports, and initial production from al-Ahdab would be only about 25,000 b/d starting in 2011. It is expected to eventually rise to 110,000 b/d.

5.) Of that production, much will initially go to fuel Iraqi power generation, which is a rather low-value use of liquid hydrocarbons. Little of the oil would make its way to the world market where it might have some impact on lowering still sky-high crude prices paid by the PRC.

6.) CNPC can bring some of its own security staff, but security at the field will be provided mainly by the Iraqi army.

7.) The deal still has to be approved by the Iraqi parliament: no small hurdle. Given the tortured history of the al-Ahdab transaction, there is no telling what other deal-killer provisions could yet be inserted.

8.) All the Western oil majors so far have rejected similar service contract deals with Iraq, finding them to be unattractive in relation to the costs and risks involved.

In short, Iraq and China appear to have reached a face-saving but only marginally attractive resolution to a vexing contractual problem over al-Ahdab. China can claim it retained its pre-war contract rights to al-Ahdab, albethey only in the form of a low-margin service contract. Iraq can avoid the major headaches it would get from China if it failed to honor the former al-Ahdab deal at least in some form. (Beijing had threatened to thwart any other development of al-Ahdab if its claim was not honored.)



http://www.energycreditmonitor.com/

[oldskool]

1. We pay high gas prices

to pay off third world counties debt for the sake of one world
government (Globalization).Why are our candidates not talking
about the 200 year supply of natural gas and 200 years of oil
on the north slope of Alaska? Because our slick Globalist
politicians have been exposed. There is no energy crisis gas
could be less than $1.50 a gallon within a year. But that is
not part of their plan.