oil and gas final

8/2/2019 Oil and Gas Final

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Introduction

The global distribution of oil and gas is very uneven. 51% of known reserves are controlled by only six

countries. Saudi Arabia being the number one country. A few countries then become the focal point for

control of crude oil and natural gas. This scarcity leads to geopolitical conflicts. (1)

Ever since oil became a crucial resource at the beginning of the 20th century, fuel for motor vehicles and

modern warships, it has been at the heart of geopolitical struggle. Today, gas used to fuel electric power

generation, industrial processes and domestic heating, is just as important.

Oil, natural gas and coal form the main constituent of fossil fuel energy. These energy resources

were formed millions of years ago as the consequence of decomposition of organic remains

trapped in the sediments and subjected to high temperature and pressure conditions in the

subsurface of the earth. Such temperature–pressure regimes prevail in the shallower part of the

crust. The presence of high order of total organic content in the sediments under this regime over

long periods of time would provide most likely sites for the formation of oil and gas. Most of the

favorable locations of oil deposits are confined to former Soviet Union, Middle East and North

Africa and Asia Pacific and some other regions of the world. (2)



This part of assignment is done by Kanwal Mahmood

Current Scenario of Oil and Gas and US interests

Current Known Oil Reserve

The top 12 states where oil reserves are located are:

1. Saudi Arabia

2. Canada

3. Iran

4. Iraq

5. Kuwait

6. UAE7. Venezuela

8. Russia

9. Libya

10. Nigeria

11. Kazakhstan

12. USA

Production-wise, in 2008, the highest producers of oil were:

1. Saudi Arabia

2. Russian

3. USA

4. Iran

5. China

6. Canada

7. Mexico

8. UAE

9. Kuwait

10. Venezuela

11. Iraq

12. Nigeria



We are now past peak oil production. Countries are now scrambling to get access to oil as the

production of it is dwindling. There is extreme interest in new technologies for extracting, and

new technologies for processing crude oil, or get access to deepwater reserves.

Because the oil supply is very much finite, the price of oil keeps on growing. Countries

producing oil gain geopolitical power. States are exploring new areas in order to find oil. Statesenter into conflicts over the control of oil and natural gas resources. (3)

Current situations

Crude oil and natural gas are finite resources. The reserves of oil and gas exist in reservoirs

below the earth's surface. The reserves are determined based on current economics and

technology. The reserves are those that can be economically produced using present technology

and current costs and prices. Therefore, this value has a lot of scientific guesswork associated

with it and can change with new technology like 3-D seismic and oil and gas prices.

World Oil Reserves

RegionReserves

(Billion Barrels)

Percent of

World's OilReserves

Reserve

Lifetime(Years)

North America 70.9 5.6% 14.8

South & Central America 123.2 9.8% 50.3

Europe & Eurasia 142.2 11.3% 22.1

Middle East 754.1 59.9% 78.6

Africa 125.6 10.0% 33.4

Asia Pacific 42.0 3.3% 14.5

World 1258.0 100.0% 42.0

OPEC 955.8 76.0% 71.1

As is seen in the table, most of the world's oil reserves are in the Middle East (59.9%) with

Europe & Eurasia having 11.3% and Africa with 10.09%.



World Natural Gas Reserves

RegionReserves

(Trillion Cubic Feet)

Percent of

World's GasReserves

Reserve

Lifetime(Years)

North America 313.1 4.8% 10.9

South & CentralAmerica

258.2 4.0% 46.0

Europe & Eurasia 2220.8 34.0% 57.8

Middle East 2680.9 41.0% 199.9

Africa 517.5 7.9% 68.2

Asia Pacific 543.5 8.3% 37.4

World 6534.0 100.0% 60.4

The world's natural gas reserves are found in the Middle East (41%) and Europe & Eurasia

(34%). The Russian Federation has 30.5% of the world's gas reserves followed by Iran with

14.8% and Qatar with 9.2%.

Reserves for Lifetime of Oil and Natural Gas

Resource Reserves Production Lifetime

Oil 1258.0 billion barrels 29.946 billion barrels 42.0 years

Natural

Gas

6534.0 trillion cubic feet 108.260 trillion cubic feet 60.4 years

At the end of 2008 there were 1,258.0 billion barrels of proven oil reserves. In 2008, the world

produced 29.946 billion barrels of oil (81,820 thousand barrels per day). That means that we had

42 years of oil left at the current rate of production. The reserve lifetime for natural gas is 60.4

years. This means that if we keep on using oil and gas at the rate we did in 2008 we will run out

of oil in 2050 and natural gas in 2068.

Before we relax too much, there are a couple of problems with this prediction. First, the world

keeps on using more and more energy. Over the past twenty years, oil demand has grown 1.3 %

annually and natural gas use has increased 2.5% per year. Assuming the same growth rates, we

would run out of oil by 2042 and natural gas by 2044. (4)

The present oil reserve estimates only take in to consideration the cumulative figure of oil

already produced.



The OPEC members hold around 75% of world crude oil reserves. The countries with the largest

oil reserves are, in order, Saudi Arabia, Iran, Iraq, Kuwait, United Arab Emirates (UAE),

Venezuela, Russia, Libya, Kazakhstan and Nigeria.

Yearly production of Oil from major oil producing countries of the world. The peak is the top of

the curve, halfway the point in the consumption of world’s oil and gas resources.

Gas Scenario

The present trend in oil consumption and it’s not encouraging prospects make natural gas a

viable replacement for oil in near future.

Worldwide natural gas is third most prominent energy resource amounting to 23% of global

energy consumption. It is expected that in future, industry will consume 40% of total gas

production. In absence of good transport system for transporting the gas to industrial plants most

of the gas associated with oil reservoirs is burnt at the wellhead. Owing to its low calorie content

it has lesser priority than oil for its use as the energy source. In order of priority Russia, Iran,

Qatar, Saudi Arabia and UAE have the highest gas reserves of the world. Russia is also highest

gas producer of the world. Global gas reserves are abundant, but unevenly distributed.

World Natural Gas Reserves by Geographic Region of Jan 1, 2009.



Middle East and Africa are likely to be main contributors for the supply of LNG in the coming

future. These two countries are likely to have tremendous growth (~21 TCF) in the production of

natural gas and especially in terms of LNG and may cover a bigger portion for the demand of gas

from other countries (EIA 2008, 2009). Recent discovery in China and India may help these

countries to reduce their import from other countries. The industrialized countries are the major

gas importers, but the major gas supplies are located in the Former Soviet Union and the Middle

East. Canada provides most of the natural gas imports to the United States.

The Organization of Economic Co-operation and Development (OECD) comprising mainly of

developed countries (USA, Canada, Japan, South Korea and others) and Non-OECD (Russia,

China, India and others) consumed around 104 TCF during the year 2006. The yearly world

demand for natural gas is 104 TCF and likely to rise to 153 TCF in 2030. In the year 2006 the

OECD countries consumed 52 TCF and non-OEBD countries utilized 53 TCF. The consumption

of natural gas by non-OEBD countries is likely to surpass to that of OEBD countries, with 2.2

average annual growth almost twice that of 0.9% growth of OEBD countries. In the year 2006

OEBD produced 38% of total natural gas production and consumed about 50% of the total gas

production making them to depend heavily on imports from other countries.



Where are the Reserves?

The reserves of crude oil and natural gas are not equally distributed among all continents and all

nations. As you might have guessed most of the world's oil reserves are in the Middle East.

Top Ten Holders of Oil Reserves

Rank CountryReserves

(Billion Barrels)

Share of

World's Reserves

Lifetime

(Years)

1 Saudi Arabia 264.1 21.0% 66.5

2 Iran 137.6 10.9% 86.9

3 Iraq 115.0 9.1% > 100

4 Kuwait 101.5 8.1% 99.6

5 United Arab Emirates 97.8 7.8% 89.7

6 Russian Federation 79.0 6.3% 21.87 Libya 43.7 3.5% 64.6

8 Kazakhstan 39.8 3.2% 70.0

9 Nigeria 36.2 2.9% 45.6

10 United States 30.5 2.4% 12.4

The Middle East has 59.9% of the world's crude oil reserves. Oil exporting nations who belong

to the Organization of Petroleum Exporting Countries (OPEC) control 76.0% of the world's oil.

The top ten reserve holders have 75.2% of the world's oil.

Top Ten Holders of Natural Gas Reserves

Rank CountryReserves

(Trillion Cubic Feet)

Share of

World's Reserves

Lifetime

(Years)

1 Russian Federation 1529.2 23.4% 72.0

2 Iran 1045.7 16.0% >100

3 Qatar 899.3 13.8% >100

4 Turkmenistan 280.6 4.3% >100

5 Saudi Arabia 267.3 4.1% 96.9

6 United States 237.7 3.6% 11.6

7 United Arab Emirates 227.1 3.5% >100

8 Nigeria 184.2 2.8% >100

9 Venezuela 170.9 2.6% >100

10 Algeria 159.1 2.4% 52.1



Of the world's natural gas reserves, 41% are in Middle East and 34% are located in Europe &

Eurasia. The top ten reserve holders have 76.5% of the world's natural gas.

United States Oil and Gas Reserves

Unfortunately the United States is not in as good a position as Middle Eastern countries when it

comes to crude oil and natural gas reserves. Current estimates indicate that America has 12.4years of crude oil reserves (30.5 billion barrels of proven reserves and 6,736 thousand barrels per

day of production). Fifty nine percent of US crude oil resources are located in Texas, Alaska and

California. Offshore reserves in Federal and state waters comprise 19.5% of reserves. Offshore

production accounted for 27.1% of production in 2007 and had a lifetime of 9.1 years.

At the end of 2008, the United States had 11.6 years of natural gas reserves remaining (237.7

trillion cubic feet of reserves and 56.2 billion cubic feet per day of production).

According to the Energy Information Administration, United States crude oil reserves in the

Lower 48 (excluding Alaska) are expected to increase 1.4% annually from 18.35 billion barrels

in 2009 to 24.39 billion barrels in 2030. U.S. oil production will increase from 5.36 million

barrels per day in 2009 to 7.14 million barrels per day by 2030. The life of the remaining Lower

48 reserves will be 10.2 years.

The Energy Information Administration expects Lower 48 natural gas reserves to decrease to

203.35 trillion cubic feet in 2030 from 229.12 trillion cubic feet in 2009 and production to grow

to 23.02 trillion cubic feet from 20.61 trillion cubic feet. The reserve lifetime is expected to

decline to 9.7 years. (5)

Oil and gas Pipelines

Events between Russia and Ukraine at the start of 2009 and between Russia and Georgia in 2008

have brought transit pipelines into the media spotlight. Growing attention is being given to

possible pipelines from Russia to China and Japan, together with other possible routes such asMyanmar to China and Iran to Pakistan and India.

Three kinds of pipelines can be defined—domestic, cross-border, and transit. Domestic pipelines

are within an existing sovereign territory. Cross-border pipelines directly link the producer state

of oil and gas with the consumer state. Transit pipelines cross a third sovereign territory to get to



market. Normally the terms of transit are enshrined in an agreement that, among other things,

determines the transit payments. Cross-border and transit pipelines have a number of common

characteristics that can generate conflict. Different parties are involved, with different interests

and motivations. This invites disagreement because of the benefits to be shared and because

mechanisms exist to encourage both. (6)

Current Energy Situation in the European Union

The problem of security supply at the EU level is a priority matter given that the Union is a

major energy consumer in the international energy arena. Security of supply is and will, for long

time to come, remain a central objective of any European energy strategy.

Energy strategy undoubtedly bas an increasingly global dimension requiring global solutions. It

cannot be confined to the national or EU dimension, since the EU countries depend on external

sources for nearly half their energy supplies.The complex problems surrounding the security of world energy supplies increase the need for

the EU to present a strong united front, not only vis-a-vis the traditional oil and gas supplying

areas, but also vis-à-vis the countries of Eurasia, whose share of the EU market is likely to

increase in the near future.

Other Countries in the Eurasian Energy Puzzle

Iran throws its full weight behind Eurasia's oil and gas deals for its perceived regional

ambitions. It offers them its energy technology & experience and geography.

It appears that Japan is yet to fully flex its economic muscles in Eurasia, although several

Japanese companies already started operating, on a relatively small scale, in the region. The

Central Asian republics link Asia and the Middle East and it seems that Japanese officials

returned from the region impressed by cultural affinities. Japan's current strategies towards

Eurasia do not seem clearly defined.

We should not pass without acknowledging such important actors in the Eurasian energy puzzle

as Pakistan, Afghanistan, India and South Korea, which proved difficult for us to cover

properly due to the lack of sufficient information about their role in the region's energy business.



The Policies of Great Powers

Russian Control over Caspian region

At this point it should be mentioned that control over these energy resources has set off a

smoldering rivalry between Russia and the US which has two dimensions: the first concerns

control of oil production and the second specific questions relative to the legal status of the

Caspian Sea. Russia claims that the Caspian is an inland lake and not a closed sea, which means

that it is not subject to the Law of the Sea. Consequently, exploitation of the Caspian resources

must be subject to an agreement among all five coastal states.

Azerbaijan and Kazakhstan maintain that the Caspian Sea is just that, a sea, and as such should

be divided into national sectors. The US holds the same position and it recently took a firm stand

on the issue. Glen Rase, the director of international energy policy at the US State Department,

declared in March 1995 that each of the countries in the region has the right to develop its own

economic resources according to its own best interests... and there should be no

misunderstanding. The US will defend its company’s interests in the Caspian. In this context the

American Government has supported the private companies which have undertaken production

on behalf of the former Soviet republics of the Caspian Sea. The United States wants to avert

Russian control over the Caspian energy resources and will resist it as much as possible.

Russia, on the other hand, is concerned with the attempts to oust it from its traditional sphere of

influence but is also worried that investment in the Caspian Sea oilfields will divert Western

financial backing and interest from its oilfields in Siberia and the Far East and capture some of

its market. In the competition over Caspian oil, therefore, Russia sees both the erosion of its

geopolitical position and the loss of key economic resources and their potential revenues.

Moscow’s initial response was an effort to strengthen the framework of the Commonwealth of

Independent States, but this was not successful. Russia is now trying to find ways to deal with its

competitors. In this context it has recently co-operated with Iran to offset Azerbaijan’s and

Kazakhstan’s claims in the Caspian and has participated in the construction of the Burgas-

Alexandroupolis pipeline in an effort to by-pass Turkey.



Central Asia was not only land-locked; it was completely isolated even from its immediate

neighbors outside former Soviet space. The Soviet Union was also a union of oil and gas.

Even as countries in the Caspian sought to strengthen their newfound political and economic

independence by inviting Western oil companies to rapidly develop the region’s oil and gas

potential, these same major oil companies saw using the old Soviet pipeline system as the easiest

way to evacuate their initially low volumes in order to defer capital expenditure on new

transportation infrastructure.

Russian control or dominance of the Caspian Sea and Basin will ensure Moscow's control of the

key oil and gas distribution systems from the region to the outside world. Continued instability in

the North Caucasus and Transcaucasia, Turkey, and Afghanistan poses serious potential threats

to the various pipelines that have been proposed for transporting oil and gas to the international

markets. (7)

“Persian oil…..is yours. We share the oil of Iraq and Kuwait. As for Saudi

Arabian oil, it’s ours.”

President Roosevelt to British Ambassador (1944)

The war in Iraq has “nothing to do with Oil, not for us, not for the UK. Not for

the United States, don’t touch it. We cannot say fairer than that.”

Prime Minister TONY Blair to MTV audience (2003)

US Foreign Policy

Despite that fact, the fall in oil prices in the 1980s, as these could not have remained at the high

levels of the 1970s, increased demand and oil imports. Thus, while in 1973 world oil

consumption was 57 million barrels a day, in 1994 it approximated to 68 million barrels.

The USA leads the world in oil consumption, with 17 million barrels a day in 1991. Of this

quantity, 50% is imported, so that dependence on oil imports is expected to rise steadily in the

next decade. Even though US government committees, examining the issue, have found that

dependence on oil imports threatens US national security, American oil policy has not changed

radically with regard to imports. The addition of new exporters, such as Kazakhstan and

Azerbaijan, to the already existing oil-producing and exporting countries provides more freedom

of choice for importing countries such as the US, while it also helps to keep oil prices down.



The US Foreign Policy and the Middle East

The ‘American interests’ in the Middle East are not really ‘national’ interests. Those interests

can best be summed up as ‘imperialist’ interests that have always centered on the pursuit of geo-

strategic advantages in control of the region's energy resources—oil and natural gas, the

pipelines and sea lanes that connect them to global markets. Its interests consisted of three

interrelated objectives: (1) To control the oil and gas resources of the region; (2) To control

certain regimes in the region as much as possible, especially Israel, Saudi Arabia, Iraq, Iran,

Egypt, and Pakistan; and (3) To prevent the rise of any popular movements—whether

communist, socialist, nationalist, or religious—that might threaten US control of the region’s

energy resources and the stability of its client regimes.

The US is trying to prevent its ongoing decline, while new powers, especially China, are

challenging the US Empire. During the past several years, Brazilian journalist Pep Escobar, who

writes regularly for ‘Asia Times Online’, has published highly informative articles and books on

the global battles over what he has dubbed “Pipelineistan.” With a wry and cynical sense of

humor and a great deal of knowledge, his “Roving Eye” has described the competition for

dominance over the Middle East and Central Asia. Among the major powers, there are no “good

guys” in this competition. They fight for their own material interests, and they do not hesitate to

threaten the lives of millions of people.

US interest for Caspian Region

The Caspian Sea, at the center of some of the world's least known states, is growing into a major

oil and natural gas producing region. The American interest in the restructuring of the Russian

oil industry as well as in participation in the development of oilfields in the Caspian Sea and the

surrounding countries. These oil deposits constitute new sources of supply from countries

outside the OPEC and are, for this reason, extremely important on the political as well as on theeconomic level. The Caspian Sea basin has attracted US interest for the following reasons:

1. The oil of this region is considered to be of good quality.

2. The biggest part of this oil is intended for export, since the needs of the producing countries

are relatively low and are expected to remain low.



3. The fact that the countries of the region lack the capital and the technology to proceed

independently to the development of these oilfields offers American companies, such as

Chevron, considerable investment opportunities.

US foreign policy in Central Asia

Is founded on the following rationale:

• The US intends to help the former Soviet republics of Kazakhstan and Azerbaijan

develop their oil and natural gas industries.

• Through the development of their oil and gas industry, which will bring economic

growth, the US hopes to extricate them from the Russian sphere of influence.

• The US Government is actively supporting American companies in Central Asia involved

in oil development as well as in the construction of pipelines which will channel the oil to

the West.

• The US will try to channel the oil coming from those countries into the international

markets in order to diversify its own sources of supply and keep oil prices at low levels.

• The US Government believes that economic growth will promote regional stability and

the resolution of local disputes.

• Finally, the US aims at reinforcing the role of Turkey in the region, while at the same

time maintaining the policy of containment and isolation of Iran. For that reason it has

actively lobbied for a pipeline which will transport oil from Baku to the Turkish port of

Ceyhan. (8)

Case Study for Three Important Oil and Gas Pipelines

Eurasia is like a showcase of oil and gas pipelines at various phases. Some have been in service

over decades. Some are just completed. Others are under construction or yet to be constructed.

Three pipelines are selected, here, for case studies.

(1) The Baku-Tbilisi-Ceyhan (BTC) oil pipeline offers an interesting example where the interests

of superpowers, landlocked countries and transit countries inter-wind.

(2) The Eastern Siberia-Pacific Ocean (ESPO) oil pipeline presents a unique case of ongoing

tripartite power games among China, Japan and Russia.

(3) The Iran-Pakistan-India (IPI) natural gas pipeline currently stands on a delicate position

between the politicization phase and the commercial phase.



1. The Baku-Tbilisi-Ceyhan (BTC) pipeline

In November 1905, Mr. J. D. Henry, a British journalist who visited Baku reported as follows;

“The Caucasus is endowed by nature with a practically inexhaustible mineral wealth -------

British interests should be well represented in this country (Azerbaijan) of great potentialities,

and steps should be taken to strengthen the bonds which connect Britain to it.”

It is both interesting and even romantic to find that someone dreamed of something like a BTC

pipeline of today a hundred years ago. At the end of the 19th century, Baku was the largest oil

producing region in the world, and the access to natural resources like oil was one of the core

drivers of the Great Game, the rivalry and strategic conflict between the British Empire and the

Russian Empire for the supremacy in Central Asia through the 19th

century to the beginning of the 20th century.

There are three big players (or group of players) with vested interests in the BTC pipeline. The

three countries (Azerbaijan, Georgia and Turkey) are the direct beneficiaries with different

interests. Russian interests are affected negatively in contrast to those of the USA and Europe.



The Geopolitics of the BTC Pipeline at a Glance

USA, Europe

-Export bypassing Russia

-Export bypassing Iran

-Weakening of Russian influence

The Three Countries

-Independent route from Russia (Azeri)

-Pipeline transit fee (Georgia)

-Bypassing of the Bosporus (Turkey)

-Energy Hub (Turkey)

-Greater geopolitical importance (Turkey)

Russia

-End of the monopoly of export route

-Risk of diminishing influence in Caspian region.

1. The Eastern Siberia-Pacific Ocean (ESPO) pipeline

From geopolitical perspectives, the Eastern Siberia-Pacific Ocean (ESPO) pipeline presents a

unique case of tripartite power game among China, Japan and Russia. Originally, it was Russia

and China that discussed building an oil pipeline from Eastern Siberia to China. But, somehow,

Russia approached Japan about a new pipeline plan from Eastern Siberia to the Pacific coast of

Russia; Japan became very serious about this pipeline.



The geopolitics of the ESPO pipeline

Among the three countries involved with this pipeline, Russia keeps by far the strong position as

the holder of oil reserves. It is interesting to learn that Russia and China have economic, military

and strategic interests in common while Russia and Japan shares economic interests. The

following cycle may explain geopolitical power game among them.

Japan

-Decrease of Middle East dependency

-E&P of East Siberian oil (risk or opportunity?)

-Delicate relation with China (e.g. North Korea)

Russia

-The strongest position among the three

-Economic, military, strategic ties with China

-Economic ties with Japan

-Development of E. Siberia as national agenda

-Shift of interest from Europe to the East

China

-Continued thirst for oil

-Russia as a short-haul supplier

-Economic, military, strategic ties with Russia-Advantage of using buyer’s power

The Iran-India-Pakistan (IPI) pipeline

A preliminary agreement was reached between Iran and Pakistan to build a

cross-border pipeline from the South Pars to Pakistan (Karachi) in 1995.

Then, Iran proposed to India the extension of the pipeline to India, where a

rapid increase of natural gas demand was expected. In February 1999, Iran

and India signed a preliminary agreement on the bilateral collaboration on

the pipeline, followed by the establishment of a task force to study the

feasibility of the pipeline. Most probably, around this time, the Indian

Government might not felt comfortable with the idea of a pipeline through

Pakistan. This option was too expensive to justify the construction, and was

ultimately abandoned.



There was no IPI pipeline until India and Pakistan accepted each other as

reliable partners. In March 2000, Pakistani Secretary of Petroleum visited

Iran and formally agreed to the pipeline crossing the three countries. The

secure transit through Pakistan was a matter of serious concern considering

the situation in some part of the country. The Pakistani Government

guaranteed the security of the IPI pipeline passage through Pakistan in July

2000. This is a typical example to show the importance of the security of the

transit country.

The geopolitics of the IPI pipeline

There are mainly three big players (or group of players) with vested interests

in the IPI pipeline. This is one of the most geopolitically delicate cases due to

the Iranian nuclear issue. The influence of the USA will have impact on India

and, to a lesser extent, on Pakistan. The following cycle may explain

geopolitical power game among them.

The Geopolitics of the IPI Pipeline at a Glance

USA

-Iran as part of “axis of evil”



-Iranian Sanctions

-Cooperation with Pakistan on war on terror

-Cooperation with India on civil nuclear

India and Pakistan

-Most economical option (1/2 of LNG costs)

-Catalyst of regional integration

-Increasing thirst for natural gas (India)

-Transit fee and own use of natural gas

(Pakistan)

Iran

-Access to a large market

-Diversification of means of transport

-Extension IPI to China (future)

Impact on the security of supply to Europe

First impact

The BTC pipeline allows land transport of Caspian oil bypassing Russia, which will naturally

enhance the security of supply to Europe. Caspian oil, now flowing through the BTC pipeline,could have been exported by pipeline system via Russia in one way or another. However, this

could have put Europe in even more disadvantageous position in her energy deals with Russia

given the ongoing tension between Europe and Russia over natural gas supply. Bypassing the

Strait of Bosporus is another important factor in this regard as referred to in 7.3. The security of

oil supply to Europe, therefore, has been improved twofold due to the BTC pipeline.

Second impact

The ESPO may have slightly negative impact on the security of oil supply to Europe. The current

estimate suggests that oil recoverable in Eastern Siberia may not be enough to fill the pipeline.

Therefore, a portion of oil produced in Western Siberia needs to be diverted to the East to fulfill

the commitment with the new customers in Asia. Russia might utilize this situation to strengthen

her bargaining power over Europe.



Third impact

The IPI pipeline may also have impact on the supply of Iranian natural gas to Europe. The

Iranian government intends to export as much oil as possible by encouraging natural gas use to

satisfy domestic energy needs. For this purpose, the prices of natural gas are reportedly set low,

and its consumption is growing rapidly. On top of this, the development of natural gas issuffering from serious delay, let alone the impact of the US and UN sanctions. The conditions of

Iranian buyback contracts are perceived to be too severe for foreign companies to smoothly

continue the development of natural gas. Therefore, once natural gas from the South Pars may

start to flow to India and Pakistan by the IPI pipeline, there is a risk that not enough natural gas

may be left for export to Europe (e.g. the Nabucco Gas Pipeline Project). (9)



The Conclusion

Oil discovered 40 years ago is the basis of current oil production. The search for oil continues

but projected oil discoveries will contribute little to projected oil production in 2030. The

declining rate of oil discoveries makes it painfully obvious--most of the oil has already been

discovered. The technology for finding oil has improved greatly since the major discoveries, yet

little oil has been found in recent years. The heyday of oil discovery was from 1950 to 1980. It is

difficult to avoid the conclusion--most of the oil has been found.

There is a growing gap between discoveries and production.

World oil production is running flat out. Only the Saudis claim to have the ability to produce

more though some dispute this. It is not a simple matter of turning a spigot or pumping faster. Oil

fields can be permanently damaged by attempting to produce too fast.

Soon there will be a gap between production and demand. (10)



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2. Thakur, N.K., Rajput, S, ‘World’s Oil and Natural Gas Scenario’, (Geophysical

techniques provider, 2011), <http://springer.com/978-3-642-14233-

8>27/1/2012<http://springer.com/978-3-642-14233-8>3. Opcit;4. Geography of Oil and Natural Gas, <http://clockhands.wordpress.com/2011/10/23/the-

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of-oil-resources-lecture-notes>5. Ibid;

6. Paul, Stevens, ‘Oil and Gas Pipelines: prospects and problems’, (nbr special report # 23,

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g/MFA/thesis/winter98/geopolitics.html>

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10.12/5/2004<http://planetforlife.com/oilcrisis/oilsituation.html>28/1/2012

http://clockhands.wordpress.com/2011/10/23/the-political-geography-of-oil-resources-lecture-notes





http://springer.com/978-3-642-14233-8








http://www.hri.org/MFA/thesis/winter98/geopolitics.html








http://planetforlife.com/oilcrisis/oilsituation.html






















http://planetforlife.com/oilcrisis/oilsituation.html

oil and gas final

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