2010

THE NEW GREAT GAME OF CENTRAL ASIA

KARZAI SAYS U.S. REPORT FINDS AFGHANISTAN
SITTING ON A TRILLION DOLLARS IN OIL AND MINERAL RESERVES

US GEOLOGICAL SURVEY SAYS VENEZUELA'S OIL SUPPLY IS BIG

2009

US MILITARY LARGEST SINGLE CONSUMER OF OIL IN THE WORLD

THE HIDDEN OIL WARS

OILFIELD OUTPUT DECLINING FASTER THAN THOUGHT

DRILLING FOR OIL: WHAT BENEFIT?

2008

SAUDIS SEND MIXED MESSAGES ABOUT THEIR OIL SUPPLY

A WAR ABOUT OIL. . .AND WE LOST

2007

REPORT: OIL HAS ALREADY PEAKED

WHY GOING TO WAR OVER OIL DOESN'T WORK

GAO: U.S. NEEDS PEAK OIL STRATEGY

[From a recent GAO report]

Most studies estimate that oil production will peak sometime between now and 2040, although many of these projections cover a wide range of time, including two studies for which the range extends into the next century.

The timing of the peak depends on multiple, uncertain factors that will influence how quickly the remaining oil is used, including the amount of oil still in the ground, how much of the remaining oil can be ultimately produced, and future oil demand.

The amount of oil remaining in the ground is highly uncertain, in part because the Organization of Petroleum Exporting Countries (OPEC) controls most of the estimated world oil reserves, but its estimates of reserves are not verified by independent auditors. In addition, many parts of the world have not yet been fully explored for oil.

There is also great uncertainty about the amount of oil that will ultimately be produced, given the technological, cost, and environmental challenges. For example, some of the oil remaining in the ground can be accessed only by using complex and costly technologies that present greater environmental challenges than the technologies used for most of the oil produced to date.

Other important sources of uncertainty about future oil production are potentially unfavorable political and investment conditions in countries where oil is located. For example, more than 60 percent of world oil reserves, on the basis of Oil and Gas Journal estimates, are in countries where relatively unstable political conditions could constrain oil exploration and production.

Finally, future world demand for oil also is uncertain because it depends on economic growth and government policies throughout the world. For example, continued rapid economic growth in China and India could significantly increase world demand for oil, while environmental concerns, including oil's contribution to global warming, may spur conservation or adoption of alternative fuels that would reduce future demand for oil.

In the United States, alternative transportation technologies face challenges that could impede their ability to mitigate the consequences of a peak and decline in oil production, unless sufficient time and effort are brought to bear.

For example:

* Ethanol from corn is more costly to produce than gasoline, in part because of the high cost of the corn feedstock. Even if ethanol were to become more cost-competitive with gasoline, it could not become widely available without costly investments in infrastructure, including pipelines, storage tanks, and filling stations.

* Advanced vehicle technologies that could increase mileage or use different fuels are generally more costly than conventional technologies and have not been widely adopted. For example, hybrid electric vehicles can cost from $2,000 to $3,500 more to purchase than comparable conventional vehicles and currently constitute about 1 percent of new vehicle registrations in the United States.

* Hydrogen fuel cell vehicles are significantly more costly than conventional vehicles to produce. Specifically, the hydrogen fuel cell stack needed to power a vehicle currently costs about $35,000 to produce, in comparison with a conventional gas engine, which costs $2,000 to $3,000.

Given these challenges, development and widespread adoption of alternative transportation technologies will take time and effort. Key alternative technologies currently supply the equivalent of only about 1 percent of U.S. consumption of petroleum products, and DOE projects that even under optimistic scenarios, by 2015 these technologies could displace only the equivalent of 4 percent of projected U.S. annual consumption.

Under these circumstances, an imminent peak and sharp decline in oil production could have severe consequences, including a worldwide recession. If the peak comes later, however, these technologies have a greater potential to mitigate the consequences. DOE projects that these technologies could displace up to the equivalent of 34 percent of projected U.S. annual consumption of petroleum products in the 2025 through 2030 time frame, assuming the challenges the technologies face are overcome. The level of effort dedicated to overcoming challenges to alternative technologies will depend in part on the price of oil; without sustained high oil prices, efforts to develop and adopt alternatives may fall by the wayside.

Federal agency efforts that could reduce uncertainty about the timing of peak oil production or mitigate its consequences are spread across multiple agencies and generally are not focused explicitly on peak oil. For example, efforts that could be used to reduce uncertainty about the timing of a peak include USGS activities to estimate oil resources and DOE efforts to monitor current supply and demand conditions in global oil markets and to make future projections. Similarly, DOE, the Department of Transportation (DOT), and the U.S. Department of Agriculture (USDA) all have programs and activities that oversee or promote alternative transportation technologies that could mitigate the consequences of a peak. However, officials of key agencies we spoke with acknowledge that their efforts-with the exception of some studies-are not specifically designed to address peak oil.

Federally sponsored studies we reviewed have expressed a growing concern over the potential for a peak and officials from key agencies have identified some options for addressing this issue. For example, DOE and USGS officials told us that developing better information about worldwide demand and supply and improving global estimates for nonconventional oil resources and oil in "frontier" regions that have yet to be fully explored could help prepare for a peak in oil production by reducing uncertainty about its timing. Agency officials also said that, in the event of an imminent peak, they could step up efforts to mitigate the consequences by, for example, further encouraging development and adoption of alternative fuels and advanced vehicle technologies.

However, according to DOE, there is no formal strategy for coordinating and prioritizing federal efforts dealing with peak oil issues, either within DOE or between DOE and other key agencies.

While the consequences of a peak would be felt globally, the United States, as the largest consumer of oil and one of the nations most heavily dependent on oil for transportation, may be particularly vulnerable.

Therefore, to better prepare the United States for a peak and decline in oil production, we are recommending that the Secretary of Energy take the lead, in coordination with other relevant federal agencies, to establish a peak oil strategy. Such a strategy should include efforts to reduce uncertainty about the timing of a peak in oil production and provide timely advice to Congress about cost-effective measures to mitigate the potential consequences of a peak.

In commenting on a draft of the report, the Departments of Energy and the Interior generally agreed with the report and recommendations.

http://www.energybulletin.net/27919.html

IRAQ'S NEW SWEETHEART LAW FOR OIL COMPANIES

IRAQ OIL SCAM UPDATE

INDEPENDENT, UK - Iraq's massive oil reserves, the third-largest in the world, are about to be thrown open for large-scale exploitation by Western oil companies under a controversial law which is expected to come before the Iraqi parliament within days. The US government has been involved in drawing up the law, a draft of which has been seen by The Independent on Sunday. It would give big oil companies such as BP, Shell and Exxon 30-year contracts to extract Iraqi crude and allow the first large-scale operation of foreign oil interests in the country since the industry was nationalised in 1972.

The huge potential prizes for Western firms will give ammunition to critics who say the Iraq war was fought for oil. They point to statements such as one from Vice-President Dick Cheney, who said in 1999, while he was still chief executive of the oil services company Halliburton, that the world would need an additional 50 million barrels of oil a day by 2010. "So where is the oil going to come from?... The Middle East, with two-thirds of the world's oil and the lowest cost, is still where the prize ultimately lies," he said. . .

http://news.independent.co.uk/world/middle_east/article2132569.ece

2006

OIL COMPANIES PREPARING BIG TIME RIP OFF OF IRAQ SUPPLIES

TREASURY SECRETARY'S FIRM MAY HAVE PLAYED MAJOR ROLE IN GAS PRICE DROP

LE METROPOLE CAFÉ - In yesterday's WSJ in Section C there is a very, very interesting item in the article, Some Investors Lose Their Zest For Commodities. The article notes that over that past few months, commodity funds have been liquidating commodity holdings. But here's the stunner: "Consider the Goldman Sachs commodity index, one of the most popular vehicles for betting on raw materials. In July, Goldman Sachs tweaked the index's content by cutting its exposure to gasoline. Investors tracking the index had to adjust their portfolios accordingly - which sent gasoline futures prices tumbling."

Prior to Goldman's July GSCI revision, unleaded gas accounted for 8.45% of the GSCI. Now unleaded gas is only 2.30%. This means commodity funds had to sell 73% of its gasoline futures to conform to the reformulated GSCI. . .

Here we have Goldman, qua keeper of the commodities index, manipulating markets simply by adjusting index components. It is noteworthy in several respects. First, we are used to the notion of them front running market sensitive information announced by third parties, but here a glorified hedge fund - albeit one dominating central banks and finance ministries worldwide - maintains market-moving indices itself. . . . Second, it lends credence to the theory that the current well-publicized commodities decline is just a well-timed, well-orchestrated head fake to benefit the incumbents in the run up to the midterm elections - someone noted recently that Bush's ratings vary inversely with gas prices. . .

www.lemetropolecafe.com

WHY GEORGE BUSH SHOULD THANK CHAVEZ

GREG PALAST - You'd think George Bush would get down on his knees and kiss Hugo Chavez's behind. Not only has Chavez delivered cheap oil to the Bronx and other poor communities in the United States. And not only did he offer to bring aid to the victims of Katrina. In my interview with the president of Venezuela on March 28, he made Bush the following astonishing offer: Chavez would drop the price of oil to $50 a barrel, "not too high, a fair price," he said -- a third less than the $75 a barrel for oil recently posted on the spot market. That would bring down the price at the pump by about a buck, from $3 to $2 a gallon.

But our president has basically told Chavez to take his cheaper oil and stick it up his pipeline. . .

Venezuela, Chavez told me, has more oil than Saudi Arabia. . . His surprising claim comes from a most surprising source: the U.S. Department of Energy. In an internal report, the DOE estimates that Venezuela has five times the Saudis' reserves. However, most of Venezuela's mega-horde of crude is in the form of "extra-heavy" oil -- liquid asphalt -- which is ghastly expensive to pull up and refine. Oil has to sell above $30 a barrel to make the investment in extra-heavy oil worthwhile. A big dip in oil's price -- and, after all, oil cost only $18 a barrel six years ago -- would bankrupt heavy-oil investors. Hence Chavez's offer: Drop the price to $50 -- and keep it there. That would guarantee Venezuela's investment in heavy oil.

But the ascendance of Venezuela within OPEC necessarily means the decline of the power of the House of Saud. And the Bush family wouldn't like that one bit. It comes down to "petro-dollars." When George W. ferried then-Crown Prince (now King) Abdullah of Saudi Arabia around the Crawford ranch in a golf cart it wasn't because America needs Arabian oil. The Saudis will always sell us their petroleum. What Bush needs is Saudi petro-dollars. Saudi Arabia has, over the past three decades, kindly recycled the cash sucked from the wallets of American SUV owners and sent much of the loot right back to New York to buy U.S. Treasury bills and other U.S. assets.

The Gulf potentates understand that in return for lending the U.S. Treasury the cash to fund George Bush's $2 trillion rise in the nation's debt, they receive protection in return. They lend us petro-dollars, we lend them the 82nd Airborne.

Chavez would put an end to all that. He'll sell us oil relatively cheaply -- but intends to keep the petro-dollars in Latin America. Recently, Chavez withdrew $20 billion from the U.S. Federal Reserve and, at the same time, lent or committed a like sum to Argentina, Ecuador, and other Latin American nations. . .

http://www.gregpalast.com/hugo-chavez-an-exclusive-interview-with-greg-palast#more-1496

SAUDI OFFICIAL ADMITS CRUDE OIL FIELDS IN DECLINE

[Platts has been covering the energy story for nearly a century]

GLEN CAREY, PLATTS, APRIL 11 - Saudi Aramco's mature crude oil fields are expected to decline at a gross average rate of 8%/year without additional maintenance and drilling, a Saudi Aramco spokesman said Tuesday. But Saudi Aramco has taken a number of measures to offset a decline in output from the country's aging oil fields, the spokesman added.

"A variety of remedial activities are always being taken in oil fields influencing their effective decline rates," the spokesman said. "The drilling of additional development wells in the producing fields is Saudi Aramco's standard practice to offset normal declines of older wells.". . .

"This maintain[ing] potential drilling in mature fields combined with a multitude of remedial actions and the development of new fields, with long plateau lives, lowers the composite decline rate of producing fields to around 2%," the spokesman said.

STUDY FINDS OIL COMPANY PROFITS NOT CRUDE PRICES DRIVING INCREASED FUEL COSTS

CONSUMER WATCHDOG - The Foundation for Taxpayer and Consumer Rights released a new study today of rising gasoline prices in California that found corporate markups and profiteering are responsible for spring price spikes, not rising crude costs or the national switchover to higher-cost ethanol, as the oil industry claims.

Independent petroleum consultant Tim Hamilton analyzed gasoline price increases from January to April to find that:

Increases in the "spot" market price of crude oil -- which is the highest price a major oil company would pay for crude oil -- accounted for only 12 cents per gallon. California's percentage sales tax increased fuel prices by another four cents per gallon. More than 40 cents of the 60-cent increase in gasoline prices over 3 1/2 months is attributable to increased refinery and marketing profit margins for the oil companies; Neither the MTBE phaseout nor the substitution of ethanol is a serious part of the increase. . .

The profit increase of 42 cents, on top of record profits last year, means California gasoline will cost consumers approximately $546 million more in April 2006 than in April of last year. . . Oil companies are opportunistically using the rising world price for crude oil as an excuse to excessively raise gasoline prices and pump up their profits, even though the spot market price for crude has gone up far more slowly than gasoline prices," said FTCR President Jamie Court. "In addition, the spot price is higher than most oil companies pay, since they either harvest their own crude or pay more stable and often much lower contract prices.

http://www.consumerwatchdog.org/energy/pr/?postId=6133

REPORT: KUWAITI OIL RESERVES HALF THAT CLAIMED

REUTERS - OPEC producer Kuwait's oil reserves are only half those officially stated, according to internal Kuwaiti records seen by industry newsletter Petroleum Intelligence Weekly. "PIW learns from sources that Kuwait's actual oil reserves, which are officially stated at around 99 billion barrels, or close to 10 percent of the global total, are a good deal lower, according to internal Kuwaiti records," the weekly PIW reported on Friday. . . PIW said the official public Kuwaiti figures do not distinguish between proven, probable and possible reserves. But it said the data it had seen show that of the current remaining 48 billion barrels of proven and non-proven reserves, only about 24 billion barrels are so far fully proven -- 15 billion in its biggest oilfield Burgan.

2005

IRAQ OIL INDUSTRY IS A MESS

HEIKO FLOTTAU, ISN SECURITY WATCH - Two-and-a-half years after the US invasion of Iraq, the country's oil industry is still in disarray. An official of the Oil Ministry in Baghdad told ISN Security Watch, on condition of anonymity: "We do not know the exact quantity of oil we are exporting, we do not exactly know the prices we are selling it for, and we do not know where the oil revenue is going to."

According to Baghdad press reports, export revenues are still not sufficient to cover the Iraqi state budget. The government is forced to take loans from international banks to cover its running expenses.

Although the US invested around US$1.3 billion in the rehabilitation of oil plants damaged by lack of maintenance during 13 years of UN sanctions, the daily output of approximately 1.3 million barrels remains far below Iraq's pre-war production level of 2.5 million barrels.

The production goal for December 2004 of 3 million barrels per day, set by the US and the Iraqi government, cannot be reached in the near future, according to experts within the Iraqi Oil Ministry who talked to ISN Security Watch. . .

The seizure of the Iraqi oil fields and the raising of the country's oil production were two of the most important motives for the US invasion of Iraq. When asked, in September 2002, whether the US could afford a costly military operation like the one planned in Iraq, White House economic adviser Larry Lindsay told the Wall Street Journal: "We can afford it."

Lindsay added that, after a regime change in Iraq, three to five million barrels per day could be added to the world oil supply and that Iraqi oil would bring in over US$50 billion in coming years. Lindsay said that Iraq would easily be able to pay for the reconstruction effort.

Michael T. Klare, a Professor of Peace and World Security at Hampshire College and author of the book "Blood and Oil", wrote that it is "an article of faith among America's senior policymakers - Democrats and Republicans alike - that military force is an effective tool for ensuring control over foreign sources of oil."

He predicts that the US will continue to send troops into politically fragile regions in future due to the dilemma of US dependence on oil sourced from these areas.

However, Klare concludes that "the growing Iraqi quagmire has demonstrated that the application of military force can have the very opposite effect; it can diminish - rather than enhance - America's access to foreign oil."

http://www.isn.ethz.ch/news/sw/details.cfm?ID=13770

WAITING FOR OIL PEAK IS TOO LATE, WHENEVER IT IS

LEWIS L SMITH - "Peak oil" is an economic concept, not a physical one. Physically most oil in a field gets left in the ground. A world average is probably around 70%.

To project the coming peak in the world production of crude oil, one should have the following information about each of the world's principle oil fields ---

[1] Historic - oil pumped, additives, gas and water injected.

[2] Current - data for some 15 parameters.

[3] Future - probable shape of the production decline curve, probable results of exploration and development projects under way in the field and elsewhere, probable impact of new E&D technologies.

Most of the people who have this kind of information, have it only for their own country, and almost none of them are talking. Some consultants claim to have such information for more than one country, but persons who are clients of at least two of these consultants say that they don't agree on either the peak year or the rate of decline. Also projecting decline curves is tricky. There are at least four different patterns which a field can follow, and sometimes a field "switches curves" in the middle of the decline.

By and large, the people who are talking are retirees [whose access to current information is uncertain] , people with "axes to grind" and/or people who work from published data. [The latter is the largest group of all]

The use of published data in the oil industry is fraught with peril. Most current data is not very accurate, and most accurate data is not very current. But some important historical data is inaccurate too, such as monthly Saudi production of crude oil. Indeed on several occasions, the OPEC Secretariat has complained publicly that its members lie to it. Also the figures for some countries' reserves are highly suspicious, even at the aggregate level. Last but not least, the principle sources of published data sometimes copy from one another, so circularity is always a threat. . .

Moreover, pinpointing the peak year for world crude production is not very important. The important thing is the shape of the aggregate decline curve.

If world production declines slowly, we will spend more money than we had planned, but will probably "muddle through." If it does anything else, we could easily have a world crisis.

Unfortunately the shape of the decline curve is indeterminate ---

[1] For the reasons mentioned above.

[2] Because production tends to follow demand and prices.

[3] Because the demand for crude is itself indeterminate.

The demand for crude is indeterminate for two reasons:

[1] There are lots of good alternatives to oil and lots of good reasons for using them but for financial and technical reasons, they cannot be deployed fast enough if the decline curve is steep. It is not enough to have new technologies that are commercially and technically feasible. One must create, equip, staff and finance the organizations that are going to use them.

[2] In the long run, diesel, kerosene, naphtha and other middle distillates can all be produced from other sources, by well proven, commercial, gas-to-liquids technologies. These sources are gasification of biomass, gasification of coal, extraction of methane from methane hydrates and gas fields economically stranded without GTL. And for diesel there are also triglycerides and insect larvae. Except for submarine methane hydrates, all the necessary technologies are technically and [in most cases] commercially feasible. [Note that kerosene is the basis for civilian jet fuel, and naphtha for military jet fuel and for petrochemicals.]

The only accurate statement that we can make about world crude-oil production is that it will peak forever sometime within our children's lifetimes.

But we should not wait for the peak. Instead we should replace petroleum fuels as soon as possible. My reasons are as follows ---

[1] It takes time to permit, construct and bring on line energy projects of any kind.

[2] It takes extra time when these projects incorporate new technologies.

[3] Energy projects all kinds are frequently subject to delays and cost overruns.

[4] The evil consequences of global warning are sneaking up on us faster than we realize.

[Lewis L Smith is an energy economist, an energy advisor to the government of the Commonwealth of Puerto Rico and a former director of what is now PR's Energy Affairs Administration]

THE HIDDEN ISSUE IN IRAQ

JAMES HOWARD KUNSTLER - Oil trade has now become a dead heat race between supply and demand, with demand looking like the stronger horse coming into the home stretch. As it overtakes supply, even more strange changes will unfold on the world scene. These are likely to take the form of fierce geopolitical struggles to gain favor in or control those regions that still have a lot of oil, foremost the Middle East, with Iraq located at dead center of it.

There is really only one condition that will allow us to pull out of Iraq. That is if we make an enormous collective effort to change our behavior here in North America; if we break free from an economy pegged to suburban sprawl, reform the way we do agriculture and retail trade, make substantial investments in public transit and railroads in particular, and practice fiscal restraint at every scale, including an end to the reckless creation of mortgages. Unless we face these facts and the tasks associated with them, then we will find ourselves at the center of that geopolitical struggle.

Right now, nobody from any political stance is talking about these facts and these tasks. Those in the anti-war movement are by-and-large people who enjoy the same suburban "entitlements" as the war-hawks. The anti-war leadership is even worse than the pro-war leadership, because the war-hawks don't even pretend to be interested in reforming the way we live -- they've declared it "non-negotiable."

If the anti-war movement has a different idea, they sure haven't expressed it. If the Democratic party were to take the lead in the anti-war movement, they would have to start negotiations for changing the way we live in this country. To evade the responsibility for this would simply be cowardice. Leading sometimes means taking public opinion into territory it hasn't been to before.

We're now entering that territory, by the way. Stealthily over the past week, the price of natural gas has crept above $14 a unit (one million btu's). Half the houses in America are heated with the stuff. 90 percent of America's farm fertilizers are made out of it. Above $14 really is uncharted territory.

http://jameshowardkunstler.typepad.com/clusterfuck_nation/

REPORT SHOWS IRAQ WILL BE THE LOSER IN THE WAR FOR ITS OIL

CONTROL OF IRAQ'S FUTURE OIL WEALTH is being handed to multinational oil companies through long-term contracts that will cost Iraq hundreds of billions of dollars, according to a new report published in London.

Crude Designs, published jointly by a number of activist organizations, reveals that current Iraqi oil policy will allocate the development of at least 64% of Iraq's reserves to foreign oil companies. Iraq has the world's third largest oil reserves. The report states that:

- The estimated cost to Iraq over the life of the new oil contracts is $74 to $194 billion, compared with leaving oil development in public hands. These sums represent between two and seven times the current Iraqi state budget.
- The contracts would guarantee massive profits to foreign companies, with rates of return of 42% to 162%.

The kinds of contracts that will provide these returns are known as production sharing agreements. PSAs have been heavily promoted by the US government and oil majors and have the backing of senior figures in the Iraqi Oil Ministry. Britain has also encouraged Iraq to open its oilfields to foreign investment. However PSAs last for 25-40 years, are usually secret and prevent governments from later altering the terms of the contract. decades."

WORLD'S SECOND LARGEST OIL FIELD UNABLE TO MEET PRODUCTION PREDICTION

AME INFO - It was an incredible revelation last week that the second largest oil field in the world is exhausted and past its peak output. Yet that is what the Kuwait Oil Company revealed about its Burgan field. The peak output of the Burgan oil field will now be around 1.7 million barrels per day, and not the two million barrels per day forecast for the rest of the field's 30 to 40 years of life, Chairman Farouk Al Zanki told Bloomberg.

He said that engineers had tried to maintain 1.9 million barrels per day but that 1.7 million is the optimum rate. Kuwait will now spend some $3 million a year for the next year to boost output and exports from other fields.

However, it is surely a landmark moment when the world's second largest oil field begins to run dry. For Burgan has been pumping oil for almost 60 years and accounts for more than half of Kuwait's proven oil reserves. This is also not what forecasters are currently assuming.

Forecasts wrong Last week the International Energy Agency's report said output from the Greater Burgan area will be 1.64 million barrels a day in 2020 and 1.53 million barrels per day in 2030. Is this now a realistic scenario?

The news about the Burgan oil field also lends credence to the controversial opinions of investment banker and geologist Matthew Simmons. His book 'Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy' claims that the aging Saudi oil filed also face serious production falls.

The implications for the global economy are indeed serious. If the world oil supply begins to run dry then the upward pressure on oil prices will be inexorable.

http://www.ameinfo.com/71519.html

IRAQ, OIL AND CHALABI

CBS 60 Minutes December 15, 2002

STEVE KROFT, co-host: If and when the United States decides to take military action against Iraq and get rid of Saddam Hussein, the Iraqi dictator will leave something behind: oil, and lots of it, 112 billion barrels of proven reserves, the second-largest supply in the world, behind Saudi Arabia. What happens to all that oil if Saddam goes, and what role is it playing in the current showdown with Iraq? If you ask anyone in the Bush administration about the importance of oil in the current crisis, as I did of Secretary of Defense Donald Rumsfeld a few weeksago during an interview for Infinity Radio, you get this answer. Mr. Secretary, what do you say to people who think this is about oil?

DONALD RUMSFELD (Defense Department): Nonsense. It just isn't. There--there--there are certain things like that, myths that are floating around. I'm glad you asked. I--it has nothing to do with oil, literally nothing to do with oil.

(Footage of oil worker; oil well; refinery)

KROFT: (Voiceover) Nothing? If you ask people in the oil industry, you'll get a slightly different answer. They'll tell you it definitely has something to do with oil.

Is oil part of the equation here?

Mr. PHILLIP ELLIS (Boston Consulting): Of course it is.

KROFT: No doubt?

Mr. ELLIS: No doubt.

(Footage of Phillip Ellis; Ellis and Kroft)

KROFT: (Voiceover) Phillip Ellis is head of global oil and gas operations for Boston Consulting, based in London. He travels the world planning strategies for large international oil companies. Ten days ago we went with him to get a glimpse of Saddam Hussein's oil, traveling north from Kuwait City on what is still called the Highway of Death, towards the Iraqi border. . .

KROFT: (Voiceover) Because of the UN embargo and a 20-year estrangement from Western oil technology, Ellis says Iraq is producing less than half of the oil it's capable of. He doesn't believe the US is interested in controlling Iraqi oil fields, even if it could. The United States, he says, now gets only about12 percent of its oil from the Middle East and is only interested in insuring reliable supplies at stable prices. But if there were to be a regime change in Iraq, its oil would become a prize worth billions of dollars for nations and corporations on the winning side of any conflict.

Mr. ELLIS: If Saddam's out of power, there's a friendly Western government, there's going to be technology coming from all over the world into Iraq, which they desperately need, to rebuild their--their industry.

KROFT: And presumably, some US participation in that rebuilding and reconstruction.

Mr. ELLIS: No doubt. No doubt. There's plenty of room in Iraq for every--every nationality of--of oil company and oil service company and--and financial institution. There is an enormous amount of oil in Iraq that hasn't been discovered yet, a huge amount. And not only that exploration, but the rebuilding of what's already there is going to take more capital than any one country or certainly any small handful of companies can possibly muster. It's got to be a global effort.

(Footage of oil wells; refinery)

KROFT: (Voiceover) It may take a decade or more, but Ellis says all of that Iraqi oil is going to come on the market one way or another. It's just a question of who gets most of the business.

(Footage of Saddam Hussein)

KROFT: (Voiceover) If Saddam could somehow manage to satisfy the United States and the world that he has no weapons of mass destruction, sanctions would be lifted, and the biggest contracts would go to Russian and French oil companies who already have signed contingency agreements with Saddam. But if Saddam is deposed and a new government installed, it could be a whole new ballgame.

(Footage of Ahmed Chalabi and Kroft; oil tanker trucks)

KROFT: (Voiceover) Ahmed Chalabi, the head of the Iraqi National Congress, an umbrella organization of Iraqi opposition groups, says all oil contracts negotiated by Saddam's regime will be up for review.

Mr. AHMED CHALABI (Iraqi National Congress): Any contracts are either illegal or unfair, and no Iraqi government is bound by them once Saddam goes. This isour belief, and of course, it is up to the Iraqi government in the future to decide those things.

(Footage of Chalabi)

KROFT: (Voiceover) It's impossible to know whether Chalabi or the Iraqi National Congress would be part of a new Iraqi government, but Chalabi says he has already held informal discussions with international oil companies eager to explore opportunities.

KROFT: Can you tell me which oil companies?

Mr. CHALABI: No.

KROFT: American oil companies?

Mr. CHALABI: Some.

(Footage of American gas stations; Chalabi)

KROFT: (Voiceover) The US government wouldn't allow American oil companies to deal with Saddam, and it's unlikely he would have signed contracts with them anyway. But Chalabi makes no secret of his willingness to let Americans share in the profits of a post-Saddam oil boom.

Mr. CHALABI: American companies did very well by abstaining from dealing with the illegal regime of Saddam, and American companies, we expect, will play animportant and leading role in the future oil situation in Iraq.

KROFT: You would be willing to tear up the contracts, let's say, of the Russians or the French and give those deals to the United States?

Mr. CHALABI: It's up to the future Iraqi government to do that. But my view is American companies must be introduced and given a chance to--to bid and to negotiate for the same things that these people do. The future democratic government in Iraq will be grateful to the United States for helping the Iraqi people liberate themselves and getting rid of Saddam. . .

KROFT: If Saddam Hussein is removed and a democratic government takes power in Iraq, isn't that a huge improvement in the strategic landscape for the United States as far as oil is concerned?

Mr. ELLIS: I think it is. I think it is. Given that the region is going to see several regime changes coming up in the next decade, having a--a partner would be a--a good counter to the--at least the--the--the possible downsides that we might see in other countries in the region.

KROFT: (Voiceover) Phillip Ellis is talking about Saudi Arabia. In a post-9/11 world, there are serious questions to be raised about the kingdom's political stability and uncertainties about the future of the Saudi royal family.

(Footage of oil refineries; OPEC meeting)

KROFT: (Voiceover) Right now Saudi Arabia pumps about 7.4 million barrels of crude oil every day, about 10 percent of the world's output. A fully operational oil industry in Iraq, under a new regime, with lots of Western investment, might be able to produce up to six million barrels a day within the next decade. That would weaken Saudi Arabia's dominant role in OPEC, put downward pressure on oil prices, and lessen US reliance on Saudi oil.And you could make the argument that the United States seems to be distancing itself from Saudi Arabia and not counting on Saudi Arabia anymore.

Mr. ELLIS: I think we're spreading the risk, actually. It's important not to have all--all your eggs in--in one basket.

SAUDIS SAY THEY WON'T BE ABLE TO MEET OIL DEMAND

FINANCIAL TIMES - Private warnings point to a worsening long-term outlook, with Saudi officials saying that the Organization of the Petroleum Exporting Countries will be unable to meet projected western demand in 10 to 15 years.

At today's prices, the world will need the cartel to boost its production from 30m to 50m barrels a day to 50m by 2020 to meet rapidly rising demand, according to the International Energy Agency, the energy watchdog for consuming countries. But senior Saudi energy officials have privately warned US and European counterparts that OPEC would have an "extremely difficult time" meeting that demand. Saudi Arabia calculates there is a 4.5m b/d gap between what the world needs and what the kingdom can provide.

http://news.ft.com/cms/s/e0cdc282-ee47-11d9-98e5-00000e2511c8,dwp_uuid=bf499000-f5eb-11d8-b814-00000e2511c8.html

SIGN OF TROUBLE: COMPANIES GOING FOR DEEP OIL
http://www.missoulian.com/articles/2005/04/23/business/biz04.tx

HOW MOONSHINING CAN HELP YOU WITH THE FUEL CRISIS
http://www.flashnews.com/news/wfn1050414J12180.html

WIRELESS FLASH - Americans who want to fight back against high gas prices are taking a tip from moonshiners. That's according to an unemployed Michigan ditch-digger who is using his time off to build personal home distilleries that let folks turn corn, potatoes or other starchy materials into ethanol - an alcohol that can be used to power cars. It's basically the same process used to make moonshine, except you mix a little bit of gasoline in the final product so it will burn properly in an auto engine.

Inventor Paul Cavalloro's Micro Fuel Plant can produce four gallons of fuel per day from 20 gallons of liquified apples, corn or other raw materials. . . Cavalloro says he's had 36 orders for the stills since he started selling them for $250 a pop a few days ago, mostly to people in high gas price hubs like California.

2004

NO ESCAPE FROM OIL DEPENDENCY

MICHAEL KLARE, TOM DISPATCH - America is more dependent on foreign oil than ever before and the Bush administration has no exit strategy for getting out of the perpetual crisis. . . The onset of this new energy crisis was first signaled in January 2004, when Royal Dutch/Shell - one of the world's leading energy firms - revealed that it had overstated its oil and natural gas reserves by about 20 percent, the net equivalent of 3.9 billion barrels of oil or the total annual consumption of China and Japan combined.

Another indication of crisis came only one month later, when the New York Times revealed that prominent American energy analysts now believe Saudi Arabia, the world's largest oil producer, had exaggerated its future oil production capacity and could soon be facing the wholesale exhaustion of some of its most prolific older fields. Although officials at the U.S. Department of Energy insisted that these developments did not foreshadow a near-term contraction in the global supply of energy, warnings increased from energy experts of the imminent arrival of "peak" oil - the point at which the world's known petroleum fields will attain their highest sustainable yield and commence a long, irreversible decline.

How imminent that peak-oil moment may in fact be has generated considerable debate and disagreement within the specialist community, and the topic has begun to seep into public consciousness. A number of books on peak oil - "Out of Gas" by David Goodstein, "The End of Oil" by Paul Roberts, and "The Party's Over" by Richard Heinberg, among others - have appeared in recent months, and a related documentary film, "The End of Suburbia," has gained a broad underground audience.

As if to acknowledge the seriousness of this debate, the Wall Street Journal reported in September that evidence of a global slowdown in petroleum output can no longer be ignored. While no one can say with certainty that recent developments portend the imminent arrival of peak oil output, there can be no question that global supply shortages will prove increasingly common in the future.

Nor is the evidence of a slowdown in oil output the only sign of an unfolding energy crisis. Of no less significance is the dramatic increase in energy demand from newly-industrialized nations - especially China. As recently as 1990, the older industrialized countries (including the former Soviet Union) accounted for approximately three-quarters of total worldwide oil consumption. But the consumption of petroleum in developing nations is growing so rapidly - at three times the rate for developed countries - that it is soon expected to draw even.

CHINA'S OIL NEEDS SOARING

FORGOTTEN BUSH 2000 CAMPAIGN DOCUMENT REVEALS OBSESSION WITH IRAQI OIL

Unnoted during the 2000 campaign, and forgotten since, is a remarkable document the Bush campaign released on September 29 of that year in Saginaw, Michigan: "A Comprehensive National Energy Policy." In the context of the campaign it was just another report, but in retrospect it was a canary in the mine shift, warning of Bush's obsession with Iraq and its importance in the country's oil supply. The document lends support to those who argue that the Iraq war was mainly about oil. Some excerpts:

- "To promote the development of U.S. oil and gas resources, and to meet the electricity needs of the new economy, Governor Bush will open only 8 percent of the Arctic National Wildlife Refuge to environmentally responsible exploration, which could replace the oil that the U.S. now imports from Iraq."

- "Internationally [the Clinton-Gore Administration] has squandered U.S. credibility with oil-producing nations in the Persian Gulf that can influence OPEC policies. This leadership failure has increased Iraqi leverage over the U.S. and international economies."

- "Increasing OPEC and Iraqi Influence. . . When the Clinton-Gore Administration took office in January of 1993, the Gulf War coalition was intact, economic sanctions were in place against Iraq, UN weapons inspectors were operating in Iraq, there was an active Iraqi opposition, and U.S. influence in the Gulf was at an all-time high. Almost eight years later, due to the failed leadership of the Administration: the international coalition assembled during the Gulf War has come apart; UN inspectors have not set foot in Iraq for almost two years, failing to monitor any attempts to produce weapons of mass destruction; the Administration has spent only a negligible amount of the $97 million appropriated by Congress under the Iraq Liberation Act to support the Iraqi resistance; U.S credibility in the Gulf is so low that the United Arab Emirates and Bahrain-once critical members of the Gulf War coalition-recently restored full diplomatic relations with Iraq."

- "As U.S. influence in the Gulf has waned, Iraq's relative influence as an oil supplier to U.S. and world markets has increased: Iraq is now the fastest growing oil supplier to the United States, selling 850,000 barrels of crude oil a day to the United states in June or over seven percent of total imports. . . As spare production capacity becomes tighter, Iraq is moving into a position to become an important "swing producer," with an ability to single handedly impact and manipulate global markets. . . "Perhaps most ominously, Saddam Hussein is threatening to cut back production is again claiming that Kuwait is stealing Iraq's oil--the same claim Iraq made in 1990."

BUSHS ENERGY PROGRAM

UN AUDITORS HIT SPENDING OF IRAQ OIL REVENUES

FINANCIAL TIMES - United Nations-mandated auditors have sharply criticised the US occupation authority for the way it has spent more than $11bn in Iraqi oil revenues and say they have faced "resistance" from coalition officials.

In an interim report, obtained by the Financial Times, KPMG says the Development Fund for Iraq, which is managed by the US-led Coalition Provisional Authority and channels oil revenue into reconstruction projects, is "open to fraudulent acts".

The auditors criticise the CPA's bookkeeping and warn: "The CPA does not have effective controls over the ministries' spending of their individually allocated budgets, whether the funds are direct from the CPA or via the ministry of finance."

The findings come after US complaints about the UN's administration of the oil-for-food programme under Saddam Hussein.

HOW MUCH OIL IS LEFT?

CHENEY'S OIL FIELDS

OIL RESERVES OVERSTATED

Jane's Foreign Report - The oil industry has been gripped by scandal since Royal Dutch/Shell twice this year downgraded its proven oil reserves by 20 per cent, or nearly 4bn barrels. Shell may not be alone.

Other companies and even governments have hyped up the estimates of how much oil they have, which is a vital factor in measuring their economic health. If exaggeration proves to be widespread, it would have an immense impact on the Middle East, whose economic weight is almost totally dependent on oil and natural gas.

Geologists and analysts have been saying for some time that estimates of global oil reserves may be dangerously exaggerated. If you take oil prices currently at around US$37 a barrel, the highest for nearly 15 years, US petrol prices at record levels and you add terrorist attacks and diminishing supplies, you have a recipe for inflation and economic slowdown. The question of reserves becomes a much more important factor.

Earlier this month, The New York Times reported that internal documents and other data indicated that Shell had over estimated its proven oil reserves in Oman by as much as 40 per cent. But that seems to have been done because everyone hoped that the latest drilling techniques would reach more deposits than in the past and merit upgrading the estimates of reserves.

EXPECTED OIL RESERVES
MORE BBC CHARTS

BANDAR SAYS SAUDIS READY TO LOWER OIL PRICES TO KEEP BUSH IN OFFICE

SIXTY MINUTES - Saturday, Jan. 11, with the president's permission, Cheney and Rumsfeld call [Saudi Arabian Prince] Bandar to Cheney's West Wing office, and the chairman of the Joint Chiefs, Gen. Myers, is there with a top-secret map of the war plan. And it says, 'Top secret. No foreign.' No foreign means no foreigners are supposed to see this," says Woodward.

"They describe in detail the war plan for Bandar. And so Bandar, who's skeptical because he knows in the first Gulf War we didn't get Saddam out, so he says to Cheney and Rumsfeld, 'So Saddam this time is gonna be out, period?' And Cheney - who has said nothing - says the following: 'Prince Bandar, once we start, Saddam is toast.'"

After Bandar left, according to Woodward, Cheney said, "I wanted him to know that this is for real. We're really doing it."

But this wasn't enough for Prince Bandar, who Woodward says wanted confirmation from the president. "Then, two days later, Bandar is called to meet with the president and the president says, 'Their message is my message,'" says Woodward.

Prince Bandar enjoys easy access to the Oval Office. His family and the Bush family are close. And Woodward told 60 Minutes that Bandar has promised the president that Saudi Arabia will lower oil prices in the months before the election - to ensure the U.S. economy is strong on election day.

FORECAST OF RISING OIL DEMAND CHALLENGES TIRED SAUDI FIELDS

JEFF GERTH, NY TIMES - Ever since its rich reserves were discovered more than a half-century ago, Saudi Arabia has pumped the oil needed to keep pace with rising needs, becoming the mainstay of the global energy markets. But the country's oil fields now are in decline, prompting industry and government officials to raise serious questions about whether the kingdom will be able to satisfy the world's thirst for oil in coming years. Energy forecasts call for Saudi Arabia to almost double its output in the next decade and after. Oil executives and government officials in the United States and Saudi Arabia, however, say capacity will probably stall near current levels, potentially creating a significant gap in the global energy supply.

2003

THE LOOMING OIL DISASTER

GEORGE MONBIOT, GUARDIAN - The oil industry is buzzing. On Thursday, the government approved the development of the biggest deposit discovered in British territory for at least 10 years. Everywhere we are told that this is a "huge" find, which dispels the idea that North Sea oil is in terminal decline. You begin to recognize how serious the human predicament has become when you discover that this "huge" new field will supply the world with oil for five and a quarter days.

Every generation has its taboo, and ours is this: that the resource upon which our lives have been built is running out. We don't talk about it because we cannot imagine it. This is a civilization in denial. Oil itself won't disappear, but extracting what remains is becoming ever more difficult and expensive. The discovery of new reserves peaked in the 1960s. Every year, we use four times as much oil as we find. All the big strikes appear to have been made long ago: the 400 million barrels in the new North Sea field would have been considered piffling in the 1970s. Our future supplies depend on the discovery of small new deposits and the better exploitation of big old ones. No one with expertise in the field is in any doubt that the global production of oil will peak before long.

HOW IMPORTANT IS AFRICAN OIL?

BBC - President George W Bush is in Africa to launch HIV/Aids, development and anti-terrorism initiatives. But his visit has also highlighted the growing importance of oil imports for the United States. The US imports two thirds of its oil needs. About 15% of that amount comes from West Africa and that figure is projected to rise to 25% in the next 10 years. The oil sector in Sub-Saharan Africa is one of the fastest growing in the world. Production has taken off in the Gulf of Guinea which includes Nigeria, Equatorial Guinea, Cameroon, Gabon, Angola and Congo.

By the end of 2003, hundreds of thousands of barrels of crude will be flowing from oil fields in Chad, through rain forests in Cameroon to tankers docked off the Atlantic coast.

. . . America may even eventually increase its military presence in the region to secure its oil supplies. Sao Tome - which has big oil reserves - has invited the US Navy to build a port from which to patrol the Gulf of Guinea. But some analysts say investing in African oil reserves will not solve all America's energy problems.

. . . Africa and Russia are not going to replace Saudi Arabia which has excess capacity which can stabilize the market Professor Paul Stevens, Dundee University "There is a move to reduce reliance on the Middle East but Africa also has its problems. Look at the recent strikes in Nigeria."

RUMSFELD TRIED TO EMBED BECHTEL AND HIMSELF
WITH SADDAM AS IRAQ GASSED IRANIANS

[A stunning new report shines new light on the involvement of Donald Rumsfeld and Bechtel with the Saddam Hussein regime in the 1980s, giving lie to the Bush administration's insistence that the war on Iraq has nothing to do with oil. In fact, the war can be seen in part as an attempt to complete a business deal that Rumsfeld started back then. The report was issued by the Sustainable Energy and Economy Network and the Institute for Policy Studies]

REPORT - Our examination shines a new spotlight on the revolving door between Bechtel and the Reagan Administration that drove U.S.-Iraq interactions between 1983 and 1985. The men who courted Saddam while he gassed Iranians are now waging war against him, ostensibly because he holds weapons of mass destruction. To a man, they now deny that oil has anything to do with the conflict. Yet during the Reagan Administration, and in the years leading up to the present conflict, these men shaped and implemented a strategy that has everything to do with securing Iraqi oil exports. All of this documentation suggests that Reagan Administration officials bent many rules to convince Saddam Hussein to open up a pipeline of central interest to the US, from Iraq to Jordan. This project, the Aqaba pipeline, was critical not only because it would mean more oil flowing to Western markets; crude would also avoid the thorny Persian Gulf and Straits of Hormuz altogether by passing, instead, through the Red Sea. . .

[This paper] notes that the break in US-Iraq relations occurred not after Iraq used chemical weapons on the Iranians, nor after Iraq gassed its own Kurdish people, nor even after Iraq invaded Kuwait, but rather, followed Saddam's rejection of the Aqaba pipeline deal. Finally, this paper shows that the main actors in the 1980s drama are now back on center stage, this time justifying military action against Iraq in terms of national security. These men's conduct during the Reagan administration - when they negotiated a major oil pipeline deal on behalf of Bechtel with Iraq - belies their present insistence that Saddam Hussein must be toppled because he holds weapons of mass destruction and is tied to terrorists. Among our key findings, confirmed by never-before published government and corporate documents:

1. Secretary of State George Shultz orchestrated the initial discussions with Iraq. Out of public view, he pushed the pipeline project on behalf of his former company, Bechtel. Behind the scenes, Shultz composed Donald Rumsfeld's pipeline pitch to Saddam. (At the time, Rumsfeld, officially, was a special envoy on a peace mission to the Middle East.)

2. From 1983 to 1988, Iraqi warplanes dropped over 13,000 chemical bombs. Iran first reported Iraq's use of chemical warfare well before Rumsfeld met with Saddam in a great victory. Reagan's envoy recorded no discussion of this horror. Instead, Rumsfeld impressed upon Saddam the U.S.'desire to help Iraq increase its oil exports.' He reiterated this desire in a March 26, 1984, meeting with Iraqi Deputy Prime Minister Tariq Aziz, the same day that a UN panel unanimously concluded that Iraq dropped chemical munitions on Iranian troops.

3. Four days after officially condemning Iraq for using chemical weapons on the Iranians, the State Department desk officer for Iraq pressured U.S. Export-Import Bank to initiate short-term loans for Iraq "for foreign relations purposes" - to build a pipeline from Iraq to Jordan.

4. Following Hussein's use of chemical weapons on the Iranians, the only response was instructions, recorded by Shultz, to the Iraqis that they not put Americans in the "embarrassing situation" of buying future chemicals that could be the "source of supply for anything that could contribute to production of CW [chemical weapons]." Reagan officials spent much more time decrying the role of "Iranian revolutionaries" in fostering bloodshed. In private, they forged ahead with the pipeline plan and assured the Iraqis that "we do not want this issue to dominate our bilateral relationship."

5. The U.S. Export-Import Bank and U.S. Overseas Private Investment Corporation, two government-backed export guarantee and credit agencies, were pressured by the Reagan Administration and private individuals lobbying on behalf of Bechtel to provide over $500 million in financing and insurance to the Aqaba pipeline.

6. Government officials and pipeline agents attempted several dubious methods of assuaging Hussein's concerns about a possible Israeli attack on the pipeline. These included secret plans to funnel pipeline income into the Israeli Labor Party and to assign U.S. aid to Israel or U.S. Defense Department funds as collateral in case of an attack on the pipeline. Judge William Clark, while on the payroll of the Bechtel pipeline promoters, flew to Baghdad as a representative of President Reagan and the National Security Council.

7. Two years after Rumsfeld first pitched the plan, Saddam issued a terse rejection. U.S.- Iraqi business relations have never been the same.

8. Many of the same U.S. officials and quasi-officials involved in the Aqaba pipeline project have orchestrated the current Bush/Cheney initiative against Iraq. In recent months, these men have denied any linkage between oil and war; but in previous years, these men repeatedly invoked the Iraqi threat to global energy security as a just cause for war. The hard lesson of the Aqaba pipeline project, it seems, is that an "evil dictator" is a friend of the United States when he is willing to make a deal, and a mortal enemy when he is not.

BUSH POST WAR PLANS AMOUNT TO HISTORY'S BIGGEST GIVEAWAY TO POLITICAL BUDDIES

CARLYLE GROUP CASHING IN AS TANKS ROLL

DENNIS KUCINICH ON THE OIL CONNECTION

[Although Dennis Kucinich was aggressively attacked by Washington Post columnist Richard Cohen for suggesting that the preemptive strike on Iraq was based on oil, the Post refused to print the presidential candidate and Ohio Democrat's response.]

REP. DENNIS KUCINICH, ALTERNET - Is President Bush's war in Iraq about oil? Of course it is. Sometimes, the obvious answer is the right one: Oil is a major factor in the President's march to war, just as oil is a major factor in every aspect of U.S. policy in the Persian Gulf. Ask yourself:

What commodity accounts for 83 percent of total exports from the Persian Gulf? What is the U.S. protecting with our permanent deployment of about 25,000 military personnel, 6 fighter squadrons, 6 bomber squadrons, 13 air control and reconnaissance squadrons, one aircraft carrier battle group, and one amphibious ready group based at 11 military installations in the countries of the Persian Gulf? . . .

What was Iraq's number one export when the U.S. made an alliance with Saddam Hussein, sold him biological and chemical weapons agents, and then did not object when he gassed his own people? For what major Iraqi resource has Saddam Hussein denied contracts with the largest U.S. and U.K. multinational companies? . . .

How do the White House and State Department plan to pay for a post-Saddam occupation and reconstruction?
The answer to all of these questions is oil, of course. Oil obviously drives U.S. policy in the Middle East. So who can doubt that this war in Iraq concerns oil?

ECONOMIST - Whether the current high level of oil prices, constitutes a big economic shock is unclear. Indeed, it is not wholly clear why prices are quite so high. Uncertainty about war with Iraq is a factor: oil traders are worried that military intervention would interrupt the supply of oil from Iraq, currently running at around 2m barrels a day. They also wonder whether a prolonged conflict would affect supplies from other Middle Eastern oil producers, either because of physical damage to oilfields or because of some sort of political embargo on oil supplies. The Malaysian prime minister has already floated the idea of Muslim countries imposing such an embargo on Western consumers.

But Iraq doesn't wholly explain the recent spike in prices. Three other factors are also in play. One is the coldest winter in the northern hemisphere for many years. Demand for oil, always higher during the northern winter, has risen sharply. Another factor is the big drop in American oil stocks, now at their lowest level for years. Even the Bush administration's declared readiness to release some of America's massive contingency reserve of oil has failed to calm fears about the impact war might have on already tight supply.

The third factor keeping the oil market tight is supply constraints outside the Middle East. The lengthy strike in Venezuela had a big impact, especially in America, its main customer. Although the strike has finally ended, experts reckon it could be months before Venezuelan exports are back to pre-strike levels. And traders are now getting rattled about possible interruptions to supplies from Nigeria if there is trouble there in the run-up to the presidential election in April.

Those with long memories - and an inclination to fear the worst - keep recalling the oil-price shock of 1973-74 when, in the aftermath of the Arab-Israeli war, the Organization of Petroleum Exporting Countries used its muscle to quadruple prices within a very short space of time. This stopped the world economy dead in its tracks and gave economists a new phenomenon to worry about: stagflation (no economic growth combined with high inflation).

All the economic evidence shows that sustained oil-price rises have a big negative impact on economic growth: similar effects were seen after the next big price hike in 1978-80. More recently, the pick-up in prices in the late 1990s helped end the long boom which, in America and parts of Europe and Asia, then turned into recession. The fact that recovery since then has been so tentative explains why the recent surge in prices has alarmed some economists.

U.S. MEETS FUEL SHORTAGE WITH OIL FROM IRAQ

STATE DEPARTMENT PLOTS IRAQ OIL FUTURE

WAR IN IRAQ COULD BE BOON TO OIL SERVICE COMPANIES

OIL AND GAS INTERNATIONAL - France and Russia have been warned they must support the US military invasion and occupation of Iraq if they want access to Iraqi oilfields in a post-Saddam Hussein Iraq. According to a report in today's Tehran Times, US Senator Richard Lugar, a leading member of the Bush administration and Republican Party chairman of the Senate Foreign Relations Committee, said Russia and France "must be ready to stand shoulder-to-shoulder in any US-led military intervention" if they want a share of Iraqi oil. The paper quoted Lugar as saying that Paris and Moscow oil companies will be deprived of Iraqi oil and have no share in the country's resources if they refuse to join in the US war to oust Hussein.

source unknown

2002

PETER SYMONDS, BANGKOK POST - A little publicized agreement signed in the Pakistani capital of Islamabad has highlighted once again the real motives behind the US military intervention into Afghanistan - access to and domination of Central Asian oil and gas. The deal between Pakistan, Afghanistan and the Central Asian republic of Turkmenistan establishes the basis for construction of a $1.9 billion pipeline from the Turkmen natural gas fields at Daulatabad through to the south-western Pakistani port of Gawadar. A parallel oil pipeline as well as road and rail connections are also being considered, along with processing facilities at Gawadar to enable the shipment of liquefied gas. All three leaders _ new Afghan President Hamid Karzai, Pakistani President Pervez Musharraf and Turkmen President Saparmurad Niyazov _ anticipate substantial benefits from the project. War ravaged Afghanistan is hoping to garner at least $100 million a year in government revenue from transit fees and to create up to 10,000 jobs in the construction and maintenance of the pipeline and associated industries. The World Bank and Asian Development Bank have already indicated backing for the project.

The lion's share of the profits, however, will not go to the three countries but to the transnational energy giants that have been scrambling for ways to exploit the huge oil and gas reserves in Central Asia - the world's second largest after the Middle East.

GIVE ME A PIPELINE OR GIVE ME DEATH

BBC: Afghanistan hopes to strike a deal later this month to build a $2 billion pipeline through the country to take gas from energy-rich Turkmenistan to Pakistan and India. Afghan interim ruler Hamid Karzai is to hold talks with his Pakistani and Turkmenistan counterparts later this month on Afghanistan's biggest foreign investment project, said Mohammad Alim Razim, minister for Mines and Industries told Reuters. "The work on the project will start after an agreement is expected to be struck at the coming summit," Mr Razim said. The construction of the 850-kilometre pipeline had been previously discussed between Afghanistan's former Taliban regime, US oil company Unocal and Bridas of Argentina. The project was abandoned after the US launched missile attacks on Afghanistan in 1999. Mr Razim said US energy company Unocal was the "lead company" among those that would build the pipeline, which would bring 30bn cubic meters of Turkmen gas to market annually. Unocal - which led a consortium of companies from Saudi Arabia, Pakistan, Turkmenistan, Japan and South Korea - has maintained the project is both economically and technically feasible once Afghan stability was secured. "Unocal is not involved in any projects (including pipelines) in Afghanistan, nor do we have any plans to become involved, nor are we discussing any such projects," a spokesman told BBC News Online.

||| DANIEL FISHER FORBES - It has been called the pipeline from hell, to hell, through hell. It's a 1,270-kilometer conduit, 1.2 meters in diameter, that would snake across Afghanistan to carry natural gas from eastern Turkmenistan-with 700 billion cubic meters of proven reserves-to energy-hungry Pakistan and beyond. Unocal of the U.S. and Bridas Petroleum of Argentina vied for the $1.9 billion project in the 1990s. Now, with the collapse of the Taliban, oil executives are suddenly talking again about building it. "It is absolutely essential that the U.S. make the pipeline the centerpiece of rebuilding Afghanistan," says S. Rob Sobhani, a professor of foreign relations at Georgetown University and the head of Caspian Energy Consulting. The State Department thinks it's a great idea, too. Routing the gas through Iran would be avoided, and Central Asian republics wouldn't have to ship through Russian pipelines.

MORE

ENRON-AFGHAN CONNECTION

||| LARRY CHIN ONLINE JOURNAL - For years, Enron (along with Unocal, BP Amoco, Exxon, Mobil, Pennzoil, Atlantic Richfield, Chevron, Texaco, and other oil companies) has been involved in a multi-billion dollar frenzy to extract the reserves of the three former Soviet republics, Turkmenistan, Azerbaijan, and Kazakhstan. . . According to Alexander's Oil & Gas Connections, Enron signed a contract in 1996, giving it rights to explore 11 gas fields in Uzbekistan, a project costing $1.3 billion. The goal was to sell gas to the Russian markets, and link to Unocal's southern export pipeline crossing Turkmenistan, Uzbekistan and Afghanistan. . . Enron recently conducted feasibility studies for a $2.5 billion trans-Caspian gas pipeline to be built jointly with General Electric and Bechtel. Enron's goal was to link this pipeline to another line through Afghanistan.

As described in many accounts, notably the recently published "Osama Bin Laden: The Forbidden Truth" by Jean Charles Brisard and Guillaume Dasique, a Central Asia Gas (CentGas) consortium led by Unocal had plans for a 1,005 mile oil pipeline and a 918 mile natural gas pipeline from Turkmenistan through Afghanistan to Pakistan. This project stalled because of the political instability in Afghanistan.

Former Unocal lobbyist Hamid Karzai now heads a bombed and gutted Afghanistan. Bush's US envoy is Zalmay Khalizad, another former Unocal representative, who helped draw up the plans for the original CentGas pipeline. . . If Enron had not made the mistake of collapsing, Kenneth Lay and his team would be in the thick of it. MORE

||| RANJIT DEVRAJ, ASIA TIMES - Where the "great game" in Afghanistan was once about czars and commissars seeking access to the warm water ports of the Persian Gulf, today it is about laying oil and gas pipelines to the untapped petroleum reserves of Central Asia . . . "US influence and military presence in Afghanistan and the Central Asian states, not unlike that over the oil-rich Gulf states, would be a major strategic gain," said V R Raghavan, a strategic analyst and former general in the Indian army. Raghavan believes that the prospect of a western military presence in a region extending from Turkey to Tajikistan could not have escaped strategists who are now readying a military campaign aimed at changing the political order in Afghanistan, accused by the United States of harboring Osama bin Laden . . . [A] study by the Institute for Afghan Studies placed the total worth of oil and gas reserves in the Central Asian republics at around US$3 trillion at last year's prices. Not only can Afghanistan play a role in hosting pipelines connecting Central Asia to international markets, but the country itself has significant oil and gas deposits. During the Soviets' decade-long occupation of Afghanistan, Moscow estimated Afghanistan's proven and probable natural gas reserves at around five trillion cubic feet and production reached 275 million cubic feet per day in the mid-1970s . . . According to observers, one problem is the uncertainty over who the beneficiaries in Afghanistan would be - the opposition Northern Alliance, the Taliban, the Afghan people or indeed, whether any of these would benefit at all . . . The "coalition against terrorism" that US President George W Bush is building now is the first opportunity that has any chance of making UNOCAL's wish come true. If the coalition succeeds, Raghavan said, it has the potential of "reconfiguring substantially the energy scenarios for the 21st century." MORE

[Now, apparently, it's safe to talk about]

||| PETER SCHWEIZER, USA TODAY - Now that the war in Afghanistan is essentially over, pulling off the country's reconstruction will not be easy. But, as Secretary of State Colin Powell has said, the USA has "an enormous obligation to not leave the Afghan people in a lurch."

One potential solution could give the United States an opportunity to help Afghanistan, help our friends and boost our own economy, all at the same time. For two centuries, Afghanistan has been a victim of its geography, wrangled over by others because of its strategic location. Now, as the United States looks toward rebuilding Afghanistan, geography may prove to be the country's best asset. North and west of Afghanistan are enormous oil and natural gas reserves in countries such as Turkmenistan, Kazakhstan, Uzbekistan and Azerbaijan. The region's available but untapped energy resources are second only to those of the Middle East. Production in this area now is about 1 million barrels a day. But daily production could rise to 3.4 million barrels or more by 2010 if a way is found to get the energy onto world markets. That's where Afghanistan becomes an intriguing option. During the 1990s, several groups of international energy companies considered building a massive pipeline from Central Asia to the sea, where ships could transport the oil to the world. One option was a pipeline to Turkey via Azerbaijan. Another was a pipeline across Iran to the Persian Gulf. A third option, considered by Unocal and others, was to construct a 1,040-mile pipeline that would cross Afghanistan to the Pakistani coast. The Afghan option made the most sense geographically, but never really went anywhere because of concerns about the Taliban and political instability. But the Bush administration now has the unique opportunity to push through the Afghan option. Almost everyone would reap enormous rewards:

[Schweizer is at the Hoover Institution] MORE

||| RANJIT DEVRAJ, ASIA TIMES - Where the "great game" in Afghanistan was once about czars and commissars seeking access to the warm water ports of the Persian Gulf, today it is about laying oil and gas pipelines to the untapped petroleum reserves of Central Asia . . . "US influence and military presence in Afghanistan and the Central Asian states, not unlike that over the oil-rich Gulf states, would be a major strategic gain," said V R Raghavan, a strategic analyst and former general in the Indian army. Raghavan believes that the prospect of a western military presence in a region extending from Turkey to Tajikistan could not have escaped strategists who are now readying a military campaign aimed at changing the political order in Afghanistan, accused by the United States of harboring Osama bin Laden . . . [A] study by the Institute for Afghan Studies placed the total worth of oil and gas reserves in the Central Asian republics at around US$3 trillion at last year's prices. Not only can Afghanistan play a role in hosting pipelines connecting Central Asia to international markets, but the country itself has significant oil and gas deposits. During the Soviets' decade-long occupation of Afghanistan, Moscow estimated Afghanistan's proven and probable natural gas reserves at around five trillion cubic feet and production reached 275 million cubic feet per day in the mid-1970s . . . According to observers, one problem is the uncertainty over who the beneficiaries in Afghanistan would be - the opposition Northern Alliance, the Taliban, the Afghan people or indeed, whether any of these would benefit at all . . . The "coalition against terrorism" that US President George W Bush is building now is the first opportunity that has any chance of making UNOCAL's wish come true. If the coalition succeeds, Raghavan said, it has the potential of "reconfiguring substantially the energy scenarios for the 21st century." MORE

2001

*** JULIO GODOY, INTER PRESS SERVICE - In the book "Bin Laden, la verite interdite" ("Bin Laden, the forbidden truth"), the authors, Jean-Charles Brisard and Guillaume Dasquie, reveal that the Federal Bureau of Investigation's deputy director John O'Neill resigned in July in protest over obstruction. Brisard claim O'Neill told them that "the main obstacles to investigate Islamic terrorism were U.S. oil corporate interests and the role played by Saudi Arabia in it".

The two claim the U.S. government's main objective in Afghanistan was to consolidate the position of the Taliban regime to obtain access to the oil and gas reserves in Central Asia. They affirm that until August, the U.S. government saw the Taliban regime "as a source of stability in Central Asia that would enable the construction of an oil pipeline across Central Asia", from the rich oilfields in Turkmenistan, Uzbekistan, and Kazakhstan, through Afghanistan and Pakistan, to the Indian Ocean . . . Confronted with Taliban's refusal to accept U.S. conditions, "this rationale of energy security changed into a military one", the authors claim. "At one moment during the negotiations, the U.S. representatives told the Taliban, 'either you accept our offer of a carpet of gold, or we bury you under a carpet of bombs'," Brisard said in an interview in Paris.

According to the book, the government of Bush began to negotiate with the Taliban immediately after coming into power in February. U.S. and Taliban diplomatic representatives met several times in Washington, Berlin and Islamabad. To polish their image in the United States, the Taliban even employed a U.S. expert on public relations, Laila Helms. The authors claim that Helms is also an expert in the works of U.S. secret services, for her uncle, Richard Helms, is a former director of the Central Intelligence Agency. The last meeting between U.S. and Taliban representatives took place in August, five weeks before the attacks on New York and Washington, the analysts maintain. MORE

*** BEN ARIS & AHMED RASHID, TELEGRAPH, LONDON - For all the talk of international alliances and the future of Afghanistan, the real game in Central Asia is control of the region's lucrative oil supply. Since the fall of the Iron Curtain, Russia has kept Central Asia's huge oil and gas reserves bottled up by restricting access to export pipelines - all of which run over Russian territory. The United States has been pushing alternative pipeline projects out of the region that do not run over Russian soil. The US National Security Adviser, Condoleeza Rice, assured the Kremlin last week that Washington had no designs on Central Asia even as a new oil pipeline started up, strengthening Russia's influence in the region . . . Kazakhstan and Turkmenistan have some of the largest reserves of oil and gas in the world, but Russia cut them off from international markets as all their export pipelines run over Russian territory. The US tried aggressively to break the Kremlin's stranglehold over the region, but Dr Rice's comments were the strongest sign yet that Washington is prepared to concede Russia's dominance of the region . . . The war in Afghanistan may have brought an end to America's ambitions in the area as a quid pro quo for Russia's co-operation in the US-led campaign. But when peace and a stable government eventually comes to Kabul, US oil companies will be looking closely at Afghanistan because it offers the shortest route to the Gulf for Central Asia's vast quantities of untapped oil and gas. The companies have invested $30 billion in developing oil and gas fields in Kazakhstan, Turkmenistan, Uzbekistan and Azerbaijan but exporting to the West involves lengthy and expensive pipelines. Washington is currently proposing a $3 billion pipeline from Azerbaijan, on the Caspian Sea, through Georgia, to Turkey's Mediterranean coast - a lengthy and expensive project. US companies could build a similar pipeline from Central Asia through Afghanistan to Karachi at half the cost, if the next Afghan government can guarantee its security. Russia fears that is exactly what the Americans want and, now that US troops are based in Tajikistan and Uzbekistan, they will not leave. MORE

RECOVERED HISTORY
The Secret War

*** RICHARD NORTON-TAYLOR, GUARDIAN, LONDON., MARCH 5, 2001: A new and potentially explosive Great Game is being set up and few in Britain are aware of it. There are many players: far more than the two - Russia and Britain - who were engaged a century ago in imperial rivalry in central Asia and the north-west frontier. And the object this time is not so much control of territory. It is the large reserves of oil and gas in the Caucasus, notably the Caspian basin. Pipelines are the counters in this new Great Game. There are plans for pipe-lines through Azerbaijan, Georgia, Turkey, Iran, Bulgaria, Macedonia - and Albania. Traditional rivalries between east and west are complicated by other threats - from Chechen separatists, Kurds, Albanian guerrilla groups, the dispute between Azerbaijan and Armenia over Nagorno-Karabakh and, throughout the region, Islamic groups whose activities are causing deep concern to Moscow, Tehran and Washington alike . . . This is the region both west and east have their eyes on. It is rich in untapped oil and gas while US reserves are running down, China is desperate for more oil, and no one outside the Gulf wants to rely on Saudi Arabia, Kuwait or Iraq - which have the biggest oil reserves.

*** DEPARTMENT OF ENERGY: Afghanistan's significance from an energy standpoint stems from its geographical position as a potential transit route for oil and natural gas exports from Central Asia to the Arabian Sea. This potential includes proposed multi-billion-dollar oil and gas export pipelines through Afghanistan, although these plans have now been thrown into serious question . . . On November 29, 1999, UN Secretary General Kofi Annan issued a report on Afghanistan which listed the country's major problems as follows: civil war (which has caused many casualties and refugees, and which has devastated the country's economy), record opium production, wide-scale human rights violations, and food shortages caused in part by drought. According to the 2000 CIA World Factbook, Afghanistan is an extremely poor, landlocked country, highly dependent on farming and livestock raising (sheep and goats). Currently, the country is experiencing a severe drought . . . The Soviets had estimated Afghanistan's proven and probable natural gas reserves at up to 5 trillion cubic feet. Afghan gas production reached 275 million cubic feet per day in the mid-1970s. However, due to declining reserves from producing fields, output gradually fell to about 220 Mmcf/d by 1980 . . . Soviet estimates from the late 1970s placed Afghanistan's proven and probable oil and condensate reserves at 95 million barrels. Despite plans to start commercial oil production in Afghanistan, all oil exploration and development work were halted after the 1979 Soviet invasion. Afghanistan's various provinces receive refined products from neighboring countries . . . Besides oil and gas, Afghanistan also is estimated to have significant coal reserves (probable reserves of 400 million tons) . . .

*** JOHN J. MARESCA, VICE PRESIDENT UNOCAL in testimony before a House committee, February 12, 1998: Today we would like to focus on issues concerning this region, its resources and U.S. policy: The need for multiple pipeline routes for Central Asian oil and gas. The need for U.S. support for international and regional efforts to achieve balanced and lasting political settlements within Russia, other newly independent states and in Afghanistan . . . The Caspian region contains tremendous untapped hydrocarbon reserves, much of them located in the Caspian Sea basin itself. Proven natural gas reserves within Azerbaijan, Uzbekistan, Turkmenistan and Kazakhstan equal more than 236 trillion cubic feet. The region's total oil reserves may reach more than 60 billion barrels of oil -- enough to service Europe's oil needs for 11 years. Some estimates are as high as 200 billion barrels . . .

[An] option is to build a pipeline south from Central Asia to the Indian Ocean. One obvious potential route south would be across Iran. However, this option is foreclosed for American companies because of U.S. sanctions legislation. The only other possible route option is across Afghanistan, which has its own unique challenges. The country has been involved in bitter warfare for almost two decades. The territory across which the pipeline would extend is controlled by the Taliban, an Islamic movement that is not recognized as a government by most other nations. From the outset, we have made it clear that construction of our proposed pipeline cannot begin until a recognized government is in place that has the confidence of governments, lenders and our company. In spite of this, a route through Afghanistan appears to be the best option with the fewest technical obstacles. It is the shortest route to the sea and has relatively favorable terrain for a pipeline. The route through Afghanistan is the one that would bring Central Asian oil closest to Asian markets and thus would be the cheapest in terms of transporting the oil.

Unocal envisions the creation of a Central Asian Oil Pipeline Consortium. The pipeline would become an integral part of a regional oil pipeline system that will utilize and gather oil from existing pipeline infrastructure in Turkmenistan, Uzbekistan, Kazakhstan and Russia. The 1,040-mile-long oil pipeline would begin near the town of Chardzhou, in northern Turkmenistan, and extend southeasterly through Afghanistan to an export terminal that would be constructed on the Pakistan coast on the Arabian Sea. Only about 440 miles of the pipeline would be in Afghanistan. This 42-inch-diameter pipeline will have a shipping capacity of one million barrels of oil per day. Estimated cost of the project -- which is similar in scope to the Trans Alaska Pipeline -- is about $2.5 billion . . .

The pipeline would benefit Afghanistan, which would receive revenues from transport tariffs, and would promote stability and encourage trade and economic development. Although Unocal has not negotiated with any one group, and does not favor any group, we have had contacts with and briefings for all of them. We know that the different factions in Afghanistan understand the importance of the pipeline project for their country, and have expressed their support of it.

A recent study for the World Bank states that the proposed pipeline from Central Asia across Afghanistan and Pakistan to the Arabian Sea would provide more favorable netbacks to oil producers through access to higher value markets than those currently being accessed through the traditional Baltic and Black Sea export routes.

*** SABRINA TAVERNISE, NY TIMES: Breaking a logjam that has held up Western-led oil development in Russia for years, Exxon Mobil said that it was ready to spend $4 billion over five years to develop large offshore oil and gas fields in far eastern Russia. The project, which could grow to $12 billion over its life of 30 to 40 years, will be Russia's largest single foreign investment so far. In recent months the Russian government has been passing measures to clear the way for the project, which had languished since the mid- 1990's awaiting new regulations and commitments to fixed tax rates that Exxon Mobil called vital. But the crucial new development was the warming of relations between Moscow and Washington after last month's pledge by President Vladimir V. Putin of Russia to support the United States in its war against terrorists in Afghanistan.

RECOVERED HISTORY

MARTIN A. LEE, SAN FRANCISCO BAY GUARDIAN, November 13, 2000: During former defense secretary Richard Cheney's five-year tenure as chief executive of Halliburton, Inc., his oil services firm raked in big bucks from dubious commercial dealings with Iraq. Cheney left Halliburton with a $34 million retirement package last July when he became the GOP's vice-presidential candidate. Of course, U.S. firms aren't generally supposed to do business with Saddam Hussein. But thanks to legal loopholes large enough to steer an oil tanker through, Halliburton profited big-time from deals with the Iraqi dictatorship. Conducted discreetly through several Halliburton subsidiaries in Europe, these greasy transactions helped Saddam Hussein retain his grip on power while lining the pockets of Cheney and company. According to the Financial Times of London, between September 1988 and last winter, Cheney, as CEO of Halliburton, oversaw $23.8 million of business contracts for the sale of oil-industry equipment and services to Iraq through two of its subsidiaries, Dresser Rand and Ingersoll-Dresser Pump, which helped rebuild Iraq's war-damaged petroleum-production infrastructure. The combined value of these contracts exceeded those of any other U.S. company doing business with Baghdad.

*** REP RON PAUL: Of course, it isn't our oil. The oil in fact belongs to the Arabs and other Muslim nations of the Persian Gulf. Our military presence in Saudi Arabia is what most Muslims believe to be a sacred violation of holy land. The continuous bombing and embargo of Iraq, has intensified the hatred and contributed to more than over 1,000,000 deaths in Iraq. It is clear that protecting certain oil interests and our presence in the Persian Gulf help drive the holy war. Muslims see this as an invasion and domination by a foreign enemy which inspires radicalism. This is not new. This war, from their viewpoint, has been going on since the Crusades 1000 year ago. We ignore this history at our own peril . . . It is only with sadness that I reflect on the support, the dollars, the troops, the weapons and training provided by US taxpayers that are now being used against us. Logic should tell us that intervening in all the wars of the world has been detrimental to our self-interest and should be reconsidered . . . What I have said today is different from what is said and accepted in Washington as conventional wisdom, but it is not in conflict with our history or our constitution. It's a policy that has, whenever tried, generated more peace and prosperity than any other policy for dealing with foreign affairs. The authors of the Constitution clearly understood this.

*** MARC LAVINE, AGENCE FRANCE PRESSE: Afghanistan's Taliban regime . . . was brought to power with Washington's silent blessing as it dallied in an abortive new "Great Game" in central Asia. Keen to see Afghanistan under strong central rule to allow a US-led group to build a multi-billion-dollar oil and gas pipeline, Washington urged key allies Pakistan and Saudi Arabia to back the militia's bid for power in 1996, analysts said. But it was soon forced to abandon its brief and shadowy flirtation with the Islamic purists, who US officials now say are unfit to rule, as the militia began imposing its brutal version of Islamic law, sparking a violent outcry from US women's groups. While the United States has denied supporting the Taliban's rise, experts say that at the time they seized the capital five years ago, Washington saw the militia as a strange but potentially stabilizing force. "Now, years on, the US has to cope with the damage for which it is partially responsible starting with its role during and after the Soviet occupation of Afghanistan," said Radha Kumar of the Council on Foreign Relations in New York.

*** BROOKE SHELBY BIGGS, MOTHER JONES: in 1996, [Unocal] cobbled together a coalition of six energy companies and the government of Turkmenistan, and went head to head with an Argentinian rival in a race to win Afghanistan's blessing for a $2 billion gas-pipeline project. Unocal has long been criticized for doing business in countries with repressive governments, and the company wasn't afraid to pursue the Taliban. "We're an oil and gas company. We go where the oil and gas is," Unocal spokesman Mike Thatcher told Mother Jones. According to one business analyst's report, Unocal courted both the Taliban and the rival Northern Alliance, but paid special attention on the Taliban. In 1997, the Unocal vice president in charge of the pipeline project was quoted as saying that his company had provided "non-cash bonus payments" to members of the regime in return for their cooperation. "We basically had to 'pre-sell' them on the idea of this pipeline," says Thatcher. "Some of them didn't understand the idea of profit motive. We had to educate them." The approach seemed to work. By late 1997, a Taliban delegation visited Unocal's offices in Sugarland, Texas to meet with company executives. A few days later, the Taliban's minister of mines met with the State Department's top official for South Asia. The visit, which came just a month after then-Secretary of State Madeleine Albright chastised the regime for its human-rights record, was arranged by Unocal . . . So did Unocal ever strike a deal with the Taliban? That depends on whom you ask. According to the US Department of Energy, "In January 1998, the Taliban signed an agreement that would allow a proposed 890-mile, $2-billion, 1.9-billion-cubic-feet-per-day natural gas pipeline project led by Unocal to proceed." Other reports put the date of the deal even earlier. But Unocal now denies that a firm agreement was ever reached. All the company had, according to Thatcher, was a "letter of support" signed by representatives of both the Taliban and the Northern Alliance. "It wasn't a binding business deal," he says, "just a piece of paper that basically said they liked the idea of the project." But even with a symbolic nod from the Taliban, the pipeline never got off -- or into -- the ground. In August 1998, the US launched retaliatory air strikes in Sudan and Afghanistan in retaliation for the bombing of US embassies in Kenya and Tanzania. Investors bailed out of the pipeline project in droves; several months later Unocal quit Cent Gas, saying it was unwilling to collaborate with the oppressive regime, at least until it was recognized as a legitimate government by the West. MORE

*** FRANK VIVIANO, SAN FRANCISCO CHRONICLE: Beyond American determination to hit back against the perpetrators of the Sept. 11 attacks, beyond the likelihood of longer, drawn-out battles producing more civilian casualties in the months and years ahead, the hidden stakes in the war against terrorism can be summed up in a single word: oil. The map of terrorist sanctuaries and targets in the Middle East and Central Asia is also, to an extraordinary degree, a map of the world's principal energy sources in the 21st century. The defense of these energy resources - rather than a simple confrontation between Islam and the West - will be the primary flash point of global conflict for decades to come, say observers in the region. "You cannot discuss the violence of this region outside the context of oil, " says Vakhtang Kolbaya, deputy chairman of the parliament in the republic of Georgia. "It's at the heart of the problem." . . .