1 T he Prize : the E pic Que st fo r Oil, Mo ne y & Po we - - PowerPoint PPT Presentation

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T he Prize : the E pic Que st fo r Oil, Mo ne y & Po we r

De lta T a b le Oc to b e r, 2015

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Glo b a l Oilpa tc h Ve te ra n

 “T

he failure o f so many to c o nside r the po ssib ility that

• il pric e s mig ht de c line , le t alo ne pre pare fo r suc h an

e ve ntuality, sug g e sts an o b livio usne ss to b o th e c o no mic s and histo ry. Afte r all, the re ’ s lo ts o f c he ap

• il le ft in the g ro und to disc o ve r.”

 J.C. Ande rso n, Ve te ra n o ilpa tc h e xe c utive

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Ro le o f Oil in Wo rld Affa irs

 Oil is c e ntral to se c urity, prospe rity and c ivilization

today and is c e ntral to globalization:

 T

he rise a nd de ve lo pme nt o f c a pita lism a nd mode r

n busine ss = o il is the wo rld’ s b ig g e st, mo st pe rva sive

b usine ss;

 Oil is a c ommodity intima te ly inte rtwine d with na tio na l

str a te g ie s, g loba l politic s a nd powe r;

 Oil e sta b lishe d the hydr

• c a r

bon e c onomy a nd the hydr

• c a r

bon ma n; a nd

 E

nvir

• nme nta lism ha s c ha lle ng e d pe tro le um a s a

g o o d symb o l o f huma n pro g re ss.

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Pre mise

 T

he c anvas is g lo b a l.

 T

he sto ry o f o il is a c hro nic le o f e pic e ve nts.

 Oil c o nc e rns itse lf with powe r, impe rso na l fo rc e s o f

e c onomic s a nd te c hnology.

 T

he stra te g ic g a me o f o il is playe d b y c unning b usine ssme n a nd po litic ia ns.

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Pro duc ts Ma de fro m a Ba rre l

• f Crude Oil

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F unda me nta ls o f Oil Pric e

 Pr

ic e s r ise – g lo b a l supplie s a re tig ht a nd c o untrie s

ne e d o il to ke e p e c o no mie s mo ving .

 Pr

ic e s fall – o ve r-pro duc tio n o f c rude a nd the wo rld is

slo shing in o il.

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L

• w Oil Pric e -- I

mpa c t o n I ndustry

 Re ve nue s fa ll so ma na g e me nt hunke rs do wn into

surviva l mo de .

 Budg e ts a re c ut imme dia te ly.  Pro je c ts a re e ithe r po stpo ne d o r c a nc e lle d.

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Pe o ple Assume d Pe tro le um Wo uld b e Che a p

 Globalization (1990-2009) c a use d the wo rld e c o no my

to a lmo st triple in size .

 9/ 11 ha ppe ne d a nd tra nsfo rme d inte rna tio na l

re la tio ns:

 Gulf Wa r I

I a nd the o ve rthro w o f Sa dda m Husse in; a nd

 Out-a nd-o ut wa r b e twe e n Muslim Sunnis a nd Shia s.

 Sur

ge in oil de mand a nd industry ha d to pla y c a tc h-

up to b ring ne w o il o n-stre a m.

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Pric e Hig hs o f 2007-2008 $30/ b b l to $145/ b b l

 Dra ma tic inc re a se to c o st o f b ring ing ne w o il a nd g a s

into pro duc tio n.

 Appre he nsio n tha t de ma nd b y China a nd I

ndia wo uld b uy a ll e xc e ss o il a nd c re a te a no the r sho rta g e .

 Supply a nd de ma nd, g e o po litic s, c o sts, fina nc ia l

ma rke ts, e xpe c ta tio ns a nd spe c ula tio n to drive pric e s upwa rds.

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Pric e Co lla pse o f 2014-2016 $108/ b b l to $27/ b b l

 De ma nd we a ke ne d .  T

rillio ns o f do lla rs sto ppe d flo wing fro m o il-impo rting c o untrie s to o il-e xpo rting c o untrie s.

 Sa udi Ara b ia wa nts to re g a in ma rke t sha re .

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Sa udi Ara b ia

 Pr

e side nt Nixon’s de al with House of Saud:  U.S. pro vide milita ry pro te c tio n to Sa udi Ara b ia a nd its

• ilfie lds;

 U.S. se ll Sa udis a ny we a po ns the y ne e de d;  U.S. g ua ra nte e pro te c tio n fro m I

sra e l a nd I ra n; a nd

 U.S. g ua ra nte e Ho use o f Sa ud a s rule rs in pe rpe tuity.

 Saudi’s de al with U.S.:

 All o il sa le s in $US; a nd  All surplus $ wo uld b e inve ste d in US T

re a sury b ills.

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Pe tro -Do lla r’ s Glo b a l I mpa c t

 Wo rld’ s de ma nd fo r U.S. $ wo uld so a r with inc re a sing

de ma nd fo r o il.

 U.S. F

e de ra l Re se rve c o uld print $$ to b uy a ll o il its c itize ns wa nte d .

 T

he pe tro do lla r a llo we d the U.S. to e xplo it (c ritic s sa y a b use ) the do lla r’ s sta tus a s the wo rld’ s re se rve c urre nc y.

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Sa udi Ara b ia F

• rc e s Oil

Pric e s Do wn

 Goal: win b a c k ma rke t sha re + punish Russia , I

SI S a nd U.S. sha le pro duc e rs.

 Cur

r e nt pr

• duc tion: 10.5 millio n b b l/ da y.

 High- r

isk str ate gy: ha s a n e stima te d $550 b illio n wa r

c he st o f fo re ig n re se rve s (wa s $750 b illio n Q4, 2015);

 E

xte r nal r isks: funding pro xy wa r with I

ra n in Ye me n, Syria a nd I ra q + b a ttling Al-Qa e da a nd I SI S within its b o rde rs.

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Will Sa udi Ara b ia Co lla pse So o n?

 Se pt. 22, 2015 Sa udi Princ e Aziz I

b n Sa ud c irc ula te d a le tte r to the ro ya l fa mily:

 I

t c a lle d fo r a “c ha ng e in le a de rship to fe nd o ff the king do m’ s c o lla pse .”

 K

ing do m o n b rink o f a “pe rfe c t sto rm:”

 Burning thro ug h mo ne y re se rve s a t a n unsusta ina b le ra te ;  L

a unc he d a n unwinna b le wa r with Ye me n; a nd

 F

ina nc e d I SI S to e nd Shia re g ime in I ra n.

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I ra q & Syria

 GW Bush surg e in I

ra q c re a te d c a lm.

 Ob a ma withdre w a nd Shia PM No uri Al-Ma liki insta lle d

a nd pe rse c ute d Sunni mino rity.

 Re vo lt b y Sunni in Syria de sta b ilize d b o th Syria a nd

I ra q .

 U.S. insiste d pe a c e ne g o tia tio ns must b e a b o ut

Pre side nt Ba she r Al-Assa d’ s de pa rture .

 I

ra q turne d a b lind e ye to Russia :

 F

lying tra nspo rt pla ne s o ve r a irspa c e ;

 De live ring we a po ns to Syria ; a nd  Sha ring inte llig e nc e (witho ut U.S. kno wle dg e ).

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I ra n

 July, 2015 Nuc le a r o il de a l inke d (w/ U.S., Russia , China ,

Brita in, F ra nc e a nd Ge rma ny):

 L

ift e c o no mic sa nc tio ns wo rth $150 b illio n in e xc ha ng e fo r I AE A to mo nito r fa c ilitie s a nd sc rutinize nuc le a r pro g ra m.

 Spring ,2016 30-50 millio n b b l I

ra nia n c rude so ld o n

• pe n ma rke t.

 L

• ng -te rm c o uld e xpo rt 3-4 millio n b b l/ d.

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Russia

 Putin wa nts to de sta b ilize pe tro -do lla r.  2009 Russia pumps 11 millio n b b l/ d a nd e xpo rts 8

millio n b b l/ d = $1 b illio n/ da y into K re mlin c o ffe rs.

 2014 Me g a -de a ls in o the r c urre nc y:

 Ma y – Russia / China = $400 b illio n na tura l g a s de a l to

supply 38 b illio n c ub ic me tre s/ da y fo r 30 ye a rs pa id in Yuan;

 Aug ust – Russia / I

ndia = $40 b illio n g a s pipe line pa id in Rub le s; a nd

 Se pte mb e r – Russia / I

ra n = 500,000 b b l/ d o f I ra nia n c rude fo r Russia n e q uipme nt & we a po ns pa id in Rub le s.

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Co mmo n E c o no mic Spa c e (CE S)

 Russia a sse mb ling c o untrie s into a fre e -tra de zo ne to

c o o rdina te e c o no mic + se c urity.

 Cha lle ng e OPE

C, E U a nd NAF T A.

 Unio n inc lude s: Russia , K

a za khsta n, Be la rus.

 Russia c o urting :

 F

• rme r So vie t sa te llite s -- T

a jikista n, K yrg yzsta n, Arme nia , Aze rb a ija n, Mo ldo va , T urkme nista n, Uzb e kista n;

 F

• rme r Co mmunist – China ;

 Shia c o untrie s – I

ra n a nd Pa kista n; a nd

 Wa nts: Afric a , L

a tin Ame ric a , Ge rma ny e tc .

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Russia + Syria + I ra q

 Putin suppo rts Pre side nt Ba sha r Al-Assa d.  Putin wo rking with I

ra n to de fe a t Sunnis.

 Putin wo rking with I

sra e l to pre ve nt nuc le a r wa r.

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Al-Qa e da

 I

nte rne t me ssa g e se nt b y ma ste rmind o f 9/ 11

 “T

he first se me ste r c o mme nc e s in 3 we e ks. 2 hig h sc ho o ls a nd 2 unive rsitie s. T his summe r will b e sure ly ho t. 19 c e rtific a te s fo r priva te e duc a tio n a nd 4 e xa ms. Re g a rds to the pro fe sso r. Go o d b ye .”

 So lve the riddle .

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U.S. I nte llig e nc e Wa rne d o f Al-Qa e da Atta c ks

 F

e b . 26, 1993 Bo mb e d Wo rld T ra de

 1995-1996

Ma ste r pla n fo r 9/ 11 disc o ve re d

 F

e b . 1998 Bin L a de n issue d fatwa a g a inst U.S.

 De c . 4, 1998

Pre side ntia l b rie fing to Bill Clinto n

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Al-Qa e da Org a niza tio n

 Co re o rg a niza tio n to pla n, re c ruit a nd tra in te rro rists to

strike U.S., We ste rn a nd I sra e li ta rg e ts;. Va ng ua rd to

• rg a nize a nd c o o rdina te jiha dist g ro ups a g a inst

Muslims.

 I

nspira tio n fo r lo ne -wo lf te rro rists.

 Bra nd na me re pre se nting suc c e ssful vio le nc e .  Ba se fo r c o nq ue st fro m Afg ha nista n in the na me o f

g lo b a l jiha d.

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I sla mic Sta te o f I ra q a nd Syria (I SI S)

 Yo uT

ub e vide o o f Ame ric a n Ja me s F

• le y.

 Al-Qa e da te rro rist o f I

ra q a nd Syria use d DVDs a s c a lling c a rds – “g re a te st hits.”

 Bin L

a de n re pulse d so e xpe lle d the m fro m Al-Qa e da .

 No w c a lle d I

SI S.

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Stro ng e st Jihadist Gro up in Wo rld Histo ry

 Wo rld’ s ric he st te rro rist g ro up ($2 b illio n in c a sh/ a sse ts)  Co ntro ls mo re fire po we r & te rrito ry tha n a ny te rro rist

g ro up in histo ry

 Se ize d 40 kg o f ra dio a c tive ura nium = dirty b o mb s  July 14, 2014 L

e a de r Ab u Ba kr Al-Ba g hda di pro c la ime d a c a lipha te whic h ha s two so urc e s o f re ve nue s:

 Sa le s fro m o il fie lds in Syria a nd I

ra q ; a nd

 Sa le s o f a ntiq uitie s fro m lo o te d histo ric a l site s.

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I SI S T hre a ts No t Ye t Ac c o mplishe d

 De stro y the K

a a b a in the Gra nd Mo sq ue in Me c c a (unda te d ).

 De stro y Ame ric a a nd kill its c itize ns (June 25, 2014).  Ca pture Do me o f the Ro c k (July 9, 2014).  Co nq ue r Ro me a nd o wn the wo rld (July, 2014).  Punish Ca na da fo r b o mb ing I

SI S (De c . 1, 2014).

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I SI S Wa r Che st

 52 – 155 mm M-198 ho witze rs (ra ng e o f 20 mile s).  1,500 Humve e s.  4,000 ma c hine g uns tha t fire 800 ro unds/ minute .  Ba ttle ta nks (inc luding se ve ra l M-1 Ab ra ms).  88 po unds o f sto le n ura nium fro m Mo sul Unive rsity.  Che mic a l a rse na l sto le n fro m Syria .

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I SI S Oil Sa le s

 Se lling a b o ut $2 millio n/ da y o f c rude o n b la c k ma rke t

= 50 – 60 tho usa nd b b l/ d.

 Se lling a t 50% disc o unt to Sa udi lig ht.  U.N. Se c urity Co unc il impo se s sa nc tio ns o n a nyo ne

b uying this o il.

 Co ntro ls 11o il fie lds a nd the ma jo r tra ffic king ro ute s.  Qa ta ri ta nke rs se lling o n inte rna tio na l ma rke t.

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Glo b a l Oilpa tc h Ve te ra n

 “T

he failure o f so many to c o nside r the po ssib ility that

• il pric e s mig ht de c line , le t alo ne pre pare fo r suc h an

e ve ntuality, sug g e sts an o b livio usne ss to b o th e c o no mic s and histo ry. Afte r all, the re ’ s lo ts o f c he ap

• il le ft in the g ro und to disc o ve r.”

 J.C. Ande rso n, Ve te ra n o ilpa tc h e xe c utive

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Pe tro do lla r Co lla pse Wha t Sho uld Ca na da Do ?

 Se ll in Ca na dia n do lla rs (b a c ke d b y Ma ple L

e a f g o ld c o ins)?

 Se ll in U.S. do lla rs (with no g o ld b a c king )?  I

nve st in Ca na dia n junio r re so urc e c o mpa nie s b y b e tting o n the rig ht ma na g e me nt te a ms.

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Ca na da ’ s Se c urity Vulne ra b ility

 Oc to b e r 19, 2014

L

• ne wo lf a ssa ssina tio n - Que b e c

 Oc to b e r 21, 2014 6 CF

• 18 fig hte rs fro m CF

B Co ld L K

 Oc to b e r 22, 2014

L

• ne wo lf a ssa ssina tio n – Otta wa

 30 I

SI S c e lls in Alb e rta whic h CSI S is wa tc hing

 Plo ts to hit pipe line s, ta nke rs, re fine rie s, pro duc tio n

fa c ilitie s

 80 Ca na dia n I

SI S fig hte rs b a c k in Ca na da (sa ys CSI S)

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Co nc lusio n

 Wha t will c a use o il pric e to rise a g a in?

 Above g round risks:

 Ge o po litic s, c o sts, g o ve rnme nt de c isio n-ma king , c o mple xity,

re stric tio ns o n a c c e ss, inve stme nts.

 Inc re a sing sha re of liquid supplie s = non- tra ditiona l oil:

 Ultra -de e p o ffsho re wa te rs, Arc tic , Ca na dia n o il sa nds,

c o nde nsa te s a nd liq uids fro m sha le s.

 Re c og nition of the she e r sc a le of de ma nd g rowth from

de ve loping c ountrie s (e .g . China a nd India ).

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Oil Pric e Pre dic tio n fo r 2016

 Bre nt c rude to a ve ra g e $58.60 vs. $55.30 (2015).  WT

I to a ve ra g e $54.10 vs. $50.30 (2015).

 I

E A c la ims 46 ma jo r o il a nd g a s pro je c ts wo rldwide ha ve b e e n c a nc e lle d o r suspe nde d re pre se nting 20 b illio n b b l re se rve s.

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Misq uo te Oilpa tc h Ve te ra n

 “T

he failure o f so many to c o nside r the po ssib ility that

• il pric e s mig ht rise , le t alo ne pre pare fo r suc h an

e ve ntuality, sug g e sts an o b livio usne ss to b o th e c o no mic s and histo ry. Afte r all, the re ’ s lo ts o f e xpe nsive o il le ft in the g ro und to disc o ve r.”

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