by Sonia Shah
Evidently, the military’s fuel-distended belly isn’t something that the Defense Department considers a big problem. As of 2001, the computer program that today’s high-tech, surgically striking military uses to calculate its fuel efficiency hadn’t been updated since 1972. The computer language it is written in, FORTAN, is so old and seldom used it is practically extinct.44
As the DSB panel noted, there are two ways to satisfy the U.S. military’s ravenous oil appetite: “to make platforms and systems more efficient so they require less logistics,” they reported, “or acquire more logistics assets.” If the military’s wanton oil consumption and casual disregard for fuel efficiency is any indication, the top brass have decided to simply capture access to more oil.
Generally speaking, the U.S. market, by its sheer size, can count on crushing any competitors for oil should it become scarce. Americans demanded over 20 million barrels a day in 2004; Japan and China, the next two largest consumers, have markets around one-quarter the size: in 2004, China required just 6.68 million barrels a day and Japan just 5.28 million barrels a day.45 By 2025, the U.S. market will still be three times bigger than its nearest rival, but there’ll be significantly less oil to go around. Its nearest rival will be much closer in terms of market size and is an unfriendly, historically hostile country: China. China depleted the majority of its own oil by 1993 and was even having trouble keeping its coal fires burning by the early twenty-first century.46
China’s prodigious coal production (involving some 5 million coal miners toiling in about 75,000 coal mines47) provides about 70 percent of the country’s energy.48 But the massive reserves are dwindling. The looming coal shortage is “one of the greatest hidden dangers in China’s future,” a Chinese coal industry spokesperson warned China’s parliament in 2003. Chinese officials decreed that Xilutian, the country’s largest strip coal mine, after nearly a century of operation rendering over 250 million tons of coal, would be closed down in 2007. The three giant mountains of slag that had been dug out of the mine would somehow be turned into a “forest park.”49
With coal-deprived Chinese on the prowl for scarce energy supplies, the already tight market will get even tighter in coming years. Big oil companies are already lining up to feed China’s engines, primarily with new oil developments in Russia. The Russian government plans to pipe oil from the windswept island of Sakhalin, floating in the Bering Sea between Russia and Alaska, direct to thirsty oil consumers in China. ExxonMobil, Shell, BP, and others have descended upon the former Czarist penal colony to help them do it.50 Shell is likewise building “a formidable presence” in north Asia, according to Petroleum Economist. The company’s expanding assets in China are “gravitating towards the centre of its investment strategy.”51 In March 2002, BP committed up to $20 billion in oil assets in Russia, making it the third largest company operating there, in order to service China’s major emerging market.52 By 2004, oil-hungry Chinese leaders would set off on whirlwind tours of oil hotspots such as Algeria and Gabon, staking their claim to the world’s crude.
China’s rising roar for oil echoes in the halls of the White House. In May 2001, not long after George W. Bush ascended from the Texan oilfields to the White House, the administration issued an energy policy report, underlining the U.S. need to corral the world’s remaining oil supplies for itself.53 The Bush administration, as was de rigeur since the 1970s, called its mission “energy security.” But for former oilmen like Bush and Vice President Dick Cheney, the equation of “energy” with “oil” couldn’t have been more transparent. The United States must “explore for energy,” Cheney asserted. Clearly, the former CEO of Halliburton was not suggesting his colleagues go hunting for sunlight to shine on solar PV panels.54
After the devastating attacks on New York and Washington on September 11, 2001, it appeared that in the public mind, the government could do no wrong. “I really think this period is analogous to 1945-1947 in that the events started shifting the tectonic plates in international politics,” said former Chevron board member and national security advisor Condoleezza Rice. The oil tanker that Chevron had named after Rice had been renamed after she moved to Washington, DC, in 2000, but the strength of her commitment to the petrolife remains clear. “It’s important to try to seize on that and position American interests and institutions before they harden again,” she said.55
Early in his first term, President George Bush met with the Canadian prime minister to hash out Canada’s role in supplying Americans with oil and gas. After September 11, 2001, the two governments, suitably enjoined to finally solve the West’s Middle Eastern problem, fingered what they deemed a “secure and strategic source of hydrocarbons”: the oil sands of Alberta, Canada.
Across the bleak landscape of northeastern Alberta, over millions of years, a giant oilfield had risen from its grave. Freed from its rocky tomb, the oilfield’s light molecules of oil and gas evaporated, leaving behind a thick, tarry sludge to bask in the thin northern sun. The sludge gummed up with the Albertan sand.
If the oil lingering in these sands, called “tar sands” or “oil sands,” could be recovered, Alberta could provide 300 billion barrels of oil, more than the proven reserves of Saudi Arabia, awed industry groups said. Beyond those 300 billion potentially recoverable barrels lie a whopping 2.5 trillion more. Alberta, in other words, held more oil in its tar sands than the entire world endowment of conventional oil.56 It isn’t the only such deposit, either. Another giant deposit of tar sands sits in the Orinoco belt in Venezuela, buried deep underground.57
In the 1980s, the cost of extracting oil from tar sands ran to around $30 a barrel,58 obviously a losing proposition when each barrel of oil fetches between $20 and $25 in the marketplace. Saudi Arabian oil, in contrast, costs just $2 a barrel to extract.59 The tar sands lay fallow for years until the Canadian government started to aggressively subsidize their development. In 1995, the Canadian federal government announced that whichever oil companies braved the Albertan winter to rescue the stranded oil sands could write off 100 percent of their expenses,60 the government forgoing the lion’s share of its royalty until the industry started to earn a profit.61
A few years later, an armada of oil companies muscled in to Alberta’s tar sands, selling off their assets in other parts of Canada to focus on the sludgy bitumen in the north.62 Shell and Chevron committed to a mine, pipeline, and new refinery to process the tar sands into crude, at a cost of over $2.6 billion.63 It was Shell Canada’s biggest investment in a single project ever.64 A host of smaller companies as well as outfits from Japan, China, Israel, and Korea buzzed around the suddenly sweeter tar sands play.
The trouble is, Alberta’s tar sands are nothing like conventional crude oil, which is why trade magazines and government agencies historically haven’t taken tar sands into account when tallying up the world’s reserves of crude. Thick and tarry, tar sands oil can’t be conveniently bundled off down a pipeline to the refinery. It must be treated first, with natural gas and other petroleum products, in order to flow. Not just with a little bit either; the tar sands require over five times more of these precious petroleum products than regular heavy crude.
Even when begrudgingly flowing, the oil is heavier than most refineries can handle. New refineries must be built or revamped in order to process it, and all they may be able to turn out is road asphalt or boiler fuel. Alternatively, yet more fuel can be burned to heat tar-sands oil into a synthetic crude oil.65
For each barrel of tar-sands oil, no less than two tons of sand and clay must be mined, using the widely reviled methods pioneered by the coal industry: forest-killing open-pit mining. With all the eviscerating procedures and additional treatment the tar sands require, extracting oil from the sands sucks up two-thirds of the energy they ultimately render,66 poisoning the atmosphere with carbon in the process. Producing a single barrel of oil from tar sands emits no less than six times more carbon dioxide than producing a barrel of conventional oil.67
By 2002, over $10 billio
n had been invested in Alberta’s oil sands, and the industry planned to squeeze out more than 3 million barrels a day by 2012.68 By then, a handful of companies that had been mining the tar sands, using the world’s biggest shovels and trucks, had depleted most of the shallow deposits. Companies turned to the deeper deposits, more than six hundred feet down. Open-pit mining wouldn’t do, but they could drill holes and shoot steam down, to push the oily sands out.69 The new technique, ”steam assisted gravity drainage,” sent the price of producing a barrel of tar sands plummeting down to around $5 to $7 a barrel.70 It also required vast amounts of precious fresh water, which after being contaminated with chemicals is pumped into giant festering lakes of waste water.71
The oil-sands industry gorges on a quarter of Alberta’s scarce fresh water—each barrel of oil needing six barrels of water to flush it out72—and burns up to a fifth of the entire nation’s natural gas supply.73 According to a leaked report from a Canadian environmental agency, the pollutants from the expanding tar-sands operations will result in enough acid rain to destroy much of the region’s majestic forests as well.74
Most oil-sands projects have gone over budget by 15 to 20 percent and worse,75 suffering sporadic sabotage from livid locals.76 But it doesn’t matter, analysts say. Government subsidies have drained the projects of financial risk. “Even if this project goes 20 percent or 30 percent over budget,” a big oil company like Shell “will still have effectively zero debt on its balance sheet,” an energy analyst told Petroleum Economist.77
In 2003, to the glee of the Canadian oil and gas industry, the U.S. Energy Information Administration added some 180 billion barrels of oil from the Alberta tar sands to its tally of “conventional” oil reserves, catapulting Canada’s reserves above those of Iraq’s and second only to Saudi Arabia’s.77 Provided they could stave off the shivering farmers and their thirsty livestock, the North American governments remained supportive, and with the price of oil high, the oil industry could potentially stay in business extracting oil from tar sands for centuries. “There’s no environmental minister on earth who can stop the oil from coming out of the sand,” Canada’s environment minister said in the fall of 2005. “The money is too big.”78
Alberta’s oil, being politically safe, might relieve some of the pressure of the United States’ dependence on Middle Eastern oil, but greater quantities of crude would be required for Bush and Cheney’s sought-after energy independence.
One such flow of oil could have been from the Caspian Sea. But in 2002, disappointing news started to emerge from the ancient oil territories around Baku, precipitating even more aggressive stampedes for oil.79
During the mid-1990s, seismic data had revealed a giant geological structure under the northern Caspian Sea, a monolith stretching two hundred miles long and fifty miles wide. If it were full of oil, it could be the largest oilfield in the world.80 “The Caspian may well be the Persian Gulf of the twenty-first century,” Offshore magazine reported in March 1996.81
Over in the State Department, ears were pricked. In 1997, the State Department had informed Congress that the Caspian held almost 200 billion barrels of oil.82 The message was not lost on the senators. “You can picture back in the think tanks of America, and the foreign service departments and the military planners, all of these people seeing this great gem sitting out there in the Caspian, and their interest shifted to how to get the damn stuff out,” recalls Campbell. “Since they are obviously not geologists, it was sort of taken as an assumption that it was there, and the problem would be to export it and bring it onto world markets.”
State leaders in the impoverished region jockeyed for position. The Caspian Sea was landlocked, bordered by a gallery of countries and peoples who nursed age-old feuds with each other: Russia, Iran, Kazakhstan, Turkmenistan, and Azerbaijan.
Struggles emerged over the sea itself. Was it a lake or was it a sea? Before 1991, only two countries bordered the Caspian: Iran and the Soviet Union. Under international law, resources in lakes are generally shared between bordering countries. This suited the Soviet Union and Iran, as all they wanted to get out of the Caspian were its wandering sturgeon and caviar. Calling the Caspian a lake and divvying up the roving delicacies was easier than hoping that the fish swam and laid their eggs on one side of the Caspian rather than the other.
Oil, however, is a much more stationary resource. After the Soviet Union broke up, Iran insisted on keeping the lake definition, but some of the new bristling countries bordering the Caspian wanted to classify the water as a sea. It was salty, after all, and had been called a sea for ages. Also, if the Caspian were reclassified a sea, under 1980s-era UN conventions, it would be sliced like a pie, with each bordering country getting a single piece. Envisioning the slicing of the Caspian cake in their minds, the various countries vied for the tastiest morsels.83
More pressing questions followed. Which way would the biggest pipelines with their precious cargo run? Which countries would net the windfalls of transit fees, and which wouldn’t? The problem of transport had already triggered violent conflict. When the Russians had decided to pump early Caspian oil through their leaky pipelines running through Grozny, the capital of Chechnya, they had set off six long years of bloody war and repression. The prize was even bigger now, and so was the brewing fight. Oil companies foresaw ferrying $21 million worth of crude oil and gas out of the Caspian Sea through pipelines every single day.84
The easiest cheapest route for a pipeline would be to pipe the oil through Russia or Georgia to the Black Sea, or through Iran to the Persian Gulf.85 Western companies were unlikely to build pipelines through Iran, in as much as the country was still under U.S. sanctions. 86 The Russian route appeared most promising, and could make use of existing Soviet-era pipes. These were notoriously leaky, dripping oil into the frozen ground, which thawed into great standing lakes of oil (the biggest was eleven kilometers long and two meters deep) during the summers.87
But the United States objected. Never mind the leaky pipelines, the United States did not want any of this precious new oil to go through any potentially hostile territories like Russia. The cherished cargo, instead, should travel a longer and more expensive route, through Georgia and U.S. ally Turkey, government analysts insisted.
In the late 1990s, the United States started pouring money into the region to prepare the ground, feting the new leaders of the Caspian states at lavish White House diplomatic events.88 The pipeline the United States wanted would cost around $3 billion. BP said it couldn’t be done without “free public money,” signing on to build the line after the U.S., U.K., Japanese, and Turkish governments agreed to subsidize the project. President Clinton traveled to Istanbul in 1999 to sign a deal for the pipeline that would carry Caspian oil into Turkey, where it could be loaded onto tankers in the Mediterranean.89 U.S. military bases sprouted across Central Asia, an iron embrace that tightened considerably with the 2001 invasion of Afghanistan, a violent and unsuccessful attempt to capture the wily Saudi terrorist Osama bin Ladin.
But then the other shoe fell. Something was going wrong in the oil patch. In 2001, BP and Statoil had gotten enough bad news. They pulled out. By late 2002, the oil industry had drilled three wells on the most promising Caspian oilfield, Kashagan, the hoped-for 200-billion-barrel savior. What they found was that “far from it being a single huge structure containing 200 billion barrels as they had hoped,” recalls Campbell, “it is made up of different individual reefs, very deep, high sulfur, and the latest estimates are it’s only got between 9 and 13 billion barrels!”90 Of the dreamed-of 200 billion barrels, just one-twentieth might materialize. The Caspian would be no substitute for the Middle East.
The pipeline, however, proceeded apace. The people along the pipeline route, impoverished by war and years of neglect, their oil-rich land lacking even in the refineries that would provide them jobs, would most likely end up seeing their most lucrative resource pumped right out from under their noses with little to show for it. They braced themselv
es for an earthquake, as the sturgeon-rich Caspian was prone to them. Locals feared, too, greater contamination of the air with “sour gas,” natural gas mixed with oil and deadly hydrogen sulfide, which was already being released by many fields in the region.91
One can only imagine how the news of the Caspian oil crash was greeted by the oilmen sitting in the Oval Office in the spring of 2002. It wasn’t long afterward that Iraq, that treasure-chest of unexplored oil riches, fell under their gaze.
Only 17 of 80 discovered oilfields in Iraq have been developed; only 2,300 wells drilled, less than 1 percent of the number of wells drilled in Texas alone, according to the EIA. Iraq’s vast Western Desert is virtually virgin territory; modern oil hunters had never subjected these oil lands to the reach and scrutiny of their directional drills and three-dimensional seismic surveys.92
Unlike the rest of his colleagues in OPEC who had been chastened by their fall from grace after the 1973 oil embargo, Iraqi President Saddam Hussein was still willing to use Iraqi oil as a weapon to punish his enemies, not least the United States. In September 2000, Hussein announced that Iraq would no longer accept U.S. dollars for its oil, only euros. In April 2002, from the seat of his starving country, weakened by years of sanctions, Hussein withheld all Iraqi oil from the market, in another attempt to punish Israel’s allies.93 It wasn’t just the West that met with the leader’s opprobrium. Hussein impetuously ripped up a deal with a Russian oil company after Russian president Vladimir Putin supported sanctions against Iraq.94
Hussein had bigger plans. In February 2003, he claimed Iraq would double its oil production to 6 million barrels a day by 2012, perhaps even 10 million barrels a day, if sanctions were lifted.95 In anticipation, the Iraqis were planning to drill more than four hundred new wells, and had already inked some deals to get the job done. The rub was that the oilmen who would drill those wells would not be working for ExxonMobil or ChevronTexaco, but Russian, French, and Chinese companies.96