The Quest: Energy, Security, and the Remaking of the Modern World

by Daniel Yergin

  Another key choke point is the Bosporus Strait—just 19 miles long, a little over two miles at its widest, and a half mile at its most narrow, connecting the Black Sea to the Sea of Marmara and on into the Mediterranean. Every day more than three million barrels per day of Russian and Central Asian oil pass through it, right down through the middle of Istanbul. Two other critical choke points are both in the Middle East: the Bab el-Mandeb Strait, which provides entrance at the bottom of the Red Sea between Yemen and Somalia for up to three million barrels per day, and the hundred-mile-long Suez Canal and Sumed Pipeline, which together connect the top of the Red Sea to the Mediterranean and through which pass about two million barrels per day of oil plus major shipments of LNG. There is also the Panama Canal, with 0.6 million barrels per day.13

  Recent years have revealed a new risk—or really the return of an old one. More open ocean waters—the world’s ungoverned geographical spaces—have become noticeably more dangerous. The area around the Horn of Africa—the Gulf of Aden, which leads to the Bab el-Mandeb Strait, and the western waters of the Indian Ocean, south of the Arabian Peninsula—has become the arena for pirates operating out of Somalia and neighboring countries. With that has come what has been described as a “radicalization of maritime piracy,” as cooperation increases between pirates and terrorist groups. Pirate attacks on shipping, including oil and LNG tankers, seem almost a daily occurrence. Using larger mother ships, the pirates operate as far as a thousand nautical miles from their bases on shore. European, U.S., Russian, Chinese, and Indian naval forces are all now active in those waters seeking to repel and deter pirate attacks.14

  Because these waters are the main route for the tankers carrying oil and LNG from the Persian Gulf to Europe and North America, and because of the proximity to the Gulf itself, this surge in piracy adds a further dimension to the security concerns for the region that holds well over half of the world’s proved oil reserves. The energy security of the region known as the Gulf is truly a global question.

  14

  SHIFTING SANDS IN THE PERSIAN GULF

  Even as the dimensions of energy security have become wider, the world’s concerns always seem to circle back to oil, and that means, as it has for so many years, back to the Middle East and the Persian Gulf. The risks today center on terrorism, the stability of societies, and Iran’s nuclear program and its drive to dominate the Gulf.

  The Gulf countries produce more than a quarter of total world oil output and hold almost 60 percent of proved reserves, making the region of central importance to the world oil market and the global economy. North Africa produces another 5 percent. But over the decades, out of the Gulf and the larger Middle East have come a series of crises that disrupted global oil supply.

  The first was the 1956 Suez crisis. Egypt’s expropriation of the Suez Canal triggered an invasion by Britain and France—along with Israel, which was threatened by Egyptian military pressure. The closure of the Suez Canal created an oil shortage in Europe. It was relieved by a surge in output from the United States, which at that point had surplus capacity. One consequence of the Suez crisis was to spur a technological advance in the development of larger tankers that could sail around Africa instead of using the canal.

  In 1967 Arab oil exporters reacted to Israel’s victory in the Six Day War with an oil embargo against the United States, Britain, and West Germany. However, this embargo failed, owing to what was at the time a large surplus in the world petroleum market. Seven years later, the 1973 embargo responded to the U.S. resupply of Israel following the Yom Kippur surprise attack. In contrast to 1967, the embargo was highly successful, owing to the tight market. It triggered a fourfold increase in the price of oil. The embargo, combined with the price increases, shook the structure of international relations and sent shock waves through the global economy, followed by several years of poor economic performance. The 1978–79 Iranian Revolution, which toppled the shah and ushered in the theocratic Islamic Republic, also ignited a worldwide panic in the petroleum market and another oil shock that contributed mightily to the difficult economic years of the early 1980s.

  Saddam Hussein’s 1990 invasion of Kuwait set off the Gulf crisis, leading to the loss of five million barrels a day of supply from Iraq and Kuwait. Other producers, notably Saudi Arabia, cranked up output and largely replaced the missing barrels over the next several months, even before Operation Desert Storm evicted Saddam’s forces from Kuwait. It was in anticipation of that military operation that the International Energy Agency organized the first-ever coordinated release of strategic stocks.

  For more than a decade thereafter, there were no petroleum disruptions in the region. Then the 2003 invasion of Iraq shut down its oil industry. Production resumed, though erratically. The reduced output from Iraq was part of the aggregate disruption that contributed to the price spike of 2008.

  All this transpired over the course of a half century in the region that is the breadbasket of world oil production.

  The unique energy position of the Gulf is the product of a peculiar geologic history that has made it the most prolific hydrocarbon basin on the planet. Over hundreds of millions of years ago, what is now much of the Arabian Peninsula and the Persian Gulf basin was submerged beneath a vast, shallow sea. The recurrent expansion and shrinking of this sea created excellent conditions for the deposit of organic material in successive layers of sediment. During the times when the sea receded, the land was not a desert but a warm and humid jungle. Temperatures much hotter than they are today encouraged lush growth, which added to the organic sediments. Pressure and heat turned this organic material into hydrocarbons—oil and gas. The shifts in the earth’s crust and the clash of tectonic plates, on a geological time scale, created huge structures for trapping these hydrocarbon deposits. And it was in those structures that in the twentieth century the drill bit found the extraordinary accumulations of oil and gas that define the modern Persian Gulf.

  “THE CENTER OF GRAVITY OF WORLD OIL”

  In 1943, in the middle of World War II, the Roosevelt administration dispatched Everette Lee DeGolyer to the Persian Gulf to assess the petroleum potential of the region. DeGolyer was America’s preeminent geologist; he had made the discovery in 1910 that opened up Mexico as a great oil producer, and in the 1920s he did more than anyone else to promote the introduction of seismic technology.

  Oil had originally been discovered in Iran in 1908; then in Iraq, in 1927; then in Bahrain, in 1932. Still, some were skeptical of what might be found in Saudi Arabia. In 1926 the senior management of one petroleum company decided that Saudi Arabia was “devoid of all prospects” of oil and that big reserves would most likely be found in Albania. In the 1930s, after several years of disappointment and dry holes, even the companies exploring in Saudi Arabia debated “whether the venture should be abandoned” and “written off as a total loss.” But then came the transformative discoveries—Anglo-Persian (later BP) and Gulf Oil hit petroleum in Kuwait, at a well called Burgan Number One, in February 1938. The next month, Chevron and Texaco did the same in Saudi Arabia, with Dammam Number Seven. Although many of the wells were capped and operations suspended during World War II, some people, including DeGolyer, suspected that these discoveries might rewrite the geopolitics of world oil. “It is uncertain,” he wrote his wife as he embarked on the trip, “and a little bit hazardous.” Yet “it seemed pretty important,” he added, “for some American to make this trip and size up the situation.”

  The survey confirmed DeGolyer’s conviction about the scale of the resource. “The center of gravity of world oil production,” he reported at the end of his mission, “is shifting from the Gulf-Carribean area to the Middle East—to the Persian Gulf area.” Another member of DeGolyer’s team summed it up more simply: “The oil in this region is the greatest single prize in all history.”1

  ONE QUARTER OF WORLD RESERVES

  The decades that followed proved these predictions on a massive scale. On the western side of the Gulf, towe
ring over all the other exporters, is Saudi Arabia, with about a fifth of the world’s proven oil reserves. Its output averaged 8.2 million barrels per day in 2010—almost 10 percent of total world production. It has the capacity to produce to 12.5 million barrels per day. It also has the great advantage of having the lowest production costs in the world. Although in recent years, Saudi Arabia’s costs for exploration and production have risen, they are still well below those of most other regions in the world.

  As a matter of ongoing policy, Saudi Arabia maintains a cushion of 1.5 to 2 mbd of spare capacity that can be brought quickly into production. That extra capacity is meant to be a stabilizer—or what Saudi petroleum minister Ali Al-Naimi calls an “insurance policy”—to counteract “unforeseen supply disruptions” in the global oil market, such as “wars, strikes, and natural disasters.” It is the producer’s analogy to a Strategic Petroleum Reserve.2

  Almost the country’s entire industry is operated by the state-owned Saudi Aramco, by far the world’s largest oil company. Saudi Aramco, which took over operations from the consortium of U.S. companies that had developed the oil industry prior to nationalization, has established itself at the forefront in terms of its technical capability and in its capacity to execute large-scale, complex projects.

  Saudi Aramco still has a substantial portfolio of untapped fields and reservoirs, with over 100 fields that contain nearly 370 reservoirs. It produces from only 19 of the fields, albeit the largest and most productive among the discovered fields, the largest of which is Ghawar. The development of three new mega-projects—Shaybah, Khurais, and Manifa—is adding over 2.5 million barrels a day of capacity, which just by itself would rank as a major OPEC exporter. The application of new technologies continues to unlock resources and open up new horizons. The part of Saudi Arabia that is heavily explored is relatively small. The company has committed close to $100 billion for investment in the oil sector for the five-year period, 2011–15, including new exploration in the northeast of the country and the Red Sea, aimed at increasing its oil and gas reserves.

  THE GULF

  Sixty percent of conventional oil reserves are located in the Gulf.

  The other major Arab producers are strung out along the western shore of the Persian Gulf. But Kuwait and Abu Dhabi, which is the largest member of the United Arab Emirates, each produce about 2.3 million barrels per day; Qatar pumps 0.8 mbd. Oil and gas have given these countries the wherewithal to play a major role in the world economy well beyond hydrocarbons. Significant amounts of their export earnings go into their sovereign wealth funds, which have become among the largest pools of capital in the world. Lesser amounts of oil are produced by Dubai and Bahrain and, on the southern end of the Arabian Peninsula, Oman and Yemen. Algeria and Libya are the main producers in North Africa.

  THE “HINGES” OF THE WORLD ECONOMY

  Al Qaeda has targeted what it has called the “hinges” of the world’s economy—its critical infrastructure. However, when Al Qaeda first emerged in the 1990s, energy systems, specifically, were not targets. In his 1996 statement, “Declaration of War Against the Americans Occupying the Land of the Two Holy Places,” Osama bin Laden argued against attacking oil infrastructure in the Middle East, which, he said, embodied “great Islamic wealth” that would be needed “for the soon-to-be-established Islamic state.” The attacks that did take place were aimed at foreign interests.

  Then a new jihadist work appeared in 2004 that called for a change in strategy. Titled “The Laws of Targeting Petroleum-Related Interests and a Review of the Laws Pertaining to the Economic Jihad,” it proclaimed the oil industry a legitimate target so long as certain “rules” were followed. Long-term oil production capability should not be damaged. That needed to be preserved for the Islamic caliphate. But it advocated conducting operations that would drive up the price of oil, thus hurting Western countries.

  Several months later Bin Laden, embracing this new doctrine, urged attacks on oil targets as part of an economic jihad against the United States. He cited the war in Afghanistan, which had “bled Russia for 10 years until it went bankrupt and was forced to withdraw from Afghanistan in defeat” and called for the same kind of policy “to make the US bleed profusely to the point of bankruptcy.” He later declared that the West sought to dominate the Middle East in order to steal oil and urged his adherents “to give everything you can to stop the greatest theft of oil in history.” He called for terror attacks that would drive oil to $100 a barrel with the aim of bankrupting the United States. In 2005 Ayman al-Zawahiri, Bin Laden’s deputy, declared that the mujahedeen should “focus their attacks on the stolen oil of the Muslims,” in order to “save this resource” for the time when an Al Qaeda caliphate would rule the Arabian Peninsula.

  A raid in September 2005 on a safe house near the largest Saudi oil field discovered the practical tools for this new doctrine: charts and maps for the oil infrastructure not only of Saudi Arabia but of the other Gulf Arab oil producers as well. The Saudis were taken aback by how detailed the information was.3

  A CRITICAL NODE

  On a Friday in February 2006, shortly after afternoon prayers, three vehicles—a Toyota Land Cruiser SUV and two pickup trucks—made their way toward a little-used service gate at the vast Abqaiq processing plant, 60 miles from Saudi Arabia’s largest oil field. Abqaiq is one of the most critical nodes in the global supply system. Up to 7 million barrels of oil—8 percent of total world supply—pass through this sprawling industrial facility every day.

  Once at the gate, the gunmen jumped from the Land Cruiser and started shooting, killing the guards, while the two pickups rammed through the fence and into the Abqaiq facility. One of the pickup drivers apparently took a wrong turn and ended up in the dead end of a parking lot. His engine, leaking oil, stalled. At that point, with nowhere to go, the driver detonated his bomb, committing suicide and destroying his vehicle. Meanwhile, the second pickup driver, trying to outrun pursuing security guards, was barreling down the road so fast that, by the time he detonated his bomb, killing himself, he had already driven past his target, and the resulting explosion did no damage to the facilities.

  But the shooters escaped in the Land Cruiser and raced back to Riyadh, where they holed up in a small compound in the eastern part of the city. Police kept them under surveillance for a few days and then moved in. In the ensuing shoot-out, the jihadists were killed. One of them, it was discovered, was among the most wanted terrorists in Saudi Arabia. Inside the compound, the authorities found a trove of terrorist tools.

  The Abqaiq facility is so big and spread out that even if the suicide drivers had been more adept, the damage would have been localized. Moreover, the Saudis maintain several levels of security at Abqaiq and other sensitive installations. Nevertheless, the attempt demonstrated the intent of the jihadists. In the aftermath of the Abqaiq attack, the Saudi government moved to further enhance security, including the creation of a new 35,000-man force specifically charged with protecting the kingdom’s oil infrastructure. In the years since, the jihadists further codified their doctrine of economic warfare. This was most obvious in the constant attacks on the oil infrastructure in Iraq. In 2008 an Arabian affiliate of Al Qaeda reiterated the call for attacks on the oil infrastructure. In July 2010 a suicide bomber in a small skiff, apparently taking off from an isolated part of Oman’s coast, rammed into a large Japanese oil tanker. Though little damage was done, it was the first such attack inside the strait itself.

  For their part, the Arab oil-exporting countries along the Gulf have, in general, substantially deepened security, hardened targets, and much honed their intelligence operations. “The terrorists have begun to focus on disrupting our energy infrastructure,” Petroleum Minister Ali Al-Naimi said after the attempt at Abqaiq. “The threat from terrorists to the world’s energy infrastructure is not limited to any one country or region. We must all be vigilant.”4

  In May 2011, Osama bin Laden was killed by U.S. Navy Seals in a villa in Pakistan. He had
lived there, hidden with no Internet connection, for several years, just 35 miles from Islamabad, Pakistan’s capital. His communications with Al Qaeda were by couriers. Among the materials seized in the raid were plans for attacking oil tankers.

  THE SOCIAL FOUNDATIONS

  In December of 2010, Mohammed Bouazizi, a young fruit vendor in the Tunisian town of Sidi Bouzid, reached the breaking point. For years, the police had been harassing him and stealing his fruit, along with that of the other vendors in the fruit market on the main street. When he tried to stop a policewoman from stealing two baskets of apples, two other policemen held him down while the policewoman slapped him. He went to the city hall to complain but was told to go away. He did leave but returned shortly after and, standing in front of the municipal building, set himself ablaze. He died a few weeks later in the local hospital.5

  But footage of protests over his fate and the way he had been treated was quickly posted on Facebook. The government did not know how to block the footage. Bouazizi’s self-immolation set off a blaze that burned across the Middle East, shaking the political order and bringing down part of the geostrategic structure of the region.