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  • Presenter notes: Whatever the cause of the current rises in oil prices, there is good reason to believe we have not yet reached Hubbert’s era of “peak oil” production. One of the effects of higher prices is that oil deposits that were once considered uneconomic to exploit have now become viable. The largest of the these unconventional oil deposits is the Athabasca tar sands of Albert, Canada. Amazingly this deposit contains over half the world’s oil reserves, equal to 1.75 trillion barrels. The oil is mixed together with sand near the surface and is extracted by opencast mining using giant dumper trucks! However, it is very expensive to extract oil from tar sands, so if this source is used extensively, prices are unlikely to fall. Nevertheless, the Athabasca tar sands together with other probable large oilfields in the Arctic and Antarctica will probably stave of oil shortages for several decades to come.
  • Lesson7oil

    1. 1. 1.2 The impact of energy insecurity Enquiry question: What are the potential impacts of an increasingly ‘energy insecure’ world?
    2. 2. Energy pathways <ul><li>The flows of energy from producer to consumer are pathways. </li></ul><ul><li>In physical terms, the pathways take the form of gas and oil pipelines, the sea routes of tankers carrying oil and gas, and electricity power lines </li></ul><ul><li>Demand and availability of energy sources are not equally matched = Countries often rely on imports from the producers to the consumers. </li></ul><ul><li>e.g. Oil and gas pipelines, oil tankers, power lines. </li></ul><ul><li>Middle east and Russia - major exporters (security issues!) </li></ul>
    3. 3. Describe the changes in the global energy trade since 1981?
    4. 4. There has been a significant increase in the export of fuels. Export growth particularly from Middle east and former Soviet Union South and central America has increased; not a major player. There has been a significant increase in imports. The countries exporting are NOT the countries importing Europe, Asia and the Asia- Pacific region are now heavily reliant on energy imports. The USA uses imports. The numbers change. They have some supplies of their own. Having found out all of this, think about what it means for global energy security.
    5. 5. Oil Global pathways Oil has a complex global pattern of PATHWAYS and PLAYERS (exporters and importers). The Middle east exports around 15 000 barrels per day, mainly TO Japan, Europe and CHINA. Substantial amounts flow from Africa, Canada and South and central America TO the USA. Russia supplies some oil to CHINA, but the bulk of its exports now head to Europe. Increasingly African nations are supplying oil and other ources to China
    6. 7. “ If we stop using fossil fuels our industrial civilization will collapse and the ensuing chaos could lead to global wars that would wreck the biosphere. If we continue to use fossil fuels, the pollution will continue to foul the world and create more resource conflicts. Damned if we do, damned if we don't. Solving these problems is the greatest challenge ever faced by our species”
    7. 8. <ul><li>There are very few energy haves in the world today. Most notable among these privileged few are Australia, Canada, Iran, Kazakhstan, Kuwait, Nigeria, Qatar, Russia, Saudi Arabia, Venezuela, Iran, Iraq (if it were ever free of conflict), and a few others. </li></ul><ul><li>These countries are in an envious position because they do not have to pay stratospheric prices for imported oil and natural gas and their ruling elites can demand all sorts of benefits -- political, economic, diplomatic, and military -- from the foreign leaders who come calling to procure copious quantities of their energy products. Indeed, they can engage in the delicious game of playing one foreign leader against another, as Kazakhstan's President, Nursultan Nazarbayev -- a regular guest in Washington and Beijing -- has become so adept at doing. </li></ul>
    8. 9. Oil consumption Top 10 biggest oil consumers- barrels per day used 2008 http://www.eia.doe.gov/country/index.cfm?view=consumption Rank Country Consumption 1 United States 19,498 2 China 7,831 3 Japan 4,785 4 India 2,962 5 Russia 2,916 6 Germany 2,569 7 Brazil 2,485 8 Saudi Arabia 2,376 9 Canada 2,261 10 Korea, South 2,175 11 Mexico 2,128 12 France 1,986 13 Iran 1,741 14 United Kingdom 1,710 15 Italy 1,639
    9. 10. Oil production http://www.eia.doe.gov/country/index.cfm?view=production 2008 Barrels per day Rank Country Production   1 Saudi Arabia 10,782   2 Russia 9,790   3 United States 8,514   4 Iran 4,174   5 China 3,973   6 Canada 3,350   7 Mexico 3,186   8 United Arab Emirates 3,046   9 Kuwait 2,741   10 Venezuela 2,643   11 Norway 2,466   12 Brazil 2,402   13 Iraq 2,385   14 Algeria 2,180   15 Nigeria 2,169  
    10. 11. oil producing countries
    11. 12. <ul><li>http://en.wikipedia.org/wiki/Oil_reserves graphs and details </li></ul><ul><li>http://planb.org/resources/beyondoil/11_map.php website against oil- conflict areas </li></ul>Summary of Reserve Data as of 2008
    12. 15. <ul><li>In 2008 global oil production and consumption stood at around 80-85million barrels a day </li></ul>BRICs Brazil, Russia, India and China Japan, UK, Germany and the USA Account for over ½ world’s total oil consumption
    13. 16. <ul><li>AND demand is still rising…… </li></ul><ul><li>China’s consumption has recently increased to 10% of the global total and India’s to 3%- but the 2 countries contain 40% of world’s population </li></ul><ul><li>By 2030 global oil consumption is expected to reach 113 m barrels a day </li></ul><ul><li>By 2030- total global energy is expected to increase by 50%- 85% increase in LDC and BRIC countries </li></ul><ul><li>Electricity generation is expected to double by 2030- fuelling demand for oil, gas and coal (70% of demand from China) </li></ul><ul><li>Nuclear Power is also expected to increase by nearly 50% mostly in China and India </li></ul><ul><li>The largest increase in oil demand will come from transport (as car purchases increase) </li></ul><ul><li>Renewable energy use is expected to increase </li></ul>
    14. 17. Explain how and why oil prices have changed in the past 150yrs (10)
    15. 18. So what is the problem? <ul><li>Oil is a FINITE resource it will eventually run out as it takes millions of years to form. Just like all non-renewable resources. All these resources have a peak level- it can only be used to a certain degree. </li></ul><ul><li>What is Peak oil? </li></ul><ul><li>&quot;The term Peak Oil refers to the maximum rate of the production of oil in any area under consideration, recognising that it is a finite natural resource, subject to depletion .“ </li></ul><ul><li>Colin Campbell </li></ul>What do you understand by the term Peak Oil? Write down your definition http://www.youtube.com/watch?v=gHKp5vF_VoE peak oil explained
    16. 19. Peak oil theory <ul><li>Peak oil theory states: that any finite resource, (including oil), will have a beginning, middle, and an end of production , and at some point it will reach a level of maximum output. </li></ul><ul><li>Oil production typically follows a bell shaped curve when charted on a graph, with the peak of production occurring when approximately half of the oil has been extracted. The underlying reasons are that oil becomes more difficult and expensive to extract as a field ages past the mid-point of its life. </li></ul><ul><li>In the US for example, oil production grew steadily until 1970 and declined thereafter, regardless of market price or improved technologies. </li></ul>
    17. 20. <ul><li>In the US for example, oil production grew steadily until 1970 and declined thereafter, regardless of market price or improved technologies. </li></ul><ul><li>In 1956 M. King Hubbert, a geologist for Shell Oil, predicted the peaking of US Oil production would occur in the late 1960's. </li></ul><ul><li>Although derided by most in the industry he was correct. He was the first to assert that oil discovery, and therefore production, would follow a bell shaped curve over its life. After his success in forecasting the US peak, this analysis became known as the Hubbert's Peak. </li></ul><ul><li>The amount of oil discovered in the US has dropped since the late 1930s. 40 years later, US oil production had peaked, and has fallen ever since. </li></ul><ul><li>World discovery of oil peaked in the 1960s, and has declined since then. If the 40 year cycle seen in the US holds true for world oil production, that puts global peak oil production, right about now; after which oil becomes less available, and more expensive. </li></ul><ul><li>Today we consume around 4 times as much oil as we discover. </li></ul><ul><li>If we apply Hubbert's Peak to world oil production we estimate that approximately half of all oil that will be recovered, has been recovered, and oil production may reach a peak in the near future, or perhaps already has. </li></ul>
    18. 21. This graph shows points various oil producing areas reached peak oil
    19. 22. Declining Oil <ul><li>In 2007- the International Energy Agency warned that earth would face a supply crunch by 2012 </li></ul><ul><li>French and German employed forecasters expect global oil production to peak by 2020 </li></ul><ul><li>Although obviously the PEAK OIL date cannot be set in stone- IT WILL DEFINITELY HAPPEN </li></ul><ul><li>Oil production in at least 18 countries is already in decline </li></ul><ul><li>Norway peaked in 2001 since dropped by 25% </li></ul><ul><li>UK oil production from North Sea has fallen 43% in 8 years </li></ul><ul><li>Similar 42% decline in Prudhoe Bay Alaska </li></ul><ul><li>Mexico’s Canterell field in the gulf of Mexico was one of the most prolific in the world, but production started to fall in 2006 and then dropped by 9% in 2 years </li></ul>
    20. 23. Impacts of peak oil <ul><li>After peak expected fall in production of 3% a year </li></ul><ul><li>With growing oil demands, deficit between what we want and what we get will expand by 4% a year </li></ul><ul><li>Within 10 years we could have just about ½ oil supply required to sustain economic growth </li></ul><ul><li>Will lead to large oil price hikes which could cause recession </li></ul><ul><li>The cost of oil derived products will also increase, so plastic will increase along with all the foodstuffs we purchase contained in it </li></ul>Describe the impacts a country will face having reached peak oil, under the following headings- Level of supply Supply reliability Impacts economically
    21. 24. How are we preparing for peak oil? <ul><li>http://www.karavans.com/peakoil.html </li></ul><ul><li>http://www.odac-info.org/reports-resources loads of resources and articles about places </li></ul><ul><li>http://www.youtube.com/watch?v=6z9T5XPrDvg&feature=related the oil crash part 1 </li></ul>
    22. 25. What about Gas? <ul><li>As another finite source gas supplies will also eventually reach a peak, however experts suggest the situation will occur further into the future. </li></ul><ul><li>Peak unlikely before 2020 </li></ul><ul><li>BUT </li></ul><ul><li>UK already experiencing problems, UK used to be self sufficient but became a net importer in 2004 </li></ul><ul><li>Has one of highest energy depletion rates of any producing country </li></ul><ul><li>Needs to quickly find alternatives or other supplies to replace falling domestic production </li></ul>
    23. 26. Where’s the prospect of new oil? Lesson 4
    24. 27. Can oil production increase? <ul><li>Increasing oil production is expensive and takes time </li></ul><ul><li>More wells need tapping and pipeline capacity needs to improve </li></ul><ul><li>Saudi Arabia is spending $50 billion to increase its production to 12.5million barrels a day by this year </li></ul><ul><li>Still short of 15 million needed to produce enough to meet anticipated demands </li></ul><ul><li>OPEC’s 13 member countries plan to invest $150 billion to expand production capacity by 5 million barrels a day by 2012 (from current 36million) </li></ul><ul><li>To meet anticipated future demand OPEC will need to pump 60 million barrels a day by 2030 </li></ul><ul><li>Even if production does increase amounts of exploitable oil are decreasing </li></ul><ul><li>But the global cash crisis has sparked an increased search for new oil </li></ul><ul><li>Brazil has discovered huge new oil field supplies BUT 75% is at least 400 metres under sea level </li></ul>
    25. 28. The world’s oil: Conventional oil endowment (cumulative production plus mean estimates of remaining oil reserves and undiscovered oil resources) by province in billion barrels of oil (BBO) for 128 oil provinces. World data are from the U.S. Geological Survey (USGS) 2000 assessment of world petroleum resources; U.S. data are from USGS (1995 assessment) and from the Minerals Management Service (1996 assessment).
    26. 29. <ul><li>http://enviro-map.com/sakhalin Oil exploration in Japan </li></ul><ul><li>http://www.eurogasinc.com/oil-gas-exploration-poland_37.html Poland </li></ul><ul><li>http://www.abc.net.au/news/stories/2007/08/27/2015860.htm Kimberly Western Australia </li></ul><ul><li>http://myaker.net/text.cfm?path=1&id=226&lid=3 Ghana </li></ul><ul><li>http://www.richminerals.ca/m1.html Brazil </li></ul>
    27. 33. Background <ul><li>One of its main findings is that natural gas is three times as abundant as oil in the Arctic, and most of that gas is concentrated in Russia. </li></ul><ul><li>The survey reflects interest in an area once off-limits to oil exploration. It has become more accessible as global warming reduces the polar icecap, opening valuable new shipping routes, oil fields and mineral deposits. </li></ul>
    28. 34. Problems? <ul><li>But any attempt to create an Arctic drilling frenzy will likely meet strong resistance from environmentalists worried about the impact on what is still a near-pristine wilderness. And it could trigger a flurry of territorial disputes over who controls the oil and gas under the Arctic seabed. </li></ul><ul><li>The USGS report, which brings together disparate data held by individual countries as well as new information from geologists working in the field, is the first time anyone has produced a comprehensive, publicly available estimate of the Arctic's hydrocarbon treasures. </li></ul><ul><li>Its conclusions will be read closely at a time when concerns about supply have driven up crude prices. But scientists cautioned that it will take decades to develop the Arctic's hard-to-get-at oil and natural gas. </li></ul>
    29. 35. What has been found so far? <ul><li>Exploration in the area north of the Arctic Circle has already unearthed more than 400 oil and gas fields. They account for about 40 billion barrels of oil and more than 1,100 trillion cubic feet of gas, the USGS said. </li></ul><ul><li>But large parts of the Arctic, especially offshore, remain unexplored. Near-permanent sea ice makes it almost impossible to acquire seismic data and drill exploratory wells. </li></ul>
    30. 36. Why these discoveries? <ul><li>Climate change is opening the region. The Northwest Passage, home to deadly ice floes that can crush ships, was ice-free last summer. Some predict it will turn into a new trade route between Europe and Asia, and a channel that oil companies can use to ferry workers, equipment and supplies around more freely. </li></ul><ul><li>Enticed by the promise of vast deposits, energy companies are flocking northward -- often because they have few other places left to go. The Arctic, especially offshore Alaska and northern Canada, is one of the few parts of the world where the majors can easily acquire exploration acreage. Elsewhere, soaring crude prices have prompted oil-rich states to renegotiate contracts and sometimes kick out Western oil companies. </li></ul>
    31. 37. <ul><li>Yet drilling in the Arctic is controversial. Shell has been forced to delay a drilling plan off northern Alaska because of a legal challenge from environmental groups that say it could harm whale and walrus populations. </li></ul><ul><li>Oil exploration might also be hampered by rising nationalism. The five circumpolar states -- Canada, Russia, the U.S., Norway and Denmark -- are scrambling to claim new territory in the central Arctic Ocean. Last August, a Russian submarine planted the country's flag on the seabed some 14,000 feet under the North Pole. Shortly afterward, Canadian Prime Minister Stephen Harper announced that his country's military presence in the Arctic would be beefed up. </li></ul>
    32. 38. <ul><li>Mr. Gautier, the U.S. geologist, said that one of the survey's main conclusions was that a lot of the gas in the Arctic is in Russian waters, in places like the South Kara Sea and South Barents Basin. These are both geological extensions of onshore areas that are rich in gas. </li></ul><ul><li>The presence of so many hydrocarbons there &quot;will reinforce Russia's global dominance in natural-gas resources,&quot; he said. Russia is already the largest producer of natural gas and sits on the biggest gas reserves. </li></ul><ul><li>Yet there is little likelihood that much of Russia's Arctic wealth will be exploited any time soon. The country still has vast untapped fields onshore that are first in line to be developed. </li></ul><ul><li>Development would also be hampered by Russia's likely reluctance to let in foreign companies with experience developing oil and gas riches in hostile environments like the Arctic. Some firms have been allowed in, but only as junior partners of state-controlled Russian entities such as OAO Gazprom . </li></ul><ul><li>The situation could change. Neil McMahon, an oil analyst at Sanford Bernstein, said Russia will come under mounting pressure to sell offshore leases to Western companies and use the cash to boost investment in flagging domestic oil production. </li></ul>
    33. 39. Cold Comfort: Arctic Is Oil Hot Spot <ul><li>Case Study of the </li></ul><ul><li>Arctic National Wildlife Refuge </li></ul>
    34. 40. <ul><li>http://www.youtube.com/watch?v=NMKcxVdju8Q The truth about ANWR </li></ul><ul><li>http://www.youtube.com/watch?v=5JbgzWCM0A4&feature=related Don’t believe the lies- against ANWR drilling </li></ul><ul><li>http://www.youtube.com/watch?v=pOZRrbE8Qao&feature=related ANWR blood and oil </li></ul>
    35. 41. http://www.anwr.org/Video/View-our-ANWR-Flash-Movie.php
    36. 46. Opinions “ I hope people understand, in a 20,000-square-mile area, this is 2,000 acres. It is a plot of land the size of LAX that we would want to drill to explore. ,&quot; Sarah Palin- John McCain's running mate for 2008 us PRESIDENTIAL ELECTION
    37. 47. <ul><li>“ ANWR Drilling could keep [America]'s economy growing by creating jobs and ensuring that businesses can expand [a]nd it will make America less dependent on foreign sources of energy, scientists have developed innovative techniques to reach ANWR's oil with virtually no impact on the land or local wildlife.&quot; </li></ul>
    38. 48. Inupiat Eskimo “ We support the drilling- it will provide jobs for locals and Americans all over the country- it will enable Alaska to further develop energy security and it doesn’t affect us or the caribou migrations we rely on”
    39. 49. Other arguments in favour <ul><li>A June 29, 2008 Pew Research Poll reported that 50% of Americans favor drilling of oil and gas in ANWR while 43% oppose (compared to 42% in favor and 50% opposed in February of the same year). </li></ul><ul><li>A CNN opinion poll conducted in August 31, 2008 reported 59% favor drilling for oil in ANWR, while 39% oppose it. </li></ul><ul><li>A large majority of Alaskans support drilling in ANWR, including every governor, senator, representative, and legislature for the past 25 years. </li></ul><ul><li>In the state of Alaska, residents receive annual dividends from oil-lease revenues. In 2000 the dividend came to $1,964 per resident. </li></ul><ul><li>Rep. Richard Pombo, R-Calif., chairman of the Resources Committee, seized on the finding Tuesday that development of the refuge would boost domestic oil production by 20 percent over what it otherwise would be in 2025. </li></ul><ul><li>“ Given America’s energy crunch, ANWR production is a must,” Pombo, who requested the analysis, said in a statement. </li></ul>
    40. 50. “ Me not want any of your dirty oil spilling on me food or land- my calves might eat it or step on it”
    41. 51. &quot;I strongly reject drilling in the Arctic National Wildlife Refuge because it would irreversibly damage a protected national wildlife refuge without creating sufficient oil supplies to meaningfully affect the global market price or have a discernible impact on US energy security.&quot;
    42. 52. <ul><li>The economic impact would be negligible, thus meaning no financial reason to drill there as the amount is not thought to be enough for mass production levels </li></ul><ul><li>Environmentalists state that the required network of oil platforms, pipelines, roads and support facilities, not to mention the threat of foul spills, would play havoc on wildlife. </li></ul><ul><li>The US FISH AND WILDLIFE SERVICE has stated that the 1002 area has a &quot;greater degree of ecological diversity than any other similar sized area of Alaska’s north slope.&quot; The FWS also states, &quot;Those who campaigned to establish the Arctic Refuge recognized its wild qualities and the significance of these spatial relationships. Here lies an unusually diverse assemblage of large animals and smaller, less-appreciated life forms, tied to their physical environments and to each other by natural, undisturbed ecological and evolutionary processes.&quot;[ </li></ul><ul><li>The Gwich'in tribe adamantly believes that drilling in ANWR would have serious negative effects on the calving grounds of the Porcupine Caribou herd that they partially rely on for food. </li></ul>Other arguments against
    43. 53. <ul><li>Case study: </li></ul><ul><li>Arctic National Wildlife reserve (ANWR) </li></ul><ul><li>What and where is ANWR? </li></ul><ul><li>Why is this regarded as an important area for energy resources? </li></ul><ul><li>Briefly outline the social, economic, environmental and political arguments arising for and against exploiting oil and gas in ANWR? (Draw a large table like this..) </li></ul>Use handouts from oxford pages 28-9 and booklet sheets to help you Looking for more energy Increasing energy insecurity has stimulated exploration of technically difficult and environmentally sensitive areas. FOR AGAINST SOCIAL ECONOMIC ENVIRONMENTAL POLITICAL
    45. 55. Canada’s Tar Sands <ul><li>Higher oil prices and new technology mean unconventional </li></ul><ul><li>oil deposits are now economically viable (e.g. tar sands) </li></ul><ul><li>The Athabasca Deposit in Alberta contains 1.75 trillion barrels, </li></ul><ul><li>or about half of the world’s proven oil reserves! </li></ul>i.treehugger.com/files/canada-tar-sands-01.jpg NASA http://www.youtube.com/watch?v=pJrZ7ZeFHPE
    46. 56. The tar sands areas in Canada are about the size of Florida.
    47. 57. First, forests must be cleared. In this case the trees were stacked and burned.
    48. 58. Secondly, strip mining begins. Strip mines in the Canadian oil sands are the largest in the world.
    49. 60. The small trucks are 4 ton service trucks.
    50. 61. Following the strip mining, the tar sands are sent to the refinery for processing.
    51. 62. Emissions
    52. 63. Water from nearby rivers is tainted with heavy metals and oil once its used to produce steam. The steam separates the tar from the sand.
    53. 64. There is no known way to decontaminate this water. Some of the holding ponds are 30 sq miles.
    54. 65. The earthen dam on the left is over 300 feet high. The river immediately adjacent runs to the Artic.
    55. 66. From 2000 feet, as far as you can see it’s the same story, a strip mine, a processing plant and a holding pond. Currently this area produces 1 million bbls/day, it 5 years it will be 5 million bbls/day, 20% of our oil supply.
    56. 67. Unconventional resources <ul><li>Tar sands (also called natural bitumen and oil sands ) are any bitumen-rich sandy deposits </li></ul><ul><ul><li>Athabasca tar sands in Alberta and Orinoco tar sands in Venezuela are two of the most promising deposits and combined maybe contain as much as 2/3 of the total world-wide oil deposits. </li></ul></ul><ul><li>In the United States, reserves of heavy hydrocarbons in the form of tar sands are primarily in Alaska and Utah. </li></ul><ul><ul><li>The Kuparuk River deposits in Alaska contain an estimate 19 billion barrels </li></ul></ul><ul><ul><li>The total estimated reserves in Utah are about 32 billion barrels, with about two thirds concentrated in the Tar Sand Triangle deposits. </li></ul></ul>
    57. 68. While Canada has the tar sands, the U.S. has vast amounts of oil shale. The majority of oil shale is in Colorado, Wyoming and Utah. The Bureau of Land Management is actively exploring options for tapping this resource.
    58. 69. Tar sand extraction <ul><li>About twenty percent of the Canadian tar sands is in surface recoverable areas. </li></ul><ul><ul><li>For the near-surface deposits it is estimated that about 1.2 million cubic feet of overburden (i.e., surface brush, peat, and topsoil) must be removed for every 50,000 barrels of recovered bitumen along with 100,000 tons of sand. </li></ul></ul><ul><ul><li>The rest are too deep and would have to be recovered with in-situ processing </li></ul></ul>
    59. 70. Tar sand extraction An area of boreal forest the size of Florida is about to be strip mined to provide a few percent of the US liquid fuel reqm’t. First step is to remove the trees.
    60. 71. Homework- Case study: Turning Canada’s tar sands into oil (pages 30-31 Oxford book) <ul><li>Read the case study notes provided and briefly outline: </li></ul><ul><li>Where tar sands are located? </li></ul><ul><li>Why the use of this source is needed? </li></ul><ul><li>How the oil is extracted? </li></ul><ul><li>A couple of key Costs and Benefits of extracting oil from tar sands. </li></ul>
    61. 72. <ul><li>Lesson 5 </li></ul>
    62. 73. Who are the key players in Energy Supply
    63. 75. Main Players <ul><li>Consumers </li></ul><ul><li>Providers </li></ul><ul><li>Companies </li></ul><ul><li>Countries </li></ul><ul><li>Transit states </li></ul><ul><li>OPEC- the Organisation of Petroleum Exporting Countries </li></ul>
    64. 76. What influences oil pricing? <ul><li>2 main determining factors- </li></ul><ul><li>Price of oil on the free market (demand and supply conditions) </li></ul><ul><li>Oil quality </li></ul><ul><li>Crude oil is the MOST TRADED COMMODITY (good) in the world </li></ul><ul><li>It can be sold as a ‘futures contract' where buyer agrees to take delivery and seller agrees to supply a fixed amount at a pre arranged price in specific location </li></ul><ul><li>Aims to avoid price fluctuation by ensuring future demand for supply in reliant industries (like Airlines) </li></ul><ul><li>Crude oil comes in varieties and is proced accordingly- Brent crude from the North Sea is the bench mark- all other oil is worth less and priced in relation to that </li></ul><ul><li>2008- </li></ul><ul><li>Oil prices continuously increased supply could not keep pace with demand (esp. from China) </li></ul><ul><li>OPEC worried about increasing output as then investors may feel there’s a glut on the market and drop prices, affecting OPEC economies </li></ul>
    65. 77. <ul><li>MERGERS & CORPORATE STRUCTURES In spite of record profits posted by oil companies, there has been a trend in oil company mergers and consolidations as a way to cut costs. Over the last 25 years alone: </li></ul><ul><li>Exxon merged with Mobil in 2001-02 (and is now the most profitable company in the world) </li></ul><ul><li>BP bought Amoco in 1998 </li></ul><ul><li>Gulf was bought by Chevron in 1984 </li></ul><ul><li>Chevron merged with Texaco in 2001-02 </li></ul><ul><li>Unocal and Chevron merged in 2005 </li></ul><ul><li>All of the mergers and acquisitions that have taken place haven't only boosted public oil company profits. The mergers have also clouded the lines of responsibility. Oil companies argue that they are not presently responsible for the actions or previous owners and management. In order to settle these disputes, groups of people who have suffered abuse at the hands of oil companies are finding ways to hold public oil companies accountable . </li></ul>
    66. 79. <ul><li>8. ENI </li></ul><ul><li>ENI or Ente Nazionale Idrocarburi is an Italian-based, government backed multinational company started in the 1920s with the official incorporation finalized about 30 years later. With strong presence inside its country of origin and worldwide, the company is now ranked as the third largest oil refiner in Europe, behind Shell and Total. ENI’s core businesses include exploration and production, gas, power, energy, engineering, technology and construction. </li></ul><ul><li>Sales = $119.27 billion, profits = $13.70 billion, assets = $128.015 billion, market value = $127.38 billion. </li></ul><ul><li>9. Petrobras (Brazil) </li></ul><ul><li>Based in Rio de Janeiro, Brazil, Petrobras inception was highly credited to the country’s two-time President, Getulio Vargas, whose political career ended with a suicide. Between 1950s up to the turn of the 20th century, Petrobras was the monopoly for the oil and gas industry in Brazil and played a big part in driving the country’s economy. Apart from its native country, the company also has significant presence in North America, South America, Africa, Europe and Asia. </li></ul><ul><li>Sales = $87.52 billion, profits = $11.04 billion, assets = $129.98 billion, market value = $236.67 billion. </li></ul><ul><li>10. PetroChina (China) </li></ul><ul><li>One of the most profitable companies in Asia, PetroChina was also ranked by Forbes as the largest company in China, and 55th in the overall worldwide ranking. Through prudent management and operation, the company has been presented with a string of awards by international magazines that include the best company in dividend payout policy, best investor relation, and best corporate governance. PetroChina is publicly traded in a few major stock exchanges including New York , Hong Kong and Shanghai. </li></ul><ul><li>Sales = $88.24 billion, profits = $18.21 billion, assets = $111.70 billion, market value = $546.14 billion. </li></ul>
    67. 80. <ul><li>5. Chevron (United States) </li></ul><ul><li>Chevron is also another spin-off from the Standard Oil company, and made its mark after discovering the world’s largest oil field in Saudi Arabia in the 50s. Chevron has commercial interests in pretty much everything related to oil and gas - exploration, production, transportation, logistics, marketing and trading, manufacturing, polymer, chemicals and power. The company operates in more than 80 countries worldwide, providing employment to more than 50,000 people across all major continents. </li></ul><ul><li>Sales = $203.97 billion, profits = $18.69 billion, assets = $148.79 billion, market value = $179.97 billion. </li></ul><ul><li>6. Gazprom (Russia) </li></ul><ul><li>Gazprom is Russia’s largest company, and controls as much as 90% of the country’s overall production of gas. Its overall capacity also accounts for more than 15% market share of the world’s gas reserve. On top of that, the company boasts its presence by owning a gas pipeline network stretching some 150 thousand kilometers in length, currently the longest pipeline in the world. Apart from oil and gas, Gazprom also has business interests in finance, insurance, banking, communication, media, agriculture and construction. </li></ul><ul><li>Sales = $81.76 billion, profits = $23.30 billion, assets = $201.72 billion, market value = $306.79 billion. </li></ul><ul><li>7. ConocoPhillips (United States) </li></ul><ul><li>ConocoPhillips is listed among the Six Supermajors alongside ExxonMobil, Shell, BP, Chevron and Total. The Supermajor refers to the world’s largest non-state owned energy companies. As of today, the company operates in close to 40 countries worldwide, with its headquarter located in Texas, United States, and employing more than 30,000 staff. Conoco runs service stations under different brand names such as ProJET (Malaysia), COOP (Switzerland) and Turkpetrol (Turkey). </li></ul><ul><li>Sales = $171.50 billion, profits = $11.89 billion, assets = $177.76 billion, market value = $129.15 billion. </li></ul>
    68. 81. <ul><li>2. Royal Dutch Shell (Netherlands) </li></ul><ul><li>Two companies - Royal Dutch Petroleum of Netherlands and Shell Transport and Trading Company of United Kingdom decided to merge their operations in the early 20th century. The result is the formation of The Royal Dutch Shell Group with 2 main offices, one in The Hague (Netherlands), and another in London (United Kingdom). The formation of the new entity also signaled the group’s intention to compete with the then dominant Standard Oil company. After more than a century, seems like it is doing well. </li></ul><ul><li>Sales = $355.78 billion, profits = $31.33 billion, assets = $266.22 billion, market value = $221.09 billion. </li></ul><ul><li>3. BP (United Kingdom) </li></ul><ul><li>The founding of BP was almost concurrent with the formation of the Shell Group, but it had to endure a path full of controversies and complexity. BP’s history is always linked to the middle east oil struggle, America’s CIA agents, and the coup of the Iranian’s power to protect the company’s commercial interest in the country. After merging with Amoco, the group was known as BP Amoco albeit for only a while before reverting back to BP. While BP originally denotes British Petroleum , the company is transitioning its name to Beyond Petroleum to reflect its global reach and operation. </li></ul><ul><li>Sales = $281.03 billion, profits = $20.60 billion, assets = $236.08 billion, market value = $204.94 billion. </li></ul><ul><li>4. Total (France) </li></ul><ul><li>The French government was once approached by the Shell Group to be part of the company, but instead of agreeing for a partnership deal, the then Prime Minister, Raymond Poincare decided to form something original, and something French. Under his directive, a company by the name of Compagnie francaise des petroles, or CFP was founded in 1924 which was also made as a commercial tool in case of war. A number of mergers and acquisition ensued in the next few decades, before the company settling with its new name Total. </li></ul><ul><li>Sales = $199.74 billion, profits = $19.24 billion, assets = $165.75 billion, market value = $181.80 billion. </li></ul>
    69. 82. Largest <ul><li>1. ExxonMobil (United States) </li></ul><ul><li>The history of ExxonMobil stretches back all the way to the 19th century, through the inception of Standard Oil company founded by John D. Rockefeller. </li></ul><ul><li>From a small outfit, Standard Oil grew enormously until it was considered a monopoly, forcing the authority to split the company to 34 different companies. Exxon and Mobil are two of the resulting new entities, which in 1999 decided to merge in a so-called the biggest merger in history. Fortune also named ExxonMobil as the world’s most profitable company , ahead of Shell and General Electric . </li></ul><ul><li>Sales = $358.6 billion, profits = $40.61 billion, assets = $242.08 billion, market value = $465.51 billion. </li></ul>
    70. 83. Use page 32 -35 of Oxford text and 20-21 of PA text and produce a mind-map of the players in the oil game. Players: Cartels State controlled companies TNCs
    71. 84. Why do we care about OPEC oil? Who are the main players involved in the supply?
    72. 85. <ul><li>‘ Oil price soars as US woes mount’ </li></ul><ul><li>US unemployment has biggest rise in 20 years </li></ul><ul><li>Israel tried to attack Iran (world’s third largest oil supplier) </li></ul><ul><li>Nigeria’s oil production also fell by 25% due to militant action </li></ul><ul><li>Saudi Arabia was urged to increase supply to bring price down </li></ul>
    73. 86. OPEC <ul><li>OPEC is a permanent intergovernmental organisation consisting of oil producing and exporting countries </li></ul><ul><li>For nearly all- oil is ONLY export and is vital for their ECONOMIC and SOCIAL development </li></ul>
    74. 88. OPEC Member Countries : Country Joined OPEC Location Algeria 1969 Africa Angola 2007 Africa Ecuador(**) rejoined 2007 South America IR Iran* 1960 Middle East Iraq* 1960 Middle East Kuwait* 1960 Middle East SP Libyan AJ 1962 Africa Nigeria 1971 Africa Qatar 1961 Middle East Saudi Arabia* 1960 Middle East United Arab Emirates 1967 Middle East Venezuela* 1960 South America *founder Members ** Ecuador joined OPEC in 1973, suspended its membership from Dec. 1992-Oct. 2007
    75. 89. ‘ The economics of oil’ <ul><li>OPEC’’s objective is to coordinate petroleum policies amongst members </li></ul><ul><li>To ensure fair and stable prices for producers </li></ul><ul><li>An efficient economic and regular supply to consumer nations </li></ul><ul><li>A far return on capital for those investing in industry </li></ul><ul><li>OPEC was formed in 1960 to protect interests of oil producing countries </li></ul><ul><li>At the time oil in mid east was controlled by TNCs- who raised and lowered prices as they wished to do so. </li></ul><ul><li>In 1960 faced with a glut of oil prices were lowered- reducing taxes and royalties for oil producers so 5 oil producers came together and OPEC was formed- </li></ul>
    76. 90. <ul><li>The OPEC Statute stipulates that: &quot;any country with a substantial net export of crude petroleum, which has fundamentally similar interests to those of Member Countries , may become a Full Member of the Organization, if accepted by a majority of three-fourths of Full Members, including the concurring votes of all Founder Members“ </li></ul><ul><li>The Statute further distinguishes between three categories of membership: Founder Member, Full Member and Associate Member. </li></ul><ul><li>Founder Members of the Organization are those countries which were represented at OPEC's first Conference, held in Baghdad, Iraq, in September 1960, and which signed the original agreement establishing OPEC. </li></ul><ul><li>Full Members are the Founder Members, plus those countries whose applications for Membership have been accepted by the Conference. </li></ul><ul><li>Associate Members are the countries which do not qualify for full membership, but which are nevertheless admitted under such special conditions as may be prescribed by the Conference. </li></ul>
    77. 91. <ul><li>Some people say OPEC is a CARTEL (Association of producers or suppliers formed to monopolise the production and distribution of a product or service to control prices etc. In politics a cartel is an alliance of parties or interests created to further common aims) </li></ul>
    78. 92. OPEC’s role in energy supply: <ul><li>Sets oil production quotas (numbers) for members in response to economic growth rates and demand supply conditions. </li></ul><ul><li>If demand suddenly rises OPEC can increase production to prevent sharp price rises </li></ul><ul><li>It can also be reduced to maintain price if demand falls </li></ul><ul><li>Aims to get fair price for members without swamping the market or restricting it (forcing price up) </li></ul><ul><li>At the end of 2006 had proven reserves of over 900,000 million barrels of crude oil (nearly 78% of the world’s total reserves) </li></ul><ul><li>They produce about 45% of the world’s crude oil and 18% of its natural gas </li></ul>
    79. 96. Homework- Powerful players in the global supply of energy OPEC <ul><li>What is OPEC? </li></ul><ul><li>What are the aims of OPEC? </li></ul><ul><li>How much power does OPEC have? </li></ul><ul><li>What countries are not part of OPEC and why might they have chosen not to be a member? </li></ul><ul><li>Why could it be argued that both oil producing countries, benefit and suffer from OPEC? </li></ul><ul><li>Exam style question- </li></ul><ul><li>Assess the impact of OPEC on global oil supply and demand (10) </li></ul>
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