One hundred years of oil after

Umberto Mazzei

07/02/2013

Opinión

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The twentieth century was the century of oil, and the nineteenth century was the century of coal. The twentieth century international politics revolved around oil. Two world wars, that actually were one, are the axis of the century and the two sides are illustrative: United States, Britain, France and Russia, rich in oil, fighting Germany, Italy and Japan, without oil.

Oil consumption is linked to the invention of the combustion engine and its applications. Both things were invented in Europe, but it is in America, with the assembly line of Henry Ford, that production of cars and consumption of oil became massive.

The oil map one hundred years ago

The U.S. started industrial oil production. In 1859, Edwin Drake opened the first well in Titusville, Pennsylvania. Samuel Andrews put a refinery in Cleveland, then teamed up with Henry and John Rockefeller Flagger and founded the Standard Oil. Allied with the Vanderbilt’s railroads and through monopolistic practices, by 1880 it controlled 95% of the oil trade in the United States, which then produced 60% of the world's oil.

Tsarist Russia was the second largest producer, with 22%. The main company was Branobel, -owned by the Nobel brothers- which operated wells at Baku (Azerbaijan) in the Caucasus. In 1890 it built the first pipeline, to carry oil to its refinery that was afterwards transported by its tanker fleet. The company suffered several takeover attempts on the stock exchanges; the first from CBSPC, the Rothschild’s oil company in the Caucasus, the second from a group of British and Russian banks in 1914. Branovel’s big share of the European market caused Standard Oil harassment, with dumping and false rumours, to no avail. Eventually, Russians and Germans formed the Petroleum Europäische Union, to defend against Standard Oil.

Austria - Hungary was the third largest producer, with 5%. Oil was extracted from wells in Galicia, now in Poland. It had many small companies that accessed the European market by rail. Austria was the first country to change its locomotives to combustion engines. Vacuum Oil, a subsidiary of Standard Oil Company was registered as an Austro-Hungarian company and started dumping. In the Austrian oil industry employed 20,000 people and in 1910 the Viennese government intervened using its control on the railroads. An ironic turn of events, because the Standard Oil made its US monopoly controlling the railroads. Washington, pressed Vienna, although Vacuum Oil Company was legally an Austrian company.

Britain and the Netherlands, were allied in oil production. Since 1890, Royal Dutch Petroleum, exploited deposits in Indonesia. In 1900, Henry Deterding was appointed its president. Marcus Samuel, partner of the Rothschild, operated a company named Shell, which had 8 tankers in the area. In 1907 they associated and the Royal Dutch Shell was born, with a shell as a badge. Its area of activity was Southeast Asia and China, between 1909 and 1911, had a local trade war with the Standard Oil. This rivalry was to be spanned to the world; in Latin America it caused revolts in Mexico and the Chaco War, between 1932 and 1935.

Mexico came early into the oil world. In 1904, Edward Doheny, an American, won oil concessions there. In 1908 some were given to Weetman Pearson, an Englishman. In 1910, Mexico produced 14 million barrels a year. The rivalry between Doheny and Pearson is linked to the long civil war that began in 1911, which spilled rivers of Mexican blood. In 1914, a U.S. fleet landed at Tampico and occupied the oil zone. Oil rivalry harassed Mexico until Lazaro Cárdenas nationalized the industry, in 1937.

Iran entered the oil map in 1900, when the British William d'Arcy received a concession from Sha Mozaffaredin to explore 1,200,000 km2, for a royalty of £ 20,000 and a 16% on profits. In 1908, at Maidan-i-Naftun, d'Arcy found a lot of oil. The Burmah Oil and the British Admiralty put money in and founded the Anglo-Persian Oil Co. By 1911 there was an oil pipeline connecting the wells to a refinery in Abadan. The Anglo-Persian was nationalized in 1951 by Mohammad Mossadegh, but the CIA organized a coup d’Etat. The company returned in 1954, but it was so hated that had to change its name to British Petroleum.

Venezuela in 1917 was an agricultural country, with a two million population and exported one million bags of coffee and 20,000 tons of sugar. That year came the "Venezuelan Oil Concessions", a subsidiary of Shell, to explore the concession given to Antonio Aranguren. In 1921, came James de Rothschild, as a sponsor of Shell. In 1922 came several Standard Oil agents. Those visits produced a new mining law, with tax exemption for oil, a 10% tax on exports and a 7.5% royalty to the government.

"Mene", a Ramón Díaz Sánchez novel, tells how yellow fever, malaria and alcohol decimated oil workers. On December, 1922, in Cabimas, oil burst from the first well: Barroso II. By 1935 Venezuela was exporting 2.5 million tons a day - 10% of the world production- and crude oil was shipped to the refineries of Standard Oil in Aruba and Shell in Curacao.

In 1935, Eleazar Lopez Contreras became president and his Minister of Finance, Alberto Adriani Mazzei, imposed changes. He requested part of the tax in oil and to build refineries on Venezuelan soil, to end the practice of exporting cheap oil, collect the tax on that basis and import expensive gasoline. He imposed a rule to lodge workers in the oil fields. A bit later he was found dead, in a room at the Caracas Hotel Majestic, at age 38.

The oil map now.

A hundred years went by and changed the oil map. In 1911 world production was less than a billion barrels a year and now it is over 30 billion. Large private companies compete now with large national companies such as PDVSA, Aramco, Petrobras, PEMEX or YPF. Another striking change is that the Persian Gulf is now the region with the biggest oil production and we are now seeing the rise of Latin America.

The U.S. ceased to be an oil exporter during the 60’s and is now the largest consumer and the largest importer. Consumption reached 20.8 million bb / d in 2005 and fell to 19 million in 2011. U.S. crude oil production was 5,675 million bb/d in 2011. Between 2005 and 2011, imports reached 12.5 million bb/d and dropped to 9 million. Transport consumes 2/3, so there is an effort to make more efficient engines and increased use of agro-fuels, as did Brazil.

Saudi Arabia began producing in the 50s and in 1973 was already the largest producer, with about 8 million bb / d. Their sites are vulnerable, being few and large, contiguous and near the coast. The seven largest are: Ghawar, Safaniya, Abqaiq, Berri, Marjan, and Abu Zuluf Sa'fah. The first two produced 75% of the total. Saudi Arabia is the wildcard that reached 12 million bb / d, at the request of Washington, to lower prices in 1980.

Saudi Aramco gives very little data on their wells, but at oil conferences, its engineers speak of very sophisticated methods for recovery, which is indicative of problems. The Saudis were unable to replace the 1.65 million bb/d from Libya in 2011, as agreed with NATO and that it would not be able to replace Iranian oil.

Iraq and Kuwait are British inventions. Under the Turks there were three entities in that area. Iraq was the third largest producer in OPEC, but with the 2001 invasion production fell from 2.4 million bb / d to 1.3. Only in 2011 was it able to reach its previous level. Iraq oil reserves place it in fourth place, with 112 billion bb.

Nigeria began to produce oil in 1958 and is now a major world producer, with 2.5 million bb/d in 2011. Gas exploitation also has great potential. Its large deposits are all in the Niger Delta. The problem of Nigeria is the poor distribution of oil revenues which causes violence and lack of control which causes ecological damage.

Russia, in November 2012, broke its previous record in post-Soviet production with 10.5 million bb/d. Gas production reached 42.5 billion cubic meters. Since 2009, Russia displaced Saudi Arabia as the world's leading producer. European economic adjustment made exports to fall by 1.3% to 5.12 million bb/d.

Latin America is on its way to making MERCOSUR the world leading producer. New deposits that increase proven reserves, the capacity to use the best technologies and the decline of Saudi Arabia, is pointing in that direction.

Brazil was rather weak on energy resources during the 80’s and imported Nigerian oil. It then reinforced its energy independence with agrofuels. In 2007, Petrobras discovered huge deposits in Bahia de Santos, on the continental shelf, at 200 and 300 kms. offshore. The one at Tupi went into production in 2011 and has 8 billion bb in reserve. In 2012 it drilled another 3 wells in that area. Brazil already produces 2 million bb/d and Petrobras has proven reserves of 16 billion, but those at Bahia dos Santos are estimated at 123 billion bb.

Venezuela is the fifth largest oil exporter with 3 million bb/d in 2011. It has now the largest proven reserves in the world, with 296 billion barrels. Its exports are growing and destinations diversifying. Its main client is the US, but exports to China reached 640 bb/d in 2011. Being now part of MERCOSUR and its PDVSA association with Petrobras and Argentina’s YPF will focus Venezuela to the south and consolidate MERCOSUR’s energy independence.

Argentina reconfirmed its energy self-sufficiency with the return to state control of the national company YPF. The near economic collapse of Great Britain will improve its access to the continental shelf around the Falkland Islands, where oil is thought to be found.

Bolivia and Ecuador have already applied for admission to MERCOSUR. Their membership can be taken for granted and both are important oil and gas exporters, so their contribution will make MERCOSUR an energy giant.

Conclusion. Energy is the comparative advantage that in the twenty-first century will boost economic development and political independence of all the countries of UNASUR.

Geneva, 04/12/2012

https://www.alainet.org/es/node/164479