Tompkins County Relocalization Project

[Tompkins County Relocalization Project <tcrp-news AT lists.ibiblio.org>]

Hello TCRP observers,

It's surprising to have two more TCRP news items to report so
soon, but there you are.

Item one (courtesy of Eric Banford) is the appearance of the TCRP
on LiveJournal:

   http://www.livejournal.com/community/peak_oil/218957.html

Unfortunately, this thread demonstrates a tendency (which I
already saw in a couple of early responses) to assume that
"Tompkins County Relocalization Project" is an initiative of
county government.  I'll have to put something on the web page to
discourage this interpretation.

The good news is that the concept of "county relocalization" is
starting to demonstrate some of the characteristics of a meme (see
http://en.wikipedia.org/wiki/Meme), which I was sort of hoping
might happen.  If we can get people to spontaneously begin
planning on the county level, maybe it won't matter that our
larger government bodies are determined to ignore the problem.

And speaking of larger government bodies, here's the second item:
a story in the Business section of today's New York Times in which
it's finally reported that Saudi Arabia does not, in fact, have
the ability to expand oil production -- just as independent
analysts such as Matthew Simmons have been maintaining for some
time now.  This is important because the supposed spare Saudi
production capacity has been the basis upon which the current
administration has been denying that we're facing an imminent
crisis.

   http://www.nytimes.com/2005/10/27/business/worldbusiness/27oil.html

The text of the article is copied below for people who run into
problems accessing the NYT site.

Jon

==================================================================

New York Times
October 27, 2005
Doubts Raised on Saudi Vow for More Oil
By JEFF GERTH

WASHINGTON, Oct. 26 - Last spring, the White House publicly
embraced plans by Saudi Arabia to increase its oil production
capacity significantly. But privately, some officials and others
advising the government are skeptical about some of those Saudi
forecasts.

The United States relies on a few producers to maintain enough
spare capacity to keep prices and markets stable, even during war
or disaster. As oil prices have climbed over the last few years
amid surging demand and tight supplies, the Bush administration
has looked to the Persian Gulf countries, particularly Saudi
Arabia, to pump extra oil.

But doubts about Saudi Arabia's assurances of how much it can
expand capacity - and for how long - have been raised in a secret
intelligence report and in a separate analysis by a leading
government oil adviser, according to a federal government official
and the oil expert.

If those skeptical assessments are correct, the administration's
hopes of increasing supplies would become still more difficult to
fulfill. Washington's expectations about oil production from Iraq
and the United Arab Emirates have proved overly optimistic, and
the White House has failed to heed advice about both those
countries from industry and government specialists, according to
documents and interviews.

The challenges facing the Bush administration on energy come as
oil companies are set to report record profits resulting from
soaring prices for oil and natural gas. Exxon Mobil, the world's
largest private oil company, is expected Thursday to announce a
quarterly profit exceeding $8.5 billion, more than companies like
Intel and Time Warner earn in a full year.

Asked about the profits on Wednesday, the White House press
secretary, Scott McClellan, said "the government and the private
sector have a role to play" in restoring the vital infrastructure
damaged by the hurricanes this year along the Gulf of Mexico and
over Florida. Gasoline prices spiked after Hurricanes Katrina and
Rita, straining oil markets already tight because of the
uncommonly low levels of spare capacity.

But when it comes to oil supply, American companies are limited:
the countries that control most of the world's oil keep out
private producers. So whatever the political repercussions from
high energy costs, the administration has had little choice but to
rely on the promises by Saudi Arabia, the world's largest
exporter, that it would continue to be the market's linchpin.

"There's always been this tenet on the American side," said Nawaf
Obaid, a consultant to Saudi Arabia on energy security, "that the
Saudis knew what they were doing and rightfully so."

But a senior intelligence official, who insisted on remaining
anonymous because he was not permitted to speak publicly on the
issue, said that the Saudi plans to increase production by nearly
14 percent in the next four years were not enough to meet global
demand. Even the Energy Information Administration recently scaled
back its expectations of how much more oil the Saudis could pump
in 20 years.

To be sure, as Mr. McClellan said Wednesday, there is more to
President Bush's energy policy than seeking to ensure surplus
capacity. The administration has called for increasing domestic
production and refineries, development of alternative and
renewable fuels, expanding nuclear energy and, recently, greater
conservation. Still, the Persian Gulf countries are seen as
crucial in moderating future prices.

During the 2000 presidential campaign, when high gasoline prices
were an issue, Mr. Bush pledged to do a better job of influencing
Persian Gulf producers to pump more oil.

Early on, the administration was mostly interested in whether the
Saudis would produce more oil during the anticipated conflict in
Iraq. Long before the war began, Saudi spare capacity - roughly
three million barrels a day above the seven million barrels being
pumped daily in 2002 - seemed adequate.

Productive capacity depends on the amount of oil in the ground as
well as the infrastructure required to drill, process, store and
transport the oil. In addition, increasing capacity is very costly
and time-consuming.

"The long-term capacity was not considered a problem," said Robert
W. Jordan, the American ambassador to Riyadh from 2001 to
2003. The Saudis, he added, "never expressed any concern about the
need to expand."

"Nor did we, or at least me, engage them on this topic," he said.

In April 2002, when President Bush met Crown Prince Abdullah, now
the Saudi king, the focus was not on oil but on
Israeli-Palestinian matters, according to Mr. Jordan. The United
States did not press the capacity issue because, even two years
later, Saudi officials were publicly expressing confidence that
there was no need over the next five years to add capacity.

Going to 12 million or 15 million barrels a day was possible,
though, because the country had an estimated 150 billion barrels
above the 260 billion in proven reserves, Nansen G. Saleri, a
senior Saudi oil executive, said at an oil conference in
Washington in February 2004.

Soon, though, rising demand from Asia made the need to invest in
new production "a front-burner issue," according to Spencer
Abraham, energy secretary in the president's first term. By May
2004, under pressure from the United States and other consumers,
the Saudis promised to pump more oil. Saudi Aramco, the
state-owned oil company, was planning to increase capacity to 12.5
million barrels a day by 2009.

Before long, Ali al-Naimi, the oil minister, and Saudi oil
executives were saying that the country could add 200 billion
barrels - from existing fields and yet-to-be-discovered resources
- to its reserves, enabling production of 15 million barrels a day
for 50 years or perhaps longer.

Just before meeting with Prince Abdullah in April, President Bush
said he wanted "a straight answer" about how much extra oil the
Saudis could pump.

At that session in Texas, the prince reaffirmed the previously
announced expansion plans. Saudi Arabia's capacity now stands at
about 11 million barrels a day. The Saudis pump about 9.5 million
barrels, leaving a cushion of about 1.5 million barrels, mostly of
heavier grades not very usable in the West. There is virtually no
other global spare capacity.

Stephen J. Hadley, the national security adviser, told reporters
after the meeting that the Saudi program was "a very good plan
because it addresses the underlying issue you have when you talk
about price, which is an issue of availability of oil and
availability of capacity."

But there are doubts about the Saudi assertions about how much oil
they have. Data about reserves is tightly guarded, and the Saudis
dismiss skeptics as uninformed.

But they do not dismiss Edward O. Price Jr., the former head of
exploration for Saudi Aramco and an adviser to the United States
government on Persian Gulf oil during both Iraq wars. He
questioned future reliance on Saudi capacity in an article in The
New York Times last year and wanted to know from his former
colleagues how they reached their estimate of more than 150
billion barrels of extra oil. Twenty years ago, a detailed study
by geologists from four large American oil companies then in
partnership with Aramco found little in the way of undiscovered
oil resources, he said.

Mr. Saleri, who manages Saudi reservoirs, met with Mr. Price in
the United States last year. Saudi Aramco officials declined to
respond to questions about the meeting. But Mr. Price said in an
interview that Mr. Saleri told him that the basis for the higher
oil figures was a global study in 2000 by the United States
Geological Survey estimating Saudi Arabia's undiscovered resources
at 87 billion barrels.

Mr. Price said he responded that the estimates "by the
U.S.G.S. had no credibility and far exceeded the detailed studies
by the old Aramco team." The Aramco study, unlike the survey
estimate, involved detailed field work.

Questions about Saudi Arabia's long-term estimates were also
raised last year in a report by the National Intelligence Council,
an advisory panel that produces the government's most
authoritative intelligence estimates, according to a government
official who insisted on not being identified because the report
was classified.

In addition to Saudi Arabia, the Bush administration has viewed
the United Arab Emirates as a supplier with excess capacity. In
2001, the emirates planned to increase capacity to 3 million
barrels a day by 2005 from 2.5 million barrels a day then. But
capacity has not grown in four years, which one administration
official attributes to a lack of urgency by emirates officials and
a lack of high-level attention by American officials.

An energy policy report by Vice President Dick Cheney in May 2001
recommended that the president actively support initiatives in
Persian Gulf nations allowing foreign investment that could lead
to increased production. The United Arab Emirates was cited as one
of the few countries that could increase its oil-production
capacity.

A status report on Mr. Cheney's task force, released in January by
the Energy Department, said administration officials moved to
carry out the recommendation in four countries. The U.A.E. was not
among them, however, and the president was not mentioned in the
report.

When Mr. Bush spoke after the Iraq war with Sheik Zayed bin Sultan
al-Nahayan, the emirates' ruler until his death late last year, he
discussed security and Iraq, not oil investment issues, according
to a Western diplomat, who spoke on condition of not being
identified because of the sensitive nature of discussions between
heads of state. A White House spokesman declined to comment.

Since the status report in January, the emirates announced that
they would increase capacity to 2.7 million barrels a day by 2006,
and long-stalled negotiations with Exxon Mobil to develop an
offshore field began moving to completion. But the country's
capacity remains at 2.5 million barrels a day, with nothing in
reserve, according to the Energy Information Administration.

In Iraq, too, the Bush administration's hopes have been
disappointed. The removal of Saddam Hussein in 2003 changed Iraq
from a pariah into a possible backstop for global oil
markets. Soon after the invasion, top administration officials
were bullish about Iraq's production: they said it would exceed
the prewar level of 2.5 million barrels a day and reach 3 million
barrels by the end of 2003 or late 2004.

But a report in July by the Government Accountability Office found
that Iraqi production had declined since late 2004 to 2.1 million
barrels a day from 2.5 million barrels, despite White House
legislative requests for almost $3 billion to restore the oil
industry there to its prewar abilities.

An important reason for the decline, the report found, was
improper management of the reservoirs. Gary Edson, then a deputy
national security adviser, was told two years ago that Iraqi
production would drop, not increase, according to an outside
report presented to him.

A White House spokesman, Frederick Jones, declined to discuss the
report. But, according to Wayne Kelley, a petroleum engineer who
wrote the report and discussed it with Mr. Edson in November 2003,
the message fell on deaf ears.