Blood of the Earth

Title: Blood of the Earth – The Battle for the World’s Vanishing Oil Resources

Author: Dilip Hiro

Publisher: Penguin 2008 (First published 2007)

ISBN: 978-0-14-310401-8

Pages: 379

Dilip Hiro is a renowned author who writes fiction as well as non-fiction and selects middle-eastern issues frequently. Oil is also a predominantly middle-eastern issue which affects all parts of the globe. Whatever happens in that strife-torn area, is bound to vigorously shake the lives of people even living in far remote areas. A good example is the pro-democratic struggle going on in Libya. The people, fed up with a dictator who reigns over them for the last four decades are desperate to get rid of him at all cost, as seen by deaths of hundreds of protestors. Libyan oil is now blocked and it has pushed up the price much above $100 a barrel. This book is a compendium of petroleum which is also called the blood of the earth. It covers the origins, identification of utility, usage and the critical influence of oil in contemporary world. Geopolitics is more or less shaped by the subtle swings of power oscillating between the oil-haves and oil-have-nots. The sole superpower in the world is itself impotent to rein in the predatory attitudes of petroleum producers who have no compunction in boosting up the price of their commodity to sky-high levels.

Commercial oil production began in mid-19^th century at Titusville, Pennsylvania in the U.S. Digging of oil wells picked up momentum soon after in Texas and Azerbaijan in central Asia. It may be curious to note that the first commercial oil well in Asia was dug at Digboi, India. Most of these first-generation wells have now been dried up and the fields themselves give diminishing returns. The average yield of American wells is 10 bpd (barrels per day) whereas the figure runs into thousands of bpd in Qatar for typical wells. Oil was first struck at Iran and then in Saudi Arabia by 1930s. The oil boom which occurred after World War II ended the coal era once and for all.

Petroleum originated in the deep bowels of earth by a process spanning several millions of years. Dead algae and planktons sink downwards to the bottom of the ocean and forms a layer. Over millions of years, this carpet hardens into nutrient rich rock called Kerogen shale, a mixture of compounds with large molecules containing carbon and hydrogen. The high pressure and temperature obtaining at depths of 2300 – 4600m, often reaching 100 – 135 deg C cooks the shale further. The high temperature breaks down the heavy molecules to smaller molecules of oil and gas. Oil is ideally seen at depths of 2300 m, below which the occurrence of gas is more probable. It is very crucial that the lighter than air gas is not bubbled off back onto the surface. Deposits of salt and anhydrous calcium sulphate left behind by receding seas act as perfect seals as seen in the mega oil fields of Kuwait and Saudi Arabia. The quality of the crude is different based on the composition and it is graded into degrees between 15 and 45 defined by the American Petroleum Institute.

The output from an oil well follows a bell-curve, first proposed by M King Hubbert, a U.S. geologist. This indicates a peak in the production, beyond which it dwindles. It is expected that the world would experience the peak in somewhere in this decade. Even super giant oil fields like Burgan in Kuwait and Ghawar in Saudi Arabia are showing signs of fatigue. OPEC will continue production until peaking around the year 2025. Non-OPEC production will be seriously affected by shortfalls and those countries are likely to depend on OPEC in the coming years. Development of new technologies are essential for these nations to take out the remaining oil from underground.

Oil is undeniably interlinked to world politics. Oil replaced coal for transport in the beginning of 20^th century. In 1912, Britain, a large producer of coal moved to oil-fuelled warships for their efficiency, speed and better capacities. The Anglo Persian Oil Company (APOC) was formed to prospect for oil in Iran. Once its efforts proved successful, the British government procured majority stake in it. One of the deciding factors in favour of Allied forces during the World War I was the naval blockade of Germany which cut off its oil supplies. The inter-war period was notable for locating oil in Iran and Saudi, and also for Mexico nationalizing its oil production capability in 1938. The second world war was also motivated in part due to oil ambitions of the players. Japan, themselves bereft of any local oil, coveted the resources of Indonesia while fearing U.S. intervention. To temporarily disable the Americans, they made a pre-emptive strike at Pearl Harbour in 1941, thus setting in motion a disastrous trail for themselves. Germany’s attack of the USSR was a twist in the European front affecting the outcome in the end. Russia had occupied a large portion of Romanian oil fields and it was to release these facilities and also to annex the Azerbaijan oil fields that Hitler turned against his former friends and allies, again with tragic consequences. Hitler intended to take hold of middle-east oil by pincer movements from Azerbaijan and North Africa. U.S. befriended ibn Saud to exclude British companies from the kingdom. An informal agreement was arrived upon by which Saudi oil was taken by U.S, Iranian oil by the British and the rest, by mutual sharing. Attempts at nationalization of oil resources by Iranian premier, Mohammed Mussadiq was foiled by the CIA and MI6 in their first ever operation against a democratically elected regime. During 1958, Soviet Union appeared as a contender for the western oil companies. To outsmart the Russians, western oil companies slashed the prices considerably, which affected the economies of middle-eastern states. OPEC was formed in 1961 to prevent such happenings in the future and it mandated the companies to consult with the governments in fixing the price and production rates. The 1967 and 1973 wars against Israel and Arab states infuriated the latter who shut off the oil. Prices boomed five-fold from $1.37 to $7 per barrel, shaking the western civilization itself at its roots. The second oil shock in 1979-80 following the Islamic revolution in Iran was another reminder for the west to seek alternate sources for energy needs.

Oil is traded in major exchanges like the New York Mercantile Exchange (NyMex – called WTI, West Texas Intermediate), Rotterdam spot market and at London Petroleum Exchange (Brent Crude). Futures trading began in 1983 which helped stabilize the markets and undermined the price setting power of OPEC. Gulf War and the competition among Arab states slashed the price of oil in 1985-86. After the war ended, Kuwait asked Iraq to return $12-14 billion it had received from Kuwait in the form of oil it supplied to Baghdad’s customers during the war. Saddam Hussein refused, claiming that the war with Iran was for the common benefit of other Arab states and they had a responsibility to share costs. An infuriated Kuwait began flooding the market with cheap oil, cutting the price from $18 to $11 in 1990. A cut of $1 in the price of oil would diminish the Iraqi economy by $1 billion. Saddam invaded and annexed Kuwait in 1990. He then controlled 20% of the world’s proven resources as against 26% of Saudi Arabia. U.S. intervened and after 43 days of one-sided operations, Iraq conceded defeat with an estimated damage of $190 bn to its infrastructure. The urge to control Iraq’s oil directly prompted U.S. to invade Iraq and deposed Saddam in 2003.

The imperative to find alternate sources of oil led to a scramble for oil fields in the 90s. Fresh reserves were identified in Azerbaijan, Caspian sea and Kazakhstan. Under U.S. pressure a giant pipeline was laid from Baku in Azerbaijan to Ceyhan port in Turkey through Tbilisi in Georgia, called BTC pipeline. Kazakh oil was later linked to the pipeline. American and Chinese companies are vying with each other and with Lukoil and Gazprom of Russia for Kazakh oil. China has adopted oil and other resources as articles of state policy and has agreed into trading agreements with African nations such as Angola, Nigeria and Sudan. Latin American countries like Brazil and Bolivia are rich in oil, but their consumption is fast rising to negate the chances of exporting it. Venezuela is an oil-rich state, which openly oppose American interests and engages in subsidized supplies to the poor, even in U.S! Oil demand surged, as China became a net importer of oil in 1993 because of its economic takeoff. Its companies reached pacts with oil producers worldwide. First oil well in India was found in 1867 at Nahorpung, while laying rail lines from Calcutta to the tea estates of Assam. Bombay High, developed in 1974 caters to one-thirds of Indian output. Private companies are also involved in oil exploration now.

It is imperative for the world to look for alternatives for oil. Natural gas is a good option, but that too is produced by the same cartel as oil. Russia, Qatar and Iran are the major players. Nuclear power is an option which was relied upon less and less by the west after the incidents at Three-mile Island in 1979 and Chernobyl in 1986. India and China are investing in more nuclear power plants. Another older option is coal, of which India and U.S. has reserves lasting for two centuries. The biggest drawback of coal is the pollution it engenders which can be alleviated by the technology called IGCC (Integrated Gasification Combined Cycle) which generates syngas from coal. Price is costlier, but the technology is very clean. Conversion of coal to oil is possible with a conversion ratio of 1.5 barrels of oil for 1 ton of coal. The method is economical only if oil price stays above $35 a barrel (2005 values).

Divorcing the internal combustion engine from automobiles is a prime consideration for bringing down the consumption of oil. There have been steps in the right directions in the form of hybrid vehicles like Toyota Prius. Judging from the present trends, it is likely that fuel cell-powered vehicles would become the norm of the future, perhaps as early as 2050. Production of hydrogen for use in fuel cells is to be boosted up. Wind energy is a very viable alternative with Germany in the world leadership, producing 10% of their total power from wind. India is vying to catch up with a proposed 1000MW wind field near Mumbai.

The book is quite easy to read, the style being simple and uncluttered. The author has introduced a ‘petroleum alphabet’ for driving home the point that oil has become an inalienable aspect of modern life. Some very interesting quotations are included, the star of them being the one said by Sheikh Ahmad Zaki Yamani, a former oil minister of Saudi Arabia – “The Stone Age did not end for lack of stones, and the oil age will end long before the world runs out of oil”. A fine set of maps are given in the first section and an equally good chronology at the end. The book is graced with an index, thought it seemed not comprehensive. When looked for finding IGCC in the index, it drew a blank, though the term is repeated 4-5 times in the text.

On the negative side, the life sketches given about persons as they are introduced seemed to be boring and beside the point. It was felt that the reader need not know that Hubbert was a puffy-faced man who appeared in one or two pages. These were uninteresting and diluted the focus of narration. Also, the chapters on India and China was not at all concentrated on the oil aspect. It simply described the amazing economic progress achieved by these countries in the first decade of the new century and as such, the description would have suited any book on contemporary financial matters. Needless details are given, and it may safely be assumed that the description could have been compressed into 2-3 pages. Altogether, the writing though simple, is more often uninteresting. In the end, the reader is likely to end up with a feeling that the author has wasted an opportunity to bring such a time-relevant concept as petroleum. Another serious drawback is the lack of technical depth of the book. The author could have come up with a little more detail of the exploration, drilling and refining of crude oil. As such, there are no such details, spoiling the utility of the book.

The book is recommended.

Rating: 3 Star