Friday, April 27, 2007

Is Saudi Arabia stealing Iraqi oil via the IPSA ?

I recently became interested in the theory that the Iraqi Saudi pipeline (IPSA) was being used by the Kingdom of Saudi Arabia to pipe Iraqi crude to the KSA to be sold as Arabian light crude. I found a good summation here. I think its fair to say that somebody at a refinery would spot the chemical differences between Basrah light & Arabian light from the start, even though they are of similar gravity and sulfur content.

Chang-Tai Hsieh and Enrico Moretti, of the University of California, Berkeley,......
As they point out, Iraqi oil, such as Basra Light, is a close substitute for Arabian Light.
Sourced here.

Refiners in India, China, South Korea, Taiwan and Japan see Basrah Light as a good alternative to Asia’s mainstay imports such as Saudi Arabia’s Arab Light

Sourced here

Additionally there is a wonderful graphic on page 5 of the pdf found here .

I then thought, what would prevent the KSA from piping Iraqi crude to its own refineries for domestic use, and can I find anything on the web concerning the IPSA. The IPSA appeared to be closed according to a number of sources, including the US State Dept, and the US Energy Information Administration. The State Dept presentation is dated January 25th, 2006 and it seems to contradict a number of other sources dated earlier that suggest the KSA portion of the IPSA was converted to Natural gas. What I do find strange is the exact same sentence is found at different websites. This of course infers a single source in the viral sense of the internet, though I was not able to track down what I thought might be the initial source.

In June 2003, Thamir Ghadban said that he hoped Iraq would be able to use the IPSA line again. However, the Saudis have stated that they are not willing to do this, having converted the line to carry natural gas to the Red Sea industrial city of Yanbu for domestic use.
Sources: the EIA, Senator Lugar's website, and World News Network.

Gerald Butt @ Alexander's, could be quoted differently

Saudi Arabia has said the section of the pipeline within the kingdom is now being used to transport natural gas and has ruled out its re-use as a crude conduit from Iraq.
Much of Saudi Arabia's natural gas production seems to come from the eastern part of the country, the offshore fields in the Persian Gulf and the NG associated with the Ghawar oil field.

The IPSA pipeline was intended to be a way for Iraq to export oil via the Red Sea port of Mu'ajiz, near Yanbu, during the Iraqi Iranian War. Yandu & is a major industrial city utilizing NG for energy. Considering the Saudi push to expand domestic NG production and use, it seems to make sense KSA would use the IPSA to move NG west to the Red Sea. Except that the IPSA doesn't appear to be the route of choice. If the IPSA is being used for NG, it could be fed from the Trans Arabian/Jordon pipeline, though a connection bewteen the 2 would have to have been built.

In Oct of 2002 Saudi Arabia did complete a $4billion natural gas processing plant at Hawiyah, near the middle of the 164 mile long Ghawar oil field. In 2004 a natural gas
processing plant was opened near Haradh, the southern tip of the Ghawar oil field. Natural gas production from these plants can free up significant quantities of crude for export.

In conclusion its not at all clear in my mind if the IPSA is being used, or what its being used for. With Iraqi oil production still below pre war levels one could argue that Iraqi oil is being pumped by the Bush Cheney faction in Iraq, to Saudi Arabia, for domestic use. As a favor to the Saudi's. On the other hand the Saudi effort to use NG domestically to free up crude for export could be argued as a model that fits into the assumed management scheme in the KSA, in light of declining crude reserves.

But why let an asset such as a pipeline sit unused for so long? I would offer that the IPSA is being used. Whether for stealing Iraqi crude, or to move the increased Saudi natural gas production, the IPSA is most likely being used.

EDIT: to include graph of KSA oil production

Note the increased oil production in the summer of '05. The Spike in the summer of '06 is new production coming online from the Haradh oil field. More important is the current overall trend of KSA production being in at least 8% decline.

Tuesday, April 24, 2007

Analysis: 2007 SS report: "We're good past 2085"

I'm sure you've seen the headlines recently, that Social Security will be broke by 2041. I also remember similar headlines after the Social Security Trustees report came out in 2004, I found the report online and read it. I realized a number of things about the doomsday year of 2042.

1) The 2004 Social Security Trustees report was predicated on not counting interest on the roughly 12 trillion in the various trust funds, represented by bonds.
2) The 2004 Social Security Trustees report relied on 1.8% growth in the GDP. To my eye 1.8% growth in GDP represents a "Mad Max scenario", an economic collapse on the order of the "Great Republican Depression" of the 1930's.
3) Apparently the 2004 Social Security Trustees report factored in the Boomer generation retiring and drawing checks from the system, but did not factor in what happens when the Boomers died.

My gut level assessment (not based on any actual economic knowledge) of the 2004 Social Security Trustees report was that assuming 3.6% growth in GDP, Social Security would be fine until 2062. Since it's not likely that many Boomers would be around in 2062 to collect checks, the big drawdown of funds would be over. The 2004 Social Security Trustees report was easy to navigate, easy to find the fine print. About an hour of poking around got me to all the details I sought. The 2007 Social Security Trustees report is a wee bit more complicated and not so easy to navigate. Never the less, I think I found the dirt in the details.

The 2007 Social Security Trustees Summary makes a most compelling statement:

Social Security could be brought into actuarial balance over the next 75 years in various ways, including an immediate increase of 16 percent in payroll tax revenues or an immediate reduction in benefits of 13 percent or some combination of the two.

And what data was used to come to this assertation? I found it organized here. Many of the interesting titles linked to huge charts that quite frankly were overwhelming. But slowly a picture of the basic assumptions behind the doomsayers words became clear. Looking at the "Principal Economic Assumptions" I noted that the Trustees had developed 3 scenarios, Intermediate cost, low cost & high cost. But which scenario was the one the trustees relied upon for their date of 2041?

Additional Economic Factors and Selected Economic Variables lead to some interesting information which could lead one to think the Trustees used some faulted economic assumtions, but these tables did not present to me, a smoking gun. I found what I was looking for, titled Estimated Trust Fund Ratios.

On the Estimated Trust Fund Ratios table I found where Social Security went broke in 2041. This was listed under the "intermediate" scenario. Looking at the "High Cost" scenario made things look worse, Social Security would go broke in 2030. While looking at the "Low cost" scenario showed Social Security would still be solvent in 2085.

I wish I had that audio clip from the Rachel Maddow show, the one where the prospecter shouts "Eureka"!

It is interesting to note that under Additional Economic Factors the "intermediate" scenario assumes GDP growth of 2% or under after 2020. While the "Low Cost" scenario assumed GDP growth of 2.5% to 3% in the outgoing years. IIRC the US has averaged 3% or 3.5% GDP growth over the last 100 years. While during the Clinton years the US saw growth in GDP between 2.5% and 4.4%.

If we don't get hold of our government, our future, this could get seriously bad. World oil production peaked in May of 2005, the global fish catch has peaked, all the easy to mine iron ore in the US was gone by by 1971, global warming needs to be reversed. If we don't provide solutions to these problems in the coming decade, it may be too late.

Sunday, April 22, 2007

Dr. Bussard: IEC Fusion, the future in a post peak oil world

Dr Bussard is the former Assistant Director of the US Atomic Energy Commission, he was the father of the US Fusion effort from the 1970's into the 1980's. Dr. Bussard went to Congress and pushed the fusion research programs in the 70's that developed the Tokamak design.

Dr Bussard now advocates a different design. For the last 11 years he has been working under US Navy contracts, building small test devices.

WB4 in 2003.

WB6 in 2005.

At the end of 2005, the Navy did not renew his contract. Since then Dr Bussard has given many lectures including the (famous in fusion circles) google tech talk of 2006. Video here:

DR Bussard was awarded the International Academy of Science Outstanding technology of the Year, award for 2006.

Why is this important? World oil production peaked in May of 2005. Dr Bussard says for 200 million he can build a proof of concept reactor by about 2011. The ITER reactor in Europe will be finished by 2013, and the concept may be ready for power generation by 2025. The ITER is slated to cost 13.3 billion. More importantly $3 million keeps Dr. Bussard working.

When the father of modern fusion tells you the Tokamak wont work, he bears listening to. Funny thing about fusion, it occurs naturally in a sphere (the SUN), just like Dr Bussards design. The ITER reactor will try to create fusion in a donut or torus, which doesn't happen in nature.

Heres an overview of Bussards recent work with some really cool pictures.

Dr. Bussard will be utilizing a non profit organization to continue his research. Please pass this link around.

Wednesday, April 04, 2007

Pelosi, while in Syria, encourages Syrian President to negotiate release of 15 sailors

While in Syria this Tuesday and Wednesday House Speaker Nancy Pelosi met with Syrian President Bashar Al Assad, encouraging him to step into the diplomatic void and use his good standing to seek the release of 15 British sailors held by Iran. Syrian Foreign Minister Walid Muallem spoke to British PM Tony Blair on the phone Wedenesday, seeking to bring an end to the crisis.

Last Wednesday at the Arab summit conference in Saudi Arabia, Syrian president Bashar Al Assad spoke with the Iranian foreign minister Manuchehr Mottaki about the 15 British sailors.

Syrian President Bashar Al Assad:

"This solution needs quiet diplomacy and Syria is now undertaking such quiet diplomacy between the two countries.

"We hope for a satisfactory solution that will lead to resolving the crisis of the British service personnel held captive in Iran."

GOP presidential hopeful Mitt Romney assailed House Speaker Nancy Pelosi on Wednesday:

``It's a very bad idea to be carrying out a separate and independent foreign policy from the president of the United States,'' Romney added. ``I just don't know what got into her head, to be completely honest with you. I think it was a huge, huge mistake.''

Families of the 15 sailors have not yet commented on Mr. Romney's statement.

House Speaker Nanacy Pelosi then flew to Saudi Arabia to meet with King Abdullah.

Beaking news:
Crude Oil Drops on Release of U.K. Sailors

At last check, the May crude oil futures contract was down 63 cents, or 0.97 percent at $64.01 per barrel after tagging an intraday low of $63.08. On Tuesday, the price of crude shed two percent as traders began to unwind the risk premium built into prices during the crisis.

Oh yeah, I almost forgot, Iranian Diplomat Seized In Iraq Returns Home

An Iranian diplomat detained in Iraq for the last two months has been released, returning Tuesday to Iran. Jalal Sharafi, who was the second secretary of Iran's Embassy in Iraq, was abducted in Baghdad on Feb. 4.