Syria, Iraq, Iran, Turkey, Russia -- Pipeline -- and the Kurds -- Nothing To Do With The Bakken

This is truly a story that has huge implications, and helps understand some of the "dots" in the Syrian war.

Deep beneath "Damascus volcano" and "the battle of Aleppo," the tectonic plates of the global energy chessboard keep on rumbling. Beyond the tragedy and grief of civil war, Syria is also a Pipelineistan power play.

More than a year ago, a $10 billion Pipelineistan deal was clinched between Iran, Iraq, and Syria for a natural gas pipeline to be built by 2016 from Iran's giant South Pars field, traversing Iraq and Syria, with a possible extension to Lebanon. Key export target market: Europe.

During the past 12 months, with Syria plunged into civil war, there was no pipeline talk. Up until now. The European Union's supreme paranoia is to become a hostage of Russia's Gazprom. The Iran-Iraq-Syria gas pipeline would be essential to diversify Europe's energy supplies away from Russia.

It gets more complicated.

Turkey happens to be Gazprom's second-largest customer. The whole Turkish energy security architecture depends on gas from Russia - and Iran. Turkey dreams of becoming the new China, configuring Anatolia as the ultimate Pipelineistan strategic crossroads for the export of Russian, Caspian-Central Asian, Iraqi and Iranian oil and gas to Europe.

Try to bypass Ankara in this game, and you're in trouble. Until virtually yesterday, Ankara was advising Damascus to reform - and fast.

Turkey did not want chaos in Syria. Now Turkey is feeding chaos in Syria. Let's examine one of the key possible reasons.

Go to the link to see how the Kurds fit into all this. I hope this linked story does not go into archives. It is a very, very interesting story. 

Wow, Can You Imagine Living In The Mideast Today?

Updates

October 12, 2012: FT - Turkey steps up military presence along Syrian border

Turkey has increased its military presence along its 900km border with Syria, scrambling jets and dispatching scores of tanks in the continuing face-off between Ankara and Damascus. 

Two fighter aircraft flew along a stretch of the border after a Syrian helicopter bombed the nearby Syrian village of Azmarin, while Turkish media reported that up to 250 tanks were in the border area.

October 12, 2012: WSJ, page A13, editorial -- Turkey's Dangerous Assad Dilemma;

The Sunni-Schiite schism stretches from Iran and Iraq to Syria and Hezbollah's reign in Beirut, versus a Sunni bloc from North Africa to the eastern Mediterranean, clustered around Turkey, Egypt, and Saudi Arabia.

Syria is the prize, and the epicenter, of this contest. Hard as Mr Erdogan (Turkey's prime minister) would try to keep the struggle for Syria within tolerable bounds, the cruelty of the civil war there would overwhelm his policy. He had pledged himself to the removal of Assad, but the dictator had not obliged. Nor had Washington -- particularly President Obama, obsessed with self-preservation -- been the ally Mr Erdogan had hoped for.

October 11, 2012: WSJ, page A10 concurs -- Syrian conflict grows on two fronts  -- Turkey forces Damascus-bound plane to land; American sends troops to Jordan


October 10, 2012: Nobel peace prize winner sends US troops to Jordan.

The revelation of U.S. military personnel so close to the 19-month-old Syrian conflict suggests an escalation in the U.S. military involvement in the conflict, even as Washington pushes back on any suggestion of a direct intervention in Syria.  

October 9, 2012: pipelines from Iran and Iraq to Turkey are blowing up. Mysteriously.

October 8, 2012: Israel launches airstrike over Gaza after rockets from Gaza hit Israel; supposedly hits a mosque; Israel says Iran 2 - 4 months from "path to nuclear weapon"; 

October 8, 2012: Turkey shells Syria for sixth day. Turkey president says worse case scenario playing out in Syria; Turkey will do what it takes to protect itself. 

October 6, 2012: In the original post, I mention the 3:00 a.m. phone call from Libya that "we" all slept through. The rank-and-file in the intel community is starting to rally behind their immediate leadership: the White House simply did not respond to the Libyan threat -- either a mistake or on purpose.

The Drudge Report says the White House is starting to point fingers; maybe/maybe not, but the administration is now trying to get its story straight. Maybe this is the story that should air two days before the election rather than the documentary on the Bin Laden mission. For which Michelle and Barack were given credit, not the intelligence community.

It will be interesting where this story ends: an opportunity for a Pulitzer Prize if any reporter is interested. It should not be too difficult to find off-the-record, anonymous sources from the intel community. Look for some "leaked" e-mails.

Original Post

A regular talking head says Iran is ready to implode; sanctions taking a toll. He says governments topple due to inflation, riots in the streets. He failed to mention that before a government fails, they often do very rash things.

Iran leadership has said Israel's days are numbered. The US official position on that (if the president represents official position): Iran's posturing is just "noise."

Then, in the last hour or so, we get news that Turkey has authorized military action INSIDE Syria. Maybe it's just me, but there's something scary about a NATO country authorizing military action inside a non-NATO country. Just saying.

With all the internal problems Syria has at the moment, it's hard to believe that Turkish military action could be the catalyst for regime change. It's hard for me to believe that Russia will idly stand by and let that happen.

In the grand scheme of things, I do believe Syria has a closer relationship with Russia than with the United States. In the grand scheme of things, I do believe Turkey has a closer relationship with the United States than with Russia.

This will be interesting to follow.

Of course, we all know what happened in Libya when the 3:00 a.m. call came in and we were sleeping. I think about that when I connect the stories above and haven't heard anything from Saudi Arabia. I doubt the princes are unaware of what's happening in their neighborhood.

And Egypt isn't exactly quiet. Wow, Israel has to be watching events in Syria very, very closely. And Egypt on its west. And Iran. This is not good.

This is simply idle chatter, just thinking what it must be like to be living in the Mideast these days. It has  to be very, very interesting.

Keep This On Your Radar Scope: Saudi Arabia

I've talked about this before. "Arab Spring" keeps moving toward Saudi Arabia. Many of the articles have been in Mideast media with agendas. This story is in CNBC.

Saudi Arabia has gone on the offensive against Iran to protect its interests. Its involvement in Syria is the first battle in what is going to be a long conflict that will know no frontiers nor limits.

The Saudis are convinced that Iran is directing the protests and fear that the problems will spill over the 25-kilometer long COSWAY into oil rich Al-Qatif, where the bulk of the Saudi Arabia's Shia are concentrated. So far, the Saudis have not had to deal with demonstrations as serious as those in Bahrain, but success there could encourage the protestors to become more violent.

The customary manner of dealing with a problem by the patriarchal regime is to bury it in money. King Abdullah announced at the height of the Arab Spring that he was increasing the national budget by $130 billion to be spent over the coming five years. Government salaries and the minimum wage were raised. New housing and other benefits are to be provided. At the same time, he plans to expand the security forces by 60,000 men.

Go to the link for update on the Shia Crescent.

Some random data points:

• Saudi Arabia increased spending on its citizens: a) it will never be enough; b) religious zealots are not interested in money; and, c) those two (a) and (b) are not connected.
• Muslim Brotherhood is "taking over all" of Egypt
• Muslim Brotherhood is anchored in the Sunnah (Sunnis)
• Saudi state religion: Sunni; the Shia sizeable minority
• Egypt is going to need cash, and a lot of it, to keep the revolution going

Arab Spring.

OPEC Spare Capacity in 1Q12: Lowest Since 2008

Updates

May 26, 2013: Internal clash in OPEC over American shale oil production. Nigeria has a huge concern. 

October 7, 2012: it is now generally agreed that Venezuela has passed Saudi Arabia in proven reserves; if accurate Venezuela is now #1 in the world for proven reserves;

According to studies, Venezuela has overtaken Saudi Arabia to become number one in the world for proven oil reserves, largely thanks to the heavy crude found in this vast alluvial plain.

According to a report this year by BP, Venezuela has reserves of 296.5 billionbarrels, about 10% more than Saudi Arabia and 18% of the global total. At the country's current levels of production, this would last about 100 years.  

Original Post

Independent Stock Analysis alerted me to this little gem.

The U.S. Energy Information Administration (EIA) estimates that global spare crude oil production capacity averaged about 2.4 million barrels per day (bbl/d) during the first quarter of 2012, down about 1.3 million bbl/d from the same period in 2011 (see chart above). The world's spare crude oil production capacity is held by member countries of the Organization of the Petroleum Exporting Countries (OPEC). There is little or no spare capacity outside of the OPEC member countries.

Spare crude oil production capacity is now less than 3% of total world crude oil consumption—the lowest proportion since the fourth quarter of 2008—based on EIA estimates. 

Link here to the full story. 

Regular readers know this fits my worldview. See Forbes/Sosnoff one year ago. Shell's John Hofmeister may not get the exact price point, but he's got the right trend, the right worldview.

There may be a reason Saudi is stockpiling 80 million bbls of crude offshore. 

Huge thanks to ISA.

Eerily Quiet in Tel Aviv -- Nothing About the Bakken

Updates

May 28, 2012: Netanyahu blames Iran for mass killings in Syria.

Original Post

Speaking of the biggest IPO in history (which we weren't, but are now), Facebook friends will have a lot to discuss when Israel visits Iran.

From the second linked story:

As the deadline for a decision draws nearer, the public pronouncements of Israel's top officials and military have changed. After hawkish warnings about a possible strike earlier this year, their language of late has been more guarded and clues to their intentions more difficult to discern.

"The top of the government has gone into lockdown," one official said. "Nobody is saying anything publicly. That in itself tells you a lot about where things stand."

Last week Netanyahu pulled off a spectacular political surprise, creating a coalition of national unity and delaying elections which everyone believed were inevitable. The maneuver also led to speculation that the Israeli leader wanted a broad, strong government to lead a military campaign.

The inclusion of the Iranian-born former Israeli chief of staff and veteran soldier, Gen. Shaul Mofaz, in the coalition, fuelled that speculation - even though both Mofaz and Netanyahu deny that Iran was mentioned in the coalition negotiations.

"I think they have made a decision to attack," said one senior Israeli figure with close ties to the leadership. "It is going to happen. The window of opportunity is before the U.S. presidential election in November. This way they will bounce the Americans into supporting them."

There's a reason Saudi is stockpiling 100 million bbls of oil off-shore.

• Saudi's stockpiles continue to grow, May 8, 2012

Biggest Mideast Story of the Day -- Nothing To Do With The Bakken

Updates

May 10, 2012: Another report that US President Obama will give in to Iran, allowing some nuclear enrichment.

Recent reports indicated that President Barack Obama is prepared to make a major concession to Iran on uranium enrichment.

According to the reports, the Obama administration now is willing to allow 5 percent enrichment if Iran were to take other major steps to curb its ability to develop a nuclear bomb.”

In that article, the writer confirms that the general consensus is that with the coalition, Netanyahu could attack at any moment. 

Original Post

Link here.

Israeli Prime Minister Benjamin Netanyahu has called off early elections in exchange for the coalition he was looking for.

Mr Netanyahu said their new coalition wanted a "responsible" peace process with the Palestinians and "serious" talks about Iran's nuclear programme.

The move came as parliament debated its dissolution before an election Mr Netanyahu had planned for September.

Kadima is currently the biggest party in the Knesset, but recent polls have suggested the number of seats it holds could be halved.

The coalition will have a majority of 94 - one of the biggest in Israeli history.

Several things to note:

a) anti-incumbent mood even in Israel; see recent Greek and French elections for anti-incumbent mood
b) not a small majority -- but one of the biggest in Israeli history
c) this will allow "serious" talks about Iran's nuclear program; as you all know, the US president has telegraphed his decision to allow Iran to continue with it's nuclear program "with conditions"; something tells me Israel's "serious" talks won't include this same policy

Did The US Just Blink? -- Nothing To Do With The Bakken

Updates

April 29, 2012: The LA Times takes up the theme. "Now, more than ever, Israel has a go-it alone strategy." Now that the administration has thrown the country under the bus. See original link. Letting Iran develop its nuclear enrichment program is tantamount to President Kennedy telling the Cubans they could continue bringing in Russian missiles, but only at a measured pace.


April 28, 2012: I wrote the original post on April 27, 2012, but placed it on "draft" status, not sure whether I wanted to post it, or if I did, when.  It turns out that one day after the US blinks with regard to Iran, Saudi Arabia pulls their ambassador to Egypt. If Americans feel a bit uneasy about events in the Mideast, Saudi Arabia is downright scared. This is not a trivial gesture among Muslim allies.

Original Post

Did the US just blink?

In a major concession, Obama administration officials say they could support allowing Iran to continue a crucial element of its disputed nuclear program if the government in Tehran took other major steps to curb its ability to develop a nuclear bomb.

Did the US just blink?

I don't think so. The administration plays a great game of "rope a dope."  The administration played this well. They just threw Israel under the bus.

No, the US did not blink?

Just a wink.

SeekingAlpha on $5 Gasoline

Link here to SeekingAlpha.com. It is a very long article. But here are a couple of nuggets (nothing new in my book).

First, consumption and production:

The world we inhabit today is a much different world than the one that existed 10-12 years ago. China has now become the world's second largest economy after the U.S. According to a recent IEA report we are facing a problematic global economic backdrop leading to a two-speed economic outlook-robust demand in non-OECD countries and falling demand in OECD nations. The result is that oil demand is expected to contract by 400,000 bd in the western world and increase by 1.2 mbd in the non-western world. The result is that oil demand continues to grow. After falling for two consecutive years, global oil consumption grew by 2.7 mbd in 2010. OECD consumption grew by 0.9% or 480,000 bd, a first since 2005. Non-OECD demand grew by a record 2.2 mbd, or 5.5%. Most of that demand growth occurred in China and the Middle East.

We have now surpassed the consumption levels reached in 2008. The IEA estimates that oil demand is forecasted to climb to 89.9 mbd in 2012, a gain of 0.8 mbd, an increase of 0.9% over last year. But where is all that increased oil going to come from? [Comment: well, for starters, the Bakken alone will be producing close to 0.6 million bopd by the end of the year]. In addition to worries over the loss of Iranian exports of 2.6 mbd, Libyan oil production is still down by 600,000 bpd from its peak before the civil war. Unrest in Yemen has knocked off roughly 250,000 bpd. South Sudan has stopped pumping 260,000 bpd day due to disputes over payments for use of its pipeline and export facilities. Civil unrest in Syria has led to a reduction of output by 200,000 bpd and Nigerian output has fallen by 20,000 bpd.

In round numbers that's over 1 million bopd currently not being supplied; but you know, there's always unrest somewhere, problems somewhere. I assume on any given day over the past twenty years one can find excuses for "lost" oil -- remember the burning Kuwaiti oil fields under George I; and I don't think Iraq was exporting a lot of oil under George II's era of "shock and awe."

But I digress.

What about the 2.6 million bopd that comes off the market if the Obama-Iran embargo goes into effect? Something tells me, this will all be worked out -- at worse, with "smoke and mirrors" behind the scenes; there's no way the Obama administration can manage a global loss of 2.6 million bopd effective July 1. It ain't gonna happen. If that much oil is taken out of production, it will be interesting to hear Bill O'Reilly, et al, talk about "speculators" again. It won't be speculation; it will be reality.

The linked article confirms my suspicions about Saudi Arabia's ability to respond with spare capacity, and so the same with the US Strategic Petroleum Reserve. Saudi is hard-pressed to make up that difference. Especially if pipelines are blown up or if oil-loading terminals are closed due to blowing sand.

With regard to refining:

The refining business has become unprofitable. Thirty-one (31) uneconomic refineries have been shut down in recent years, with two dozen more on the chopping block. Refiners earn an average profit of $11 for every barrel they process. That equates to $0.26 a gallon, about the average profit over the past decade. By comparison state and federal taxes average $0.39 per gallon. Now who is being greedy, the oil companies that do the work of refining oil or the governments that collect a tax?

Bottom line:

One can always find examples of disruptions in oil supply, so I don't get too excited about the "lost" one million bbls noted above from Libya, South Sudan, Yemen. The author didn't mention a similar amount in new oil coming from the likes of Utica, Bakken, Permian, and Eagle Ford. So, that's a wash.

On July 2, 2012, there may be folks arguing that the embargo has taken effect and/or is effective, and there may be folks arguing that the embargo hasn't happened and/or isn't effective, but I honestly don't think come July 1, 2012, I'm going to wake up and read that 2.6 million barrels of Iranian oil is suddenly off the market.

Timing Is Everything -- The Mideast -- Nothing To Do With The Bakken

Earlier this evening, perhaps an hour ago, I updated this old posting, with recent events putting an Islamist in charge of Egypt's parliament. I concluded the post by saying that it will be interesting to see what Egypt looks like in 18 months.

Now, just an hour later, I see the headline story in the LA Times. Maybe we are seeing some foreshadowing.

Go the new link to get the visual of what Egypt looks like now. 

Worry over fuel supplies has gripped the country for more than a week. Many gas stations have been forced to shut down or remain open for only a few hours. The government said premium and regular-grade gasoline is available but that drivers are hoarding over speculation that prices will rise.

Minister of Petroleum Abdullah Ghorab told local media that more than 15,000 tons of gasoline is provided to gas stations each day, 2,000 tons more than the usual daily consumption. He said the government has no intention of raising the price of fuel, which is subsidized, and urged consumers not to panic.

But gas station managers say supplies have been cut.

A picture is worth a thousand words, they say.