Posts Tagged ‘oil’

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What’s really behind the Saudi rewards program

February 16, 2014

Saudi Arabia says it will offer rewards to people within the kingdom who provide evidence about terrorist financing that leads to a conviction (hat tip to El Grillo).

It has been rumored that the maneuver is designed to reign in Saudi-backed elements among the Syrian rebels whom Saudi Arabia can no longer control.

Money Jihad suspects that the initiative, which resembles the U.S. Rewards for Justice program, is a Saudi smokescreen designed to placate Western diplomats, U.S. Treasury officials, and international financial watchdog FATF.

Unfortunately, this wouldn’t be the first instance of Saudi deception about a counter-terror finance initiative.

In 2008, Saudi Arabia announced that its central bank, SAMA, would review charitable contributions from Saudi Arabia overseas (which are rife with donations to terrorist causes), but meaningful oversight has never occurred.  Saudi public statements about the SAMA program have been documented to be false.

In 2010, Saudi Arabia’s ulema council issued a ruling against terrorism, but the very same ruling defended zakat, which has often been used by wealthy Saudis to finance terrorist causes.  Saudi pronouncements against terrorism have often focused on protecting its own oil and gas infrastructure, and have pointedly excluded suicide bombers in Israel or Iraq from its definition of terrorism.

In 2014 we are told that Saudi Arabia will pay rewards to those who provide information about terror finance.  If this is actually enforced, Money Jihad predicts that it will be used against Shia dissidents, particularly in its oil rich, Shia-dominant Eastern Province (see related commentary by Amy Myers Jaffe here), or against those who transfer money to Shias in Bahrain or Syria.

It will not be used to curtail Saudi money flowing to Somalia, Bangladesh, Chechnya, or any of the other countries where Saudi Arabia has strategic interests.

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Saudis spooked by sputtering oil prices

October 31, 2013

Sweeter news than any Halloween candy, the T. Boone Pickens’s blog is reporting that the Gulf monarchies are suffering from increased U.S. energy production that has helped keep the global oil price in check.

Perhaps the Saudis wanted the U.S. to bomb Syria, not just because it would help Saudi-sponsored rebels to defeat the Shia-backed Alawite regime in Damascus, because it would have helped increase instability in the Middle East and drive up oil market prices.

The next time our heads of state meet, U.S. presidents won’t have to hold hands with or bow to the Saudi king.

From the Daily Pickens on Oct. 20:

Arab Sheiks Need – And Want – Higher Oil Prices

As U.S. oil and gas production numbers continue to climb, oil prices have leveled off. In fact, for the first time in three years, some American consumers are seeing the price of gasoline at the pump dip below $3 a gallon.

And that’s got Arab sheiks worried.

According to The New York Times – and T. Boone Pickens – the social commitments of the monarchies in the Persian Gulf require hundreds of billions of dollars each year. But lower oil prices and diminishing reserves are making that increasingly difficult, especially for the Kingdom of Saudi Arabia:

Thus, on top of declining oil reserves, rapidly rising domestic energy consumption and increasing energy-supply diversification among its allies, the kingdom’s spiraling spending is also fast raising the break-even oil price for Saudi Arabia and all five of the other Gulf monarchies; in other words, the price of a barrel of oil that these states need in order to balance their books is getting higher and higher. In Bahrain it’s now over $115 (far higher than yesterday’s price of around $102) while in Oman it’s up to $104.

There is no easy short-term fix for this drain on the Saudi treasury.

Moreover, spending for stability’s sake in Saudi Arabia and the other Gulf monarchies will necessarily be quite short-lived. The kingdom pledged a record-breaking $500 billion for “welfare” this year — most to be spent on social security subsidies and new public sector jobs.

Such vast wealth distribution can’t be kept going for much longer. That level of public expenditure is not sustainable and it flies in the face of decades of efforts to promote better fiscal accountability in the kingdom and wean the population off handouts and public-sector entitlement.

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Back on top: U.S. world’s biggest energy producer

October 14, 2013

Hydraulic fracturing is quickly changing the global balance of power.  This year U.S. has become or will shortly become the #1 producer of oil and gas on the planet.  This analysis comes from the Wall Street Journal:

U.S. Is Overtaking Russia as Largest Oil-and-Gas Producer

The U.S. is overtaking Russia as the world’s largest producer of oil and natural gas, a startling shift that is reshaping markets and eroding the clout of traditional energy-rich nations.

U.S. energy output has been surging in recent years, a comeback fueled by shale-rock formations of oil and natural gas that was unimaginable a decade ago. A Wall Street Journal analysis of global data shows that the U.S. is on track to pass Russia as the world’s largest producer of oil and gas combined this year—if it hasn’t already.

The U.S. ascendance comes as Russia has struggled to maintain its energy output and has yet to embrace technologies such as hydraulic fracturing that have boosted American reserves.

“This is a remarkable turn of events,” said Adam Sieminski, head of the U.S. Energy Information Administration. “This is a new era of thinking about market conditions, and opportunities created by these conditions, that you wouldn’t in a million years have dreamed about.”

The U.S. produced the equivalent of about 22 million barrels a day of oil, natural gas and related fuels in July, according to figures from the EIA and the International Energy Agency. Neither agency has data for Russia’s gas output this year, but Moscow’s forecast for 2013 oil-and-gas production works out to about 21.8 million barrels a day.

U.S. imports of natural gas and crude oil have fallen 32% and 15%, respectively, in the past five years, narrowing the U.S. trade deficit. And since the U.S. is such a big consumer of energy, the shift to producing more of its own oil and gas has left substantial fuel supplies available for other buyers. Nations that rely on peddling petroleum for their economic strength and political clout face dwindling market power as a result. Oil prices so far remain high, however, closing Wednesday at $104.10 a barrel, up 18% from a year ago.

Many analyses of energy markets look only at crude oil. But Russia and the U.S. also are major players in natural-gas markets, where they far outproduce countries such as Saudi Arabia, the world’s largest oil producer.

The U.S. last year tapped more natural gas than Russia for the first time since 1982, according to data from the International Energy Agency. Russia’s exports have been crimped by rising competition and the economic slump in Europe. Russia forecasts that its gas production will increase slightly in coming years, but its forecast for this year is below current U.S. production.

The U.S. is also catching up in the race to pump crude. Russia produced an average of 10.8 million barrels of oil and related fuel a day in the first half of this year. That was about 900,000 barrels a day more than the U.S.—but down from a gap of three million barrels a day a few years ago, according to the IEA.

The amount of crude from two of the hottest plays in the U.S.—the Bakken oil field in North Dakota and the Eagle Ford shale formation in South Texas—continues to rise rapidly…

Readers should take a look at this video from Fox News which addresses the strategic implications of this development for U.S. national security.  The shift means a reduced likelihood of U.S. entanglement in Middle Eastern affairs, less risk of disruption due to volatility in and hostility from that part of the world, and a reduced flow of petrodollars to regimes that fund terrorism.

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The Middle East and your price at the pump

September 30, 2013

What to do about Syria?  One thing is to rid ourselves of the remaining vestiges of oil dependence on that part of the world.

In a recent op-ed in the Fort Worth Star-Telegram, Chris Faulkner points out that Syrian energy output is minimal, but the political volatility puts a Middle Eastern premium onto our gas bills.  If we pursue further steps toward energy self-reliance in North America, we could minimize the risks of price volatility and supply disruptions.

Policies being proposed by the energy sector are making more sense than the policies being pursued by our elected officials.  Read it all:

Energy independence is the best response to Syria crisis

When an American missile strike in Syria seemed inevitable, oil futures shot up to a two-year high. Just days later, as U.S. officials began considering a diplomatic response, prices fell.

Many analysts have blamed these fluctuations on investor overreaction — Syria provides less than 0.1 percent of the world’s oil. But such assessments are dangerously naïve.

Any intervention in Syria would have impacted America’s access to oil and no one can safely assume there won’t be another Middle East crisis on the horizon.

That’s why the United States must reduce its dependence on Middle Eastern oil.

Syria might not be a major oil producer or exporter, but one of President Bashar Assad’s chief supporters, Iran, holds the world’s fourth-largest proven conventional oil reserves.

More than that, Iran controls the Strait of Hormuz, a shipping lane that’s essential to the transport of roughly 35 percent of all seaborne oil.

There’s no telling what an Iranian response to a U.S. attack on Syria might look like, but if the mullahs even hint at shutting down the Strait, oil prices could jump dramatically.

The ripple effects of a U.S. military action wouldn’t stop there. A strike against Assad’s regime would inflame relations with other oil-rich nations.

The conflict has already worsened sectarian tensions in Iraq, OPEC’s second-largest producer of crude oil.

Even defusing the Syrian crisis won’t end the civil war there, nor diminish the prospect of future strife, rebellions, or war. Indeed, the Syrian civil war has stoked anew the centuries-old enmity between Islamic sects that threatens to engulf the entire region — a region that holds more than half of the world’s proven conventional oil reserves.

The situation in Syria has made clear why it’s so important for the United States to make certain our energy interests aren’t tied to the volatile politics of the Middle East.

In practice, this means embracing technologies like hydraulic fracturing, horizontal drilling and projects like the Keystone XL pipeline. These represent historic opportunities for America to gain greater control over our own energy security.

In the case of Keystone XL, a proposed pipeline that would deliver crude from western Canada’s vast oil sands to America’s Gulf Coast, the Obama Administration could dramatically increase the amount of oil we receive from our neighbor to the north.

The U.S. Department of Energy has estimated that, once completed, the pipeline would deliver as much as 830,000 barrels of oil a day, or roughly half of what we currently import from the Middle East…

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Fueling ourselves leaves Saudi Arabia in the dust

September 9, 2013

Increased domestic energy production is enabling the United States to pursue its own foreign policy objectives without having to run a three legged race with Saudi Arabia.  Hydraulic fracturing allows America to begin to separate itself from a distant monarchy that imposes ruthless sharia law on its people and funds terrorism around the world.  Reuters has the story:

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Plan would reduce Canada’s need for OPEC oil

September 6, 2013

Canada is considering a proposal to fuel itself by building a pipeline from the oilsands of Alberta to the more heavily populated provinces of eastern Canada.  Although Canada is already a net energy exporter, this pipeline would be a further step in weaning North America off Arab oil and reducing the flow of petrodollars to de facto state sponsors of terrorism.

The rationale for the “Energy East” pipeline comes to us from a marvelous column by Ezra Levant (h/t Blazing Cat Fur) in the Sun:

Freedom oil: Energy East pipeline appealing and has a politically important spinoff

The largest oil refinery in Canada isn’t in Alberta. Neither is it in Ontario or Quebec, the biggest provinces with the most cars.

It’s the Irving Oil refinery in New Brunswick.

Trouble is, that refinery, like most of eastern Canada, buys imported oil, including from OPEC countries. It’s a paradox: Canada produces an enormous amount of oil, but we export the good stuff to the U.S. and import conflict oil for ourselves.

It’s not just that Canadian oil is produced in a more environmentally friendly manner than OPEC oil; we also use the proceeds for peaceful purposes, treat our workers well and respect human rights. It’s like the difference between Canadian diamonds and African blood diamonds.

There’s another difference, too: Canadian oil is cheaper – on any given day, oil from Canada’s oilsands sells at a $10 to $35 discount to world prices, mainly because of a pipeline bottleneck. So Irving Oil is spending literally millions of extra dollars every day on expensive foreign imports. All for a lack of a pipeline connecting Alberta to the East.

Which is why the proposed Energy East pipeline, announced last week by TransCanada Pipelines, is so appealing.

Its main purpose is to ship oil, of course. But politically it has a more important spin-off. At an estimated $12 billion cost, the pipeline is easily the largest infrastructure project in Canada. Construction will employ thousands of workers, mainly in eastern Canada. And the more affordable crude oil it ships will save thousands more jobs at refineries not just in Saint John but along the route in Quebec, where several refineries have recently closed and more are teetering on the brink.

The pipeline will carry a staggering 1.1 million barrels a day, enough to supply the refineries along its route and then some.

And so TransCanada and Irving Oil propose to build a tanker export facility in Saint John. Instead of Saudi tankers bringing shariah oil to Canada, imagine the possibility of Canadian tankers sending freedom oil out.

At the announcement ceremony at the Saint John refinery, rows of workers stood in hard hats for a photo, and behind them and around the site were simple banners reading “Alberta, Always Welcome.”

Nothing to do with economics, nothing to do with jobs. Everything to do with national unity and calling out the unseemly anti-Alberta bigotry that animates so many anti-oilsands extremists.

What a noble, dignified, grand answer to the critics, like the NDP’s Thomas Mulcair, who has called the oilsands an economic “disease.”

New Brunswick knows this pipeline is the most important economic opportunity they will have in a generation; their partisan provincial legislature issued a unanimous statement of support for it.

Alberta wins with a new path for its oil, a path that can’t be blocked by a pro-OPEC U.S. president.

Quebec and New Brunswick refineries win with affordable feedstock. Construction workers win.Canada wins with a deep-water port to export oil to the world.

Who loses? Saudi Arabia, Algeria and Angola, three odious dictatorships that will have to peddle their blood oil somewhere else…

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Libya mess shows need for energy independence

September 5, 2013

The apparent crumbling of the Libyan state and related, ongoing spike in global oil prices illustrate the importance of ending Western dependence on Middle Eastern and North African oil.  From The Telegraph:

“We are currently witnessing the collapse of state in Libya, and the country is getting closer to local wars for oil revenues,” said the Swiss-based group Petromatrix.

The country’s oil ministry said production has slumped to an average of 300,000 barrels per day (b/d) in August, down by more than four-fifths from its peak after the overthrow of the Gaddafi regime two years ago.

“Militia groups are behaving like terrorists, using control over oil as political leverage to extract concessions,” said Dr Elizabeth Stephens, head of political risk at insurers Jardine Lloyd Thompson. Port closures and strikes have compounded the damage but the deeper story is the disintegration of political authority.

Libya is the most extreme example of political mayhem around the world disrupting output and causing a chronic shortfall in oil supply. Production has slumped in Iraq, Nigeria, Iran, Yemen and Syria itself, each for different reasons.

This has cut daily global supply by 1.1m over the past year to 92m, explaining why Brent crude prices have remained stubbornly high despite the slump in Europe and China’s slowdown. To compound the problem, Libya’s oil is some of the highest quality produced in the Middle East and the kind preferred by European refiners. Jitters over Syria have already pushed Brent to $115, near levels that typically erode confidence and inflict serious economic damage…

Is it logical to remain reliant on a region fraught with despotism, Islamist rebellions, intra-Islamic sectarianism, corruption, and utter disrespect for the rights of religious minorities?

No.  The good news is that the U.S., Canada, and Europe do not have to entangle themselves in the Middle East if they are willing to bring the environmentally reactionary fringe under heel.  There is plenty of oil and gas beneath our very feet if we are willing to extract it.  And we will do so in a more environmentally responsible fashion than Arab oilmen anyway.

As part of the president’s proposal to punish Assad for gassing children to death, Obama should simultaneously announce his support for the Keystone XL pipeline, increased offshore and federal land drilling, and ease permit issuance for hydraulic fracturing.  What good is a solitary, short-term military campaign without a longer term strategy for peace?

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Government shares wealth with MILF

July 18, 2013

The central government of the Philippines has brokered a deal with the radical Moro Islamic Liberation Front to split revenues generated in the breakaway southern island of Mindanao.  The MILF (or “Bangsamoro”) will receive 75 percent of tax revenues, 75 percent of mining revenues, and 50 percent of fossil fuel revenues, with the central government retaining the balance.  The “crown jewel” of the agreement is that the MILF will receive their whopping cut through an automatic, annual, haggle-free grant from the central government.

It remains to be seen which taxes, such as zakat, jizya, or kharaj, the MILF may seek to impose on Mindanao residents.  The agreement is reminiscent of a truce between the government of Pakistan and militants in the tribal belt that resulted in the imposition of jizya against Sikhs in that country in 2009.

From the Philippine Star on Tuesday:

MANILA, Philippines – A wealth-sharing deal with the Moro Islamic Liberation Front (MILF) is advantageous to the country and “will stand the test of legality and constitutionality,” the chief of the government panel negotiating peace with Muslim rebels said yesterday.

In a press briefing at Malacañang, chief negotiator Miriam Coronel-Ferrer said a wealth-sharing scheme approved on Saturday was justified as it would make the envisioned Bangsamoro entity self-sustaining and progressive.

The Bangsamoro is also entitled to automatic appropriation from the central government.

Based on the agreement, the Bangsamoro entity gets 75 percent share in taxes and revenues from natural resources and metallic minerals and 50 percent from energy and other mineral resources.

Ferrer said that of all the provisions in the wealth-sharing annex, “the jewel in the crown” was the provision entitling Bangsamoro to automatic appropriation and regular release of budget.

The allocation will be in the form of an annual “block grant” from the central government similar to the internal revenue allotment (IRA) received by local government units.

“The formula for the automatic appropriation of block grant will be provided in the basic law. Many of us have not focused on this detail because much of the reporting on media have concentrated on the sharing arrangements with regard to natural resources but, as I said, this is the jewel in the crown,” Ferrer said.

At the same time, Ferrer said the agreement provided that revenues collected by the Bangsamoro from additional taxes and their share in government income from natural resources would be deducted from the annual block grants on the fourth year of the operation of the regular Bangsamoro government.

“This provision came from the MILF. It indicated that behind the haggling for more share is the intent to be less and less dependent on the national government,” Ferrer said.

“It indicated that the intention is not to get the ‘lion’s share’ for its own sake but to be able, in the future, to stand tall as a progressive and peaceful region; an equal partner of the central government in an equally peaceful and progressive country,” she said.

“This, indeed, is the true meaning of partnership – a partnership that is not based on dependency and patronage, but on the strength and capacities introduced by both for the benefit of the whole,” she added.

Ferrer said this was a unique provision because there would be automatic appropriation that would spare the region from the constraints of central budgeting process.

“I would like to say that this is a structural difference. This is not just an add-on in terms of additional percentage or whatever but this, basically, redefines the whole structure with regard to the financing of the Bangsamoro government,” Ferrer said…

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Canadian subsidiary invests in genocidal Sudan

April 14, 2013

Despite Sudanese state sponsorship of terrorism and its campaign of massacres by Arab Muslims against black Muslims and Christians, a Vancouver-based firm, Statesman Resources, has an African subsidiary that maintains an oil exploration concession in the Sudan.

This information comes from Jonathan Schanzer of the Foundation for Defense of Democracies.  Schanzer points out that although he believes such investment is legal, it is totally out-of-step with Western expectations about refraining doing business with the Sudanese:

Why is the West Doing Business with Sudan?

Jonathan Schanzer
5th April 2013 – National Post

What does Canada have in common with the regime in Sudan, which perpetrated genocide in Darfur, while allying with Iran and providing weapons to the Palestinian terror group Hamas?

In practical terms, they share very little. Ottawa withholds commercial support services and government-to-government development co-operation from Sudan. Canada’s parliament also has enforced sanctions mandated by the United Nations Security Council, including an arms embargo, as well as an asset freeze and travel ban on certain individuals.

Yet, somehow, it is legal for Canadian firms to invest in Sudan’s oil sector.

Just consider Vancouver-based Statesman Resources. The company owns 50.1% of an African subsidiary, Statesman Africa. In July 2012, Statesman Africa was awarded 75% of an oil exploration area known as “Block 14” in northwest Sudan, along Egypt’s southern border.

Preliminary estimates by Statesman Africa indicated that the block might have a “mean potential resource of 600 million barrels.” By November 2012, Block 14’s prospects looked even brighter. One estimate suggested that it held “1.5 billion barrels of gross un-risked prospective resources.”

According to the Associated Press, as of December 2012, Statesman Africa was “in the process of being formally registered in Sudan and opening an operational office in Khartoum.” According to the company’s CEO, Sudan’s state oil company, Sudapet, is “essentially … a joint venture partner.” Statesman must also work with Sudan’s Ministry of Petroleum, which is the regulatory authority.

To be clear, there is nothing illegal about Statesman’s investment in Sudan. Canadian companies are apparently free to do business with Khartoum. But in doing so, they are out of step with Canada’s otherwise sensible foreign policies in the Middle East.

Sudan, as noted above, is a patron of Hamas. It allows the group’s leaders to fundraise and train on Sudanese soil. It also was the origin point for Iranian-made Fajr 5 long-range rockets that were smuggled into Gaza and subsequently fired into Israel during the conflict in November 2012. This was not the first time Sudan helped Iran smuggle weapons into Gaza, either.

Canada has properly listed Hamas under its criminal code. There are severe penalties for “persons and organizations that deal in the property or finances of a listed entity. In addition, it is a crime to knowingly participate in, or contribute to, any activity of a listed entity for the purpose of enhancing the ability of the entity to facilitate or carry out a terrorist activity.”

Yet, somehow, it is legal to engage in business with Hamas’ patron, Sudan.

Sudan serves as an important hub for Iran’s terrorist training, financial investments, and the distribution of Iranian weapons to jihadi groups across the African continent. Canada has placed strong sanctions on Iran for its global terrorist activity and its pursuit of an illicit nuclear program. Yet, somehow, it is legal to engage in business with Iran’s close ally, Sudan.

This dissonance appears to be rooted in Canada’s focus on Sudan’s civil conflict, rather than its foreign policies. As one official government website notes, “Improved bilateral relations between Canada and Sudan are contingent on the Government of Sudan’s willingness to take steps toward maintaining a peaceful relationship with the Republic of South Sudan and its other neighbors, ending the current violence in Darfur and the transitional areas, and improving the overall human rights situation across the country.”

The United States, by contrast, lists Sudan as a State Sponsor of Terror. Khartoum earned this distinction in 1993 by allowing al-Qaeda to create its headquarters in the country during the 1990s. However, it remains on the list now for its close and continuing ties to both Iran and Hamas…

Read it all here.

By the way, Ken Rijock also advises entities doing business with Sudanese companies to obtain written assurances from them that their goods and services aren’t benefiting end users in Iran.  Statesman Resources wouldn’t want to run afoul of Canada’s sanctions on Iran by engaging in slipshod business practices in Sudan, would they?

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Freedom from Arab oil boosted by record production in North Dakota

March 29, 2013

770,000 barrels per day closer to independence

Texas, federal waters, and North Dakota constitute the holy trinity of the U.S. energy production, and North Dakota contributes an increasingly larger portion of the total.

Bakken output puts us the U.S. closer toward energy self-sufficiency, which, over time, will mean less power for OPEC, fewer petrodollars going to state sponsors of terrorism, a decreased risk of supply interruptions, and less pressure for America to become involved in the squabbles of the Middle East.

This encouraging data comes to us from PennEnergy on Mar. 18 (hat tip to Steve Maley):

http://www.pennenergy.com/articles/pennenergy/2013/03/north-dakota-oil-production-reaches-new-high-in-2012.html?cmpid=EnlDailyPetroMarch192013

North Dakota oil production reaches new high in 2012

North Dakota crude oil production (including lease condensate) averaged an all-time high of 770,000 barrels per day in December 2012. Total annual production more than doubled between 2010 and 2012 through the use of horizontal drilling and hydraulic fracturing of deposits in the Bakken Formation in the Williston Basin. North Dakota production in 2012 trailed only Texas and the U.S. Federal Offshore region, and the state accounted for 10% of total U.S. crude oil production.

Much of crude oil production in North Dakota is gathered and transported by truck to railcars leaving the state. In the four counties where production is concentrated, about 75% of production is transported by truck, and this can cause supply chain problems at times. Severe weather can impede truck travel, which may lower oil production in the state. Once on-site storage tanks at production sites are full, production stops until the trucks can move again. For example, in November 2012 North Dakota crude oil production fell slightly from the October level to 735,000 bbl/d because of weather-induced transportation problems caused by an unusually heavy snowstorm. Pipeline networks, which can be more efficient and less subject to storm disruptions than trucking, are currently being expanded.

Weather slowing or halting truck transportation can also affect the completion of wells that are not yet producing. According to the North Dakota Department of Mineral Resources (DMR), almost all (95%) wells drilled in North Dakota use hydraulic fracturing to produce the crude oil embedded in shale rock and tight (low permeability) formations. To start production, each well needs hundreds of truckloads of material (900-2,000, including 800 truckloads of water, according to the DMR) on-site that are delivered by tank trucks to storage tanks, unless a sufficient quantity of water is available at the wellsite. The total amount of water needed for hydraulic fracturing must be at the wellsite before hydraulic fracturing can begin.

Because over 80% of North Dakota’s wells are located in only four counties—Dunn, McKenzie, Montrail, and William—in the northwest area of the state, harsh weather in these areas can reduce the state’s total crude oil production, as happened in November 2012 and again in January 2013.

It’s also worth noting that pipeline expansion would help even further—a point lost on extreme environmentalists and Democrats.

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Oil discovered in Arabia 75 years ago this month

March 20, 2013

Standard Oil of California, which would later become Chevron, obtained a concession in the early 1930s to explore for oil in Saudi Arabia by paying $175,000 in gold up front.  After five difficult years of dry holes, Socal struck oil at Well Number 7 in the Arab Zone in March 1938.

Several years ago, Time magazine explained the significance of this discovery in a short article called “Finding the King’s Fortune“:

March 3, 1938

The king of Saudi Arabia, Abd-al-Aziz ibn Saud, had authorized a team of American engineers to explore the trackless desert bordering the Persian Gulf, an arid landscape marked only by the occasional palm-fringed oasis. He hoped they would find water. A tribal leader with precarious finances, Ibn Saud believed the Americans might discover places where he could refresh his warriors’ horses and camels. But the team, from Standard Oil of California, had something else on its mind.

Oil had been discovered in other countries in the region, and the engineers thought they would find more in Saudi Arabia. Over several years, they drilled more than half a dozen holes without result. In desperation, they decided to dig deeper at well No. 7. They plumbed to a depth of 4,727 ft. and finally hit what would turn out to be the largest supply of crude oil in the world.

The King did not appear to appreciate the news fully at first. It was an entire year after the discovery when he and his retinue arrived in a caravan of 400 automobiles at the pumping station of Ras Tanura to witness the first tanker hauling away its cargo of Saudi crude. Henceforth the King would no longer rely for income on the pilgrims arriving in Mecca, Islam’s holiest city. And his kingdom’s petroleum wealth would emerge as a crucial factor in Middle East politics and the bargaining over global energy supplies.

Princeton University professor Bernard Lewis has memorably described what this discovery of oil in Wahhabi-backed Saudi Arabia meant for Islam and the world today:

…Imagine that some such group as the the Ku Klux Klan or Aryan Nation were suddenly to come into the possession of unlimited wealth and use that money to set up schools and colleges all over the world promoting their particular version of Christianity and you get an idea of what has happened to Islam as a result of the enormous wealth that oil has brought to some people in Saudi Arabia.

It has enabled them to set up schools and colleges all over the Muslim world teaching their brand of Islam—this kind of fanatical, extremist version of Islam—which has thus acquired a scope and expansion which it could never otherwise would have had.  Without oil money, this kind of Islam would have remained a fringe group in a marginal country…

In addition to funding schools and Wahhabi causes around the world, Saudi Arabia has funded terrorism through two main methods:  1) governmental “charitable” foundations such as the Muslim World League, World Assembly of Muslim Youth, and the International Islamic Relief Organization, and 2) private zakat and sadaqa donations from rich Arabs—who themselves had become wealthy from oil and oil-related Saudi boom sectors in banking and construction—such as those listed in the Golden Chain document.

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