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Q&A: Ali Samsam Bakhtiari

Keith_McClary:

According to his website, Dr. Bakhtiari seems to think it is a good idea to bring in western oil companies with their advanced technologies to pump out the oil as fast as possible. Nationalists in Iran, Iraq etc. would prefer the work to be done by local companies employing local workers.

Dr. Bakhtiari:

No, not "pump out the oil as fast as possible" but rather to optimize current production and recovery --- especially secondary and tertiary recovery (a lot of barrels).

Yes, it is clear local companies and local workers cannot achieve optimization. This is pure propaganda which no one believes in (it is difficult to fool the oil industry employees). So it will have to be foreign companies, and the best available the better, for all concerned --- please do bear in mind that after 'peak oil', consumers will be more interested in optimization than the producers themselves!! Foreign companies (oil, gas, services, contractors) could come and hire locals (even train some, like FLUOR used to do), would be less expensive and create local jobs.

I expect this question of local vs. foreign to slip way down the agenda as other crucial questions rise to the top (eg, terrorism in oil fields, see Stephen Hamilton Bergin at www.no19bus.org.uk/ *).

*{link corrected - 22-Sep-04; EE}
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buster:

You've stated that you expect gasoline to cost twice its current price at the pump very soon.

Are you satisfied with the way oil prices are currently arrived at, through OPEC response to market demand? Shouldn't the remaining oil stocks be more aggressively priced, to discourage frivolous use?

Would you have any suggestions for a better means to price oil?

Dr. Bakhtiari:

I certainly do expect gasoline prices at the pump to skyrocket: it would be in everyone's interest if they did (although the large majority wouldn't understand why). Best would be a regular (not explosive) increase, like oil prices are doing now. But I didn't say "very soon", I said "over the next 3 to 4 years", but that may be "very soon". OPEC has lost his role and raison d'etre (see INSIGHTS), I don't think its actions have any impact on prices anymore. Unless it finds "new vision", it will go straight into history's dustbin; I doubt it has the visionaries to do so (I offered my humble services two years ago and they declined, not my fault).

Yes, oil should surely be priced more aggressively, but that is exactly what 'peak oil' is doing now: pushing prices up gradually, again in everyone's interest. The higher they are, the less damage will the inevitable occasional explosion bring about. Let us hope prices do stay for some time in $40-$50 range, that would be a good thing, before taking the next step.

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Soft_Landing:

You are recently on record (during your tour of Australia) as saying that petrol prices at the pump may as much as triple within 3 to 4 years.

Wouldn't you imagine that if oil prices even vaguely approached levels that would translate to such higher prices at the pump, worldwide recession would rapidly act to haul in oil prices again?

Dr. Bakhtiari:

For that to happen in Australia will require three-digit oil prices, but I don't see how this can be avoided in the next few years. Yes, naturally such high prices would trigger global economic recession.

However, the question will soon not be "recession" but "economy" --- then the question will be "which economy?" Because with 'peak oil' we will soon enter a complete "paradigm change".

Barbara:

Dear Dr. Bakhtiari,

First of all, my best wishes for the future of your brave people.

I have two sets of questions for you:

You are an eminent personality of NIOC. Since oil is nationalized in your country, this means you must have strong connections with your national leaders, and furthermore, they approve of your involvement with the Peak Oil debate. These are my questions:

1) Why is the awareness of peak oil in the world placed primarily on your shoulders? Why do your leaders burden you singularly with this difficult task and then keep it from being discussed at large? If a warning about peak oil were to come from the leaders of one of the world's main oil producers [Iran], a respected member of OPEC, it would undoubtedly reverberate around the world. Why this silence?

2) Why are you the only scientist (and eminent personality) from an OPEC country to speak about peak oil? Have you ever asked yourself this? I'm sure if you know about peak oil, then your colleagues in Saudi Arabia or Venezuela must be aware as well. Do you know why your country is the only one allowing one of its scientists to speak publicly about peak oil?

Thanks a lot,
Barbara from Italy

Dr. Bakhtiari:

Dear Barbara,

First and foremost, thank you for your best wishes for the future of Iran and the very brave Iranian people. They deserve it.

Secondly, allow me to correct a misconception: I am not an eminent NIOC personality. The present company officials simply detest me (all of 'them') and are doing their utmost to have me quit (after 33 years of service, mainly not to pay me my final bonus and retirement); they certainly couldn't care less about 'peak oil' --- and this is as far I can go in a public forum. I leave it to your imagination to envision the rest...

1) I really don't know how it came about that I am the only OPEC (and Middle Eastern) expert on
'peak oil'. Certainly neither political leaders nor company officials ever guided or encouraged me unto this path (to the contrary). I kind of stumbled on Dr. Campbell's work in 1995 (his days at PetroConsultants) and since ... I have come all this long way (thanks mainly to the Internet). I still have to take from my personal yearly leave of absence and find a sponsor in order to be able attend international conferences. I finance part of my research out of "Letter from Tehran" income.

2) I really don't know why I am so singular within OPEC (although I am not a very common individual, with a eventful past). Maybe the others are told to shut up and do so for their own good (and benefits). I will always speak out.

Well, I hope you were able to read between the lines, because although none of 'them' speaks or reads English, someone (among the Western puppet-masters) might call 'them' to attention. Now, the seemingly apparent contradictions might be beginning to make some sense...

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Soft_Landing:

One of the aspects of peak oil that interests me the most is how the Middle East will hold up. In the initial phases of peak, higher prices should mean a temporary windfall for oil supplying countries. However, once the first peak related recession sets in (and the concomitant destruction of demand), this poses an extreme problem for those countries that derive a large portion of their income from oil revenue. In particular, for those countries that are past their peak of oil production, they may well be equally past their peak of revenue (and this is to totally ignore per capita revenue).

If surplus capacity appears tight now, one can assume it will only be more so during the playing out of peak. Just as the world can ill afford the disruption of even small flows of oil now - the market reacts strongly to every little piece of news - we must expect that during a peak plateau, this sensitivity would be even greater. Thus, the world has a great interest in maintaining the stability of all oil producing regions once peak plateau is upon us.

Now considering a proactive program of powerdown, or a worldwide adoption of the Uppsala protocol, this problem remains (i.e. revenue to oil exporting countries declines throughout the powerdown process). There is clearly a sizable risk of large scale supply disruption, and this risk will increase as a powerdown progresses. So the question is this:

Can you imagine any feasible alternative income sources for Saudi Arabia, Kuwait, etc., that might supplement their income throughout a powerdown? Do you imagine foreign aid could be used to fill this gap?

How can countries that derive much of their income from oil survive a gradual powerdown? How can the rest of world act to reduce the ris of regime failure in oil exporting regions throughout a proactive (or otherwise) powerdown?

Is the concept of voluntary powerdown and the Uppsala Protocol not then fundamentally flawed?

Dr. Bakhtiari:

It seems that you have very well understood the implications and possible consequences of 'peak oil'.

Let me tell you frankly that I don't believe in Uppsala (or Rimini) Protocols or any other Covenant. I believe that when politicians (of any country) have their back to the wall, it is 'force majeure' and then anything goes ...

Someone who has already seen through it all is Dr. Williams, the Archbishop of Canterbury, in July 2004 he said:

"In a world of severely limited supply, it is clear that for the less economically advantaged countries the chances of equal access to fossil fuel supplies is negligible"

With all due respect to the Archbishop, I would have added "militarily" to 'economically' and replaced 'negligible' with "nil".

Again frankly: all Persian Gulf countries have absolutely no alternative to oil (even natural gas is no substitute as it is not as fungible); their only hope is to use it best they can in the years ahead (of high prices), but even on that I have my doubts. Given present conditions, it will all go to waste.

You are correct to worry about the future, it won't be rosy.

I am working on a book on that very subject; if the Company leaves me a little peace, you could soon purchase a copy.....
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tkn317071:

What steps have you personally taken to prepare for Peak Oil? Are you trying any financial strategies, buying second homes in the country, encouraging your families to move or prepare for blackouts, anything like that?

Some people are honestly concerned about a so-called "die-off" scenario, where oil and gas depletion lead to serious resource wars, starvation, and possibliy societal collapse. Do you personally worry about, or prepare for the "die-off" scenarios at an individual level? Or is that over-reacting?

Dr. Bakhtiari:

You are right to worry, it is very worrying. I certainly do not think you are ove-reacting.

But as the French say:
- "Un homme averti en vaut deux"
- "An aware individual is worth twice an unaware one"

And although there is still some time left before the real Crunch, it is wise to start preparing now. The sooner you start, the less expensive it will be. Only one advice, if I am allowed: never, never panic.

Personally, I am not worried at all, I would return to my Bakhtiariland in the Zagros mountains and plan the migration of our 11 million sheep and goats: I am very good at planning and logistics. On the side, I could deal in oil affairs too: 90% of Iran's oil reserves are located on Bakhtiari territory. In case of 'force majeure' and 'peak oil', anything could happen...

OilsNotWell:

I am fascinated by Dr. Bahktiari's depletion model (WOCAP), as it reflects a real-world approach to the effect of politics, conflict, and price on supply depletion. Although some of us wish to dismiss economics (and economists in particular!) completely, it does have a pronounced effect on shape of the production curve (although the area under the curve remains the same), thus shifting peak back and forth a few years.

That is the one flaw in most of the other models that I have seen, particularly ASPO's. In addition, these non price-sensitive models have at least two fundamental underlying assumption that can be proved false:

1) Maximal production is assumed whenever possible
2) Alternative sources and transitional fuel transfer that occur as prices rise is not reflected.

These two assumptions can easily shown to be false by examining 1) Saudi Arabia's role in the last 30 years and for 2) The drastic decline in production following 1979 price shocks. While 1) will not hold true forever, and in fact, I think it's pretty much been acknowledged that NOW everybody is producing flat out. [Because of the special status of SA, and the large disagreement in even the true amounts of past production, let alone current production, I wouldn't give a whole lot of credence to the fact that they may have extra capacity. There is lot to protect in those production capacity numbers. I wouldn't even be surprised if SA declared a surplus, then cut production a bit. In fact, they've already done the first part. They have to give a reason for cutting back production, because otherwise they'd have to admit that 9.5 or 9.3 or exactly whatever it is mb/d is surge capacity, not sustained capacity. A look at their production pattern from 2003 suggested this to me...]. But I could be wrong on this point, and in fact, hope that I am.

&

On a side note, Dr. Bakhtiari seems to be an amazing man - humanist, philosopher, scientist, well-read and spoken, and pragmatic - almost mystical. I'm thinking of subscribing to his "Letter from Tehran." I worry about his country in light of what may seem to him as the looming militaristic U.S. policy and the decades-long interference there.

Dr. Bakhtiari:

Thank you for your kind comments on the WOCAP model. Really appreciated, as comments look rather pertinent! I also am in full agreement with your analysis of present global production ("everyone all out") and the Saudi question: you are not wrong at all! In my opinion, most of these production statistics are fixed --- not only for SA and other OPEC, but even as far as Russia.

And thank you for your remarkable 'side note' ... very well summarized (let me add: very mystical); and also for worrying about Iran and Iranians, and thinking of subscribing to "Letter" (good idea).
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Soft_Landing:

Ok people. This is a bit crazy, but I'd like to hear what you all think.

As most everyone is aware, the US, and more recently, the UN, have been threatening Iran with respect to Uranium enrichment. Weapons of mass destruction. Indeed.

Specifically, the US has sanctions against Iran already, but is talking about the possibility of broader UN based sanctions.

If these were successfully imposed what would happen?

I think it's safe to assume retaliatory action of some sort. Wouldn't it be safe to assume that Iran would use it's swing producer capacity to hurt the world? 4 million b/d is a potent weapon. Take it off the market and the effects would be instant. The Iranian government/populace would suffer financially, but presumably, could rally around leadership whilst western interests faltered. It wouldn't take long before the UN would have to either back down, or go in... both very bad options. In the meantime, oil price would probably spike up around $100/b.

So the US wouldn't really consider this, right?

After all, no one wants oil price to spike up around $100/b, right?

Well, unless you want to destroy demand around the world, 1979-83 style, thereby obscuring peak.

Could this dangerous Iranian roulette be a rational attempt to disguise, soften, and otherwise navigate past peak? Maybe the US thinks that they can supplement oil from the SPR and can outlast any oil removal by Iran... After all, Bush has been awfully keen to fill that SPR, despite these high oil prices. Having an SPR is a liability unless it gets used...

Thoughts?

Dr. Bakhtiari:

I don't feel comfortable discussing openly Iran's geopolitical predicament (please do excuse me, but I am sure you understand).

However, general analysis outlined seems to be on right tracks.

Just a few points:

(1) I don't think oil can be used as a weapon anymore --- liable to backfire and hurt producer(s) more than consumers. Many things have changed since 1973/74.

(2) No one wants oil to spike around $100, but it will eventually. This is inevitable. One day people might think $100 was not all that bad. Mr. Matthews Simmons has predicted up to $182 ...

(3) Very wise, President Bush! Filling the SPR is the best possible policy today! 700 bnb is fine, but more would be better! Of course, he can rely on advisors like Mr. Simmons ...

{In a judgment call, I included this discussion based on the merits of its potential future value -- a la, for posterity. As the map of the world gets rearranged in the next 5 years, such illuminance will be of great worth, if even as only a dim memory. EE}
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Guest reply to Soft_Landing:

The US (and Israel) is desperate for a pre-text for bomb and attack Iran. They are forcing Iran's hand and know it.

All of their supposed "proof" of weapons activity at specific sites has been debunked at the UN, and Iran has allowed over 800 IAEA inspections this year. The US has been desperate to force Western allies to install an artificial deadline and start "the clock is ticking" mentality. (see recent news reports). The US started moving advanced tactical strike fighters to Israel to provoke a reaction. They will pressure every country they can to isolate Iran. Also note that India is just wrapping up production/re-development/expansion deals with Iran. The plan for Iran is and will be the same as was for Iraq. Stir up the hysteria, force the UN into a resolution, and attack. The big if's in this equation are Russia and China.

What will they do? Stand by like Iraq?

The madmen in charge (the neocons) hope that Iran will try to use the oil weapon, as it will really galvanize world support for invasion and occupation.

OPEC won't dare to use the oil weapon again. They know if they do, watch the US topple Venezuela, Saudi, and Iran and others in short order...

Think this is out of the question? Wait and see.

Dr. Bakhtiari:

Again same caveat as for previous question. Nothing these days is "out of question", especially in Middle East. There are still many steps to be taken out here. Expect the unexpected...
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The_Virginian:

USA and Iran/Persia & War

Salem Dr. S.A. Bakhtiari,

Could you clarify the geology of the 1999 find in Iran - specifically in terms of your assessments for only 100,000 bpd. Has the outfit from Japan advised it's shareholders of any downgradings in reserve estimates?

Secondly Iraq 's reserves seem promising, but are reportedly abused by saltwater injection instead of repair and maintenance.

About a year ago, I read a report that some wells in Iraq were only recovering 9% of the total well reserves due to poor management, and the notion that it is more important to keep the oil flowing to the USA than it is to keep the wells in good repair.

Will permanent damage be done to these wells?

You give a slightly earlier date for Peak Oil than Campbell & Aleklett. How much of this in your estimation is due to guesses of "future finds" (offshore/polar etc.) ?

It seriously appears that the USA and Iran/Persia are headed for an era of clashes, even possibly war. Do you believe the US leadership has been duped into believing the Iranian reserves are worth plundering?

Would Iran be advised to show the true nature of these reserves to divert such an attempt? Or will the "Hawks" in the Iranian government continue to use proxy forces (Iraqi Shia) to harass the USA in an attempt to achieve the same goal?

Thank you for your graciousness in answering any or all of the questions you can given your time constraints.

Dr. Bakhtiari:

Salaam.

As you correctly mention, 1999 for discovery of Azadegan oil field, now after five years: ouput nil. Only a Japanese shell company (INPEX) with a $ 2bn buy-back contract to develop, but it has no experience, no know-how, no technology, no ... I seriously doubt it could yield much more than 100,000 b/d (esp. if developed by INPEX), that could take at least another three years (if everything goes well). Why did SHELL and TOTAL decline a free farm-in in Azadegan ??

Iraq still faces enormous problems. It was possible that at times there has been some short-termism in production. The two supergiants (very old) fields of Kirkuk and Rumaila are certainly not in very good shape (things go back to Saddam's short-termism). Nine percent recovery seems far too low to me (under any set of conditions).

If insecurity in Iraq (viz. your last 2 questions) can be overcome (let us all hope so), there are eleven grassroots fields waiting to be brought on stream for an output of at least 2.5 mb/d: a real "licence to print money" at 48 $/b oil. And still there remains the almost unexplored Western Desert ...

I don't hold much hope for non-conventional oil (ao, polar oil). The difference between my WOCAP (2006-7) and the ASPO predictions (2008) is negligible: at that level a few years is not at all significant. As for your last two questions, I unfortunately cannot expand, only tell you that I simply cannot envision any type of diplomatic-political settlement of the deep-seated differences ....

Editorial Notes: Peak Oil is an active message board and source of news and information. Biography Ali Samsam Bakhtiari holds a PhD in chemical engineering and is currently Senior Expert attached to the Director's office in the Corporate Planning Directorate of the National Iranian Oil Company (NIOC). He began his employment with NIOC in 1971 as Project Engineer at its Research Centre. In 1974, he joined the National Petrochemical Company as Project Engineer in its Projects Evaluation Department, and in 1977 he moved to its Corporate Planning Division. He returned to the NIOC Research Centre in 1985, where he headed several departments, and then moved up to Deputy-Director in charge of Special Projects. Between 1990 and 1995, he was Senior Expert in Technology and Development at the NIOC Corporate Planning Directorate, Senior Project Assayer, coordinator of NIOC's international seminars in Iran, and secretary of several internal technical committees. From 1996 to 1998, he was Senior Expert in Technology and Environmental Affairs in the NIOC Corporate Planning Directorate. In 1999, he was managing editor of The Journal of the Iranian Petroleum Institute. He has also been a part-time lecturer in the Chemical Engineering Department at Tehran University, has published numerous articles, and is the author of Peaks and Troughs (London: Minerva Press 1996) on the history of modern Iran. Also: Ali Morteza Samsam Bakhtiari is a senior expert in the Corporate Planning Division of the National Iranian Oil Company (NIOC), Tehran, Iran. He specializes in questions related to the global oil, gas and petrochemical industries, with special emphasis on the Middle East. Formerly, he lectured on design and economics at the chemical engineering department of Tehran University’s Technical Faculty. Dr. Samsam Bakhtiari holds a PhD in chemical engineering from the Swiss Federal Institute of Technology (ETH), Zurich, Switzerland. www.samsambakhtiari.com/

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