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The Facts


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Oil pipelines / THE FACTS

The Facts - Paying the pipers

Where is it? Who consumes the oil?

Oil from the pipelines: who's got it and who wants it
As current oil-consumption patterns continue, the largest oil-consuming nations are making plans to cope with their massive reliance on oil reserves from outside their borders. The three regions that consume over two-thirds of the world’s oil have less than 6 per cent of the oil reserves left in the world. While the US has less than 2 per cent of world crude-oil reserves, it consumes a quarter of the world’s petroleum.

Motor vehicles account for about a third of global oil use: a half of oil use in the US. In the rest of the world, heating and power generation account for most oil use.3

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Whose oil is it anyway?
Oil economies achieve slower economic growth – an average of 1.7 per cent per annum – than non-oil economies – an average of 4 per cent per annum4. The more reliant economies and government are on oil revenue, the less ordinary people profit from their oil resources.

Nigeria – where crude oil generates between 90 and 95 per cent of its foreign-exchange earnings and 80 per cent of government revenues – is ranked seventh in the world as an oil exporter. The proportion of Nigerian households living below the UN’s $1-per-day poverty line grew from 27 per cent in 1980 to 66 per cent in 19964.

Even the people of Saudi Arabia (the biggest oil producer and exporter in the world, where oil accounts for nearly 90 per cent of total export earnings5) are themselves surprisingly poor, with an average per-capita income of $8,4606 in 2002.

By comparison, the oil company majors Shell and ExxonMobil – both of which trade and operate in Saudi Arabian oil and have a strong crude oil presence in Nigeria – are ranked third and fifth most profitable companies in the world in 20027.

Christian Aid estimates that it would cost just over one per cent of the revenue generated by the global oil industry to halve the number of people without a safe water supply. [image, unknown] [image, unknown]

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[image, unknown] Why oil is measured in barrels
During the first oil discoveries in northwest Pennsylvania in the United States, oil was transported in old wooden whiskey barrels, which were made to a standard size. Teamsters – clogging the roads with their horse-drawn barrel-loads – charged more to move each barrel over a few muddy miles to a railway stop than it cost to transport each barrel by rail from Pennsylvania to New York. By building pipelines (initially wooden) to replace barrels as oil transporters, oil owners were able to avoid both the teamsters and their exorbitant charges.14

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Oiling government palms
A study of 113 countries concludes that oil and mineral wealth tends to make countries less democratic. Governments that fund themselves through oil revenues and large budgets are more likely to be authoritarian and more able to build armed forces and encourage repression.9 Foreign oil companies aggravate anti-democratic cultures by paying unaccountable and untraceable sums of money, like bribes.

[image, unknown] An estimated 87 per cent of Angola’s income comes from oil, much of it paid directly to the Government by foreign companies. Of the $5 billion the Angolan Government receives in oil revenues every year, an estimated $1 billion goes missing.4

[image, unknown] Corruption is widely acknowledged as a major problem within all three of the countries through which the Azerbaijan-Georgia-Turkey oil pipeline will pass. Contractors in Turkey have traditionally been asked to pay up to 15 per cent of the value of their contracts to politicians. The former speaker of the Azerbaijan Parliament, Rasul Guliyev, has been charged with misappropriating $12 million from a $300-million oil contract in 1992-93. Guliyev hit back with allegations that then President Aliyev had accepted $50 million.10

[image, unknown] Halliburton – an engineering and construction company previously run by US Vice-President Dick Cheney that is developing an offshore oil and gas facility in Nigeria – has admitted that one of its subsidiaries paid bribes totalling $2.4 million to a Nigerian tax official during 2001 and 2002 in an effort to obtain favourable tax treatment.

[image, unknown] US authorities accuse consultant James Giffen of taking more than $78 million in commissions and fees from Mobil and other Western oil companies and then illegally funnelling them to senior officials in Kazakhstan in order to get a slice of the action in the huge Tengiz field then operated by ChevronTexaco. Charges have also been filed against a former Mobil executive involved in negotiating related oil deals.11

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Private pipelines get public dollars
At least $20 billion worth of public money from the rich world has gone into supporting oil exploration and exploitation in the past decade. Much of this finance is provided by Minority World governments through the World Bank Group, whose various financing agencies spend an annual average $433 million on oil and gas projects.4

From 1992 to 2002, the World Bank Group has financed consortium projects involving the following major oil players12:

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1 Compiled from statistics in the Oil and Gas Journal;
2 Compiled from Energy Information Administration (US) tables on World Petroleum Consumption;
3 Ian Roberts ‘The second gasoline war and how we can prevent a third.’ in British Medical Journal Vol 326, 18 Jan 2003;
4 Christian Aid Fuelling poverty: oil, war and corruption (Christian Aid (UK), 2003);
5 Energy Information Administration (US) OPEC Revenues: Country Details (EIA, 2003);
6 World Bank Group ‘GNI per capita 2002, Atlas method and PPP’ in World Development Indicators 2003 www.worldbank.org;
7 Fortune Global 500 (July 2003);
8 Energy Information Administration (US) OPEC Fact Sheet (June 2003) and Non-OPEC Fact Sheet;
9 ML Ross ‘Does Oil Hinder Democracy?’ in World Politics, Vol 53 (April, 2001);
10 PLATFORM and others Some Common Concerns: Imagining BP’s Azerbaijan-Georgia-Turkey Pipelines System (PLATFORM et al, 2002);
11‘Bribery has long been used to land international contracts’ in Alexander’s Gas and Oil Connections Vol 8, No 11, June 2003 and other news agency outlets;
12 J Vallette Transnational corporate beneficiaries of World Bank Group fossil-fuel projects 1992-August 2002 www.seen.org;
13 The two pipeline projects are the Chad-Cameroon pipeline (see here) and the AGT pipeline (see here);
14 Daniel Yergin The Prize (Simon & Schuster, 1992); www.pipeline101.com

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New Internationalist issue 361 magazine cover This article is from the October 2003 issue of New Internationalist.
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