write a reading response for each articles. there are two readings. write 7-10 sentences each paragraph.

Twelve
‘MAKING HOLES IN THE

GROUND’: THE EXTRACTIVE
INDUSTRIES

CHAPTER OUTLIN

E

Beginning at the beginning 396
Production circuits in the extractive industries 397
Global shifts in the extractive industries 40

0

Oil 400
Copper 402
Volatile demand 402
Technologies of exploring, extracting, refining, distributing 404
The centrality of state involvement in the extractive industries 408
Nationalizing the assets 408
Controlling prices 409
A (partial) return to privatization 4

10

Power games: states and firms; states and states 41

1

Corporate strategies in the extractive industries 413
Consolidation and concentration 413
The oil industry 413
The metal mining industries 414
Organizational and geographical restructuring 416
Resources, reserves and futures 419

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PART FOUR THE PICTURE IN DIFFERENT SECTORS396

BEGINNING AT THE BEGINNING

In a very real sense, the extractive industries represent the ‘beginning of the begin-
ning’: the initial stage in the basic production circuit and in the web of GPNs that
make up the global economy:1

Minerals … [excluding oil] … account for a small share of world
production and trade. Nonetheless, their supply is essential for the
sustainable development of a modern economy. They are basic, essen-
tial and strategic raw materials … No modern economy can function
without adequate, affordable and secure access to raw materials.2

The basis of the extractive industries is the notion of the natural resource: materi-
als created and stored in nature through complex biophysical processes over vast
periods of time. However, natural resources are not, in fact, ‘naturally’ resources.
An element or material occurring in nature is only a ‘resource’ if it is defined as
such by potential users. In other words, it is both a socio-cultural and a political con-
struction. It is given meaning by its socio-cultural context and given differential
priorities through political choices.3 Basically, there must be an effective demand,
an appropriate technology, and some means of ensuring ‘property rights’ over its
use: ‘If any of these conditions ceases to hold, resources could “unbecome”.’4 The
resources that form the basis of the extractive industries (energy materials like oil,
as well as ferrous and non-ferrous minerals like iron ore and copper) are, effectively,
non-renewable. They are fixed in overall quantity, at least under known technologi-
cal conditions. The more we use today, the less will be available for tomorrow.

Quite apart from their finiteness, extractive resources are locationally specific. They
are where they are. They have to be exploited, at least initially, where they occur,
although later stages of refining might well be located elsewhere. In either case,
their use involves vast investment and expenditure, not only on exploration,
extraction and processing, but also on transportation infrastructures:

The most significant differences about the extractive production net-
work relate, in one way or another, to the ‘landed’ nature of assets …
on the one hand, the nature-based character of extractive enterprises
and the influence that the materiality of [the resource] exerts on the
organization of production; and on the other … the territoriality of [the
resource] in the sense of its embeddedness in the territorial structures
of the nation-state … Resources are closely bound to notions of sov-
ereign territoriality and national identity.

5

This triadic combination of finite quantities, fixed locations and territorial embed-
dedness creates the specific shape and developmental path of the extractive indus-
tries.6 It helps to explain why the extractive industries are so sensitive economically,

12_Dicken-7E_Ch-12.indd 396 19/11/2014 10:47:02 AM

THE EXTRACTIVE INDUSTRIES 397

politically, environmentally and even culturally; why they are the focus of such
intense conflict and bargaining between firms, between states and between firms
and states. To a greater extent than most other industries, the extractive industries
are made up of a strong mix of private firms (TNCs) and state-owned enterprises
(SOEs). They are also dominated by giant firms: a significant number of the 50
largest companies in the Financial Times Global 500 are oil or mining companies.
They are overwhelmingly producer-driven industries.

These industries, then, are at the heart of many of the most pressing and most
controversial debates in the global economy. As we saw in Chapter 2, the roller-
coaster trajectory of production and trade in the past 50 years has often been
closely related to sharp fluctuations in the supply – and, therefore, the price – of
oil and other natural resources. ‘The race for resources’ has been a central compo-
nent of the development of a global economy for centuries.7 It still is, as the
insatiable growth of China’s demand shows so very clearly.8 The extractive indus-
tries are also at the centre of the development dilemma – the so-called ‘resource
curse’ (see Chapter 10) – facing many resource-rich, but deeply impoverished,
countries, especially in Africa.

PRODUCTION CIRCUITS IN THE EXTRACTIVE
INDUSTRIES

As Figure 12.1 shows, the extractive industries fall into three broad categories
based upon the kind of minerals involved. In this chapter we will focus primar-
ily on two of these industries: oil and copper (one of the most important of the
metallic metals industries, accounting for a little under one-fifth, by value, of world
metallic mineral production).9 Both oil and copper are employed in an enormous
variety of end uses. In the case of oil, this includes both final consumer demand
for transportation and heating fuel as well as providing the feedstock for chemicals
and related industries. Copper, on the other hand, like most of the base and ferrous
metals, is overwhelmingly a producer commodity:

Copper is one of the oldest metals ever used … Because of its proper-
ties, singularly or in combination, of high ductility, malleability, and
thermal and electrical conductivity, and its resistance to corrosion,
copper has become a major industrial metal … Electrical uses of cop-
per, including power transmission and generation, building wiring,
telecommunication, and electrical and electronic products, account for
about three quarters of total copper use.10

Figure 12.2 outlines the basic production circuit for extractive industries. At the most
general level, it is a relatively straightforward sequence of stages, from exploration

12_Dicken-7E_Ch-12.indd 397 19/11/2014 10:47:02 AM

PART FOUR THE PICTURE IN DIFFERENT SECTORS398

through to final consumption, although, in fact, it is a highly complex and contested
process. Something of that complexity is shown in Figure 12.3, which goes beyond
the basic production circuit to depict the production of oil as a

global production network of inter-firm and firm–state relations that
link nationalized oil companies, resource-holding states and publicly
traded, transnational firms. It reveals a number of lateral/horizontal
relations not captured by the linear commodity chain.11

Electricity, organic
chemicals/plastics,

process fuel,
transportatio

n

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construction,
electronics,

engineering,
manufacturing,

steel makin

g

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industrial

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engineering,
manufacturing

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fillers/pigments,

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steel, metallurgy,
water treatment

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industrial

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oil, uranium

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lead, magnesium,
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metals

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es

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minerals

Energy
minerals

Non-metallic
minerals

E N D U S E S

Figure 12.1 Classification of extractive industries

Source: based on UNCTAD, 2007: Box III.1.1

Exploration Development Extraction Processing Distribution Consumption

Transportation Transportation Transportation

Identification
of resource

deposits

Preparation
of site for
extraction

Use of smelte

rs

to produce

concentrates

Estimation
of size and
geophysical

characteristics

Additional
delineation
of deposits

Removal of
resources from

the ground

Removal
of waste
material

Figure 12.2 The basic extractive industry production circuit

Source: based, in part, on Turner et al., 1994: Box 16.4

12_Dicken-7E_Ch-12.indd 398 19/11/2014 10:47:02 AM

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12_Dicken-7E_Ch-12.indd 399 19/11/2014 10:47:03 AM

PART FOUR THE PICTURE IN DIFFERENT SECTORS400

Overall, the production circuits in the extractive industries are highly capital and
technology intensive, involving primarily large firms (or consortia of firms), both
private and state owned.

GLOBAL SHIFTS IN THE EXTRACTIVE INDUSTRIES

Oil

Between 1975 and 2012, world oil production grew by 54 per cent, from 56 bil-
lion barrels to 86 billion barrels. Production of crude oil is quite widely spread
geographically, as Figure 12.4 shows. But, in many cases, the quantity produced
is relatively small. In 2012, twelve countries accounted for 67 per cent of the
world total, two of which – Saudi Arabia and the Russian Federation – produced
more than one-quarter of the total. However, major changes have occurred in the
global map of oil production since 1975 (immediately after the ‘first oil shock’).
Important new producers emerged. So, although the Middle East still accounted
for 33 per cent of world oil production in 2012, the world production map is
much more complex than it was 30 years ago. And it is changing even more as oil
extracted from shale is becoming a major feature of the industry, particularly in the
USA and the Russian Federation, but also elsewhere as the controversial ‘fracking’
industry expands its reach.

12,000

6,000

1,000

100

Oil production
(thousand

barrels per day)

20121975

Figure 12.4 The changing geography of global oil production

Source: based on data in BP Statistical Review of World Energy 2013

12_Dicken-7E_Ch-12.indd 400 19/11/2014 10:47:03 AM

THE EXTRACTIVE INDUSTRIES 401

The pattern of world trade in oil is shown in Figure 12.5. Almost half of total
oil imports go to Europe and the USA, with a further one-quarter going to Japan
and China. In particular, China’s significance as an oil importer has increased at
enormous speed as its economy has grown at the dramatic rates discussed in
Chapter 2. In the early 1990s, China was the biggest exporter of oil in Asia; today
it is the fastest-growing importer of oil in the world. Much of that shift has
involved China’s sourcing of oil from Africa, as we will see in later sections. For
many of the world’s major oil exporters, oil is by far the most important com-
modity, constituting, in some cases, virtually the entire basis of the country’s
export sector.

Canada

Mexico

S & C

America

US

Europe

North

Africa

Middle

East

Japan

Other Asia

Pacific

China

India

Australasia

West

Africa

E & S

Africa

Former

Soviet Union

17.6

10
1

0.1

Million barrels
per day

5

Crude
exports

Crude
imports

Figure 12.5 Patterns of world trade in oil

Source: based on data in BP Statistical Review of World Energy 2013

However, the global map of oil trade seems likely to change dramatically in the
next few years if the predictions of the International Energy Agency are borne
out. In particular:

By around 2020, the United States is projected to become the largest
oil producer (overtaking Saudi Arabia until the mid-2020s) … the
result is a continued fall in US oil imports, to the extent that North
America becomes a net oil exporter by 2030. This accelerates the
switch in direction of international oil trade towards Asia … The
United States, which currently imports around 20% of its total energy
needs, becomes all but self-sufficient in net terms – a dramatic reversal
of the trend seen in most other energy-importing countries.12

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PART FOUR THE PICTURE IN DIFFERENT SECTORS402

Copper
World copper production has increased even more rapidly than that of oil during the
past two decades: by 84 per cent between 1988 and 2011 (from 8.8 million tonnes to
16.2 million tonnes). Such growth reflects the particular qualities of copper in a wide
range of end uses and, again, the growth of China and its seemingly insatiable hunger
for raw materials. Figure 12.6 maps the world distribution of both mine production
and refined copper. Five countries produce 61 per cent of mined copper. Chile is by far
the biggest producer, with 33 per cent of the world total; its share of world production
doubled between 1988 and 2011. Copper production in Africa, notably in Zambia and
the Democratic Republic of Congo, as well as in China, has also grown significantly.
Indeed, China was the world’s second-largest producer of mined copper in 2011 having
overtaken the USA. China is by far the world’s largest producer of refined copper (with
27 per cent), followed by Chile (16 per cent). The pattern of refined copper production
reflects the fact that it incorporates about 20 per cent of copper scrap in its production,
such scrap being generated by major copper users. This explains, for example, the pres-
ence of countries like Japan and Germany as major producers of refined copper only.

5,500

2,500

1,000

100
10

Copper production
(thousand tonnes)

Refined
copper

Mine
production

Figure 12.6 The geography of world copper production

Source: based on data in Brown et al., 2013: pp. 19, 21

VOLATILE DEMAND

Welcome to the new world of runaway energy demand
(Financial Times, 14 November 2007)
Global oil demand to collapse
(Financial Times, 10 December 2008)

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THE EXTRACTIVE INDUSTRIES 403

These two headlines, separated by almost exactly one year, illustrate the extreme
volatility of the market for the extractive industries. Periodic boom and bust
are the norm. Periods of strong economic growth intensify the demand for
commodities; periods of economic decline produce the opposite effect so that
demand may collapse, at least until the next upturn. This means that the extractive
industries are much more sensitive to the general state of the economy than most
other sectors, although the speed of adjustment to ups and downs in the cycle
may not be immediate and this can cause problems of over- and under-capacity.

Figure 12.7 Fluctuations in the prices of oil and metallic minerals (base year
2000 = 100)

Source: based on UNCTAD, 2007: Figure III.1

Korean
War

Vietnam
War

Second
Iraq War

Entry of new
oil producers

Nationalizations

Domination of the ‘Seven Sisters’ cartel Excess metal capacity

Privatizations and/or
opening up to FDI

First
oil crisis

Second
oil crisis Falling

world
demand

Rising
Asian

demand
Metals

Oil

2000199019801970196019

50

0
50
100
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a

r
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=

1
0

0
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150

200

Such massive swings in demand are, of course, reflected in equally massive fluc-
tuations in prices. Figure 12.7 shows how the prices of oil and metallic minerals
fluctuated in the six decades since the 1940s in response to changing market
conditions:

1974 marked the end of the 30-year ‘golden period’ of strong world
economic growth, and high demand for minerals that began after the
Second World War … From the first oil crisis in 1973–1974 until the
early 1980s, oil prices began to climb steeply … Metal prices, on the
other hand, began a long-term declining trend … Crude oil prices
also began to decline in real terms in 1985 … The depressed mineral
prices of the 1980s and 1990s had important consequences: instead of
being regarded as strategically important to economic development,
oil and metals were increasingly treated as simple commodities …

It is only in recent years that the gradual decline in mineral prices has
been reversed.13

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PART FOUR THE PICTURE IN DIFFERENT SECTORS404

In fact, this reversal, especially in the case of minerals, was unexpectedly sudden.
The first half of the 2000s, especially after 2004, saw what were, in effect, ‘gold
rush’ conditions. This acceleration in demand reflected, in general terms, the rapid
overall growth of the global economy but it was especially driven by the vast
increase in demand for resources from some developing countries, most notably
China. Depiction of China as ‘a ravenous dragon’ became common:14

There is no exaggerating China’s hunger for commodities. The country
accounts for about a fifth of the world’s population, yet it … has swallowed
over four-fifths of the increase in the world’s copper supply since 2000.

15

In light of these new circumstances, the predictions in 2007 were that prices would
remain high, and even accelerate:

The economic ascendancy of China, India and other developing
countries, along with the resource-intensive stages of their current
development phase could well result in a long-running acceleration of
commodity demand growth. This can be seen as a new stage in interna-
tional commodity markets, with prices remaining at unprecedentedly high levels
… there are no indications of an impending world recession.16

Of course, this reflects China’s increasingly significant role as an export producer
of a whole range of metal-intensive (and energy-intensive) manufactured goods.

So much for prediction. One year later, the financial conflagration had resulted in
a collapse of commodity prices. The price of oil fell from $150 per barrel in July 2008
to below $40 a few months later. The price of copper fell from more than $8000 per
tonne in June 2008 to less than $3000 per tonne in June 2009. The bonanza was,
apparently, over. Of course, if history is the guide, the process will occur again at some
time in the future, although we cannot know when, and precisely how, this will hap-
pen. There has indeed been some recovery in prices: in mid-2013, oil was around $100
per barrel and copper around $7000 per tonne. It is likely, however, that virtually all
the growth in the demand for oil and many other commodities over the next 20 years
will come from developing countries. Of course, these shifts in demand reflected in
price fluctuations are not only the result of changes in the market for oil or metals.
Supply-side changes, especially those generated by changes in state policies and cor-
porate strategies, play a highly significant role, as we will see in subsequent sections.

TECHNOLOGIES OF EXPLORING, EXTRACTING,
REFINING, DISTRIBUTING

The core of the extractive industries, as Figure 12.2 shows, is the sequence of stages
from exploration, through development, extraction, processing, distribution, to

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THE EXTRACTIVE INDUSTRIES 405

consumption. Each of these poses immense technological challenges. The reason
lies in the basic characteristics of the resource-based industries alluded to earlier:
their finiteness and their locational specificity. In general, highly expensive, sophis-
ticated technologies have to be employed at all stages of the production circuit:

Building a large base-metals mine can cost over a billion dollars. The
magnitude of investments in the oil and gas industry is even greater.
Constructing a pipeline, developing an oil deposit or revitalizing an ailing,
underinvested mineral industry can run into many billions of dollars.17

As a consequence, capital intensity is extremely high while labour intensity is
low. These industries employ comparatively few workers relative to their size. For
example, the biggest non-state oil company in the world, ExxonMobil, employs
around 80,000 workers. The biggest metal mining company, BHP Billiton, employs
42,000. In comparison, the retailer Wal-Mart employs 2,100,000 workers while
the automobile company Toyota employs more than 300,000. The difference is
especially dramatic if we compare sales per worker: ExxonMobil $4.83 million;
BHP Billiton $1.43 million; Wal-Mart $180,000; Toyota $730,000.

Firms in the extractive industries face three closely related technological chal-
lenges: finding new sources of supply, extracting the highest yield from these
sources, and getting them to the market. Of course, such challenges face firms in
all industries. But the extractive industries are unique in that they are faced with
‘managing a depleting asset’.18 Unlike the agro-food industry, for example (see
Chapter 13), a new crop cannot be grown next year. Once an oil well dries up or
a copper mine becomes exhausted it cannot be regenerated, although in some
cases technological innovation enables some further extraction to occur.

New sources of supply must continuously be sought as existing sources become
exhausted and/or too expensive to exploit at prevailing market prices. This is not
unlike searching for needles in haystacks. Immensely sophisticated techniques of
geochemical, geophysical and satellite remote sensing techniques are involved:

The exploration period may take up to 10 years, and in many cases
such investments turn out to be unsuccessful … Even if the explora-
tion is successful and a new mine is developed and brought into pro-
duction, the investor still faces various technical risks, market risks
(related to demand and price forecasts), political risks (e.g. changes in
mining laws, nationalizations), and social and environmental risks.19

In addition, the time (and investment) needed to develop a new resource – its
gestation period – can be very long indeed. The situation is not unlike that in the
pharmaceuticals industry, where vast investments are made over many years in the
hope that a drug breakthrough will occur. In fact, of course, the majority fail, and
that is also true of the extractive industries:

12_Dicken-7E_Ch-12.indd 405 19/11/2014 10:47:05 AM

PART FOUR THE PICTURE IN DIFFERENT SECTORS406

[I]n the actual process of extraction, the raw materials tend to get
more and more difficult to harvest as time goes on; for example, sur-
face deposits of minerals are used up and people have to dig deeper,
the most pure ores are depleted and users must shift to more amalga-
mated sources, etc. This requires the application of bigger, more pow-
erful equipment, new techniques, etc.20

A major problem, therefore, is that most of the easily accessible sources have already
been exploited. New resources almost invariably tend to be found in less accessible
locations and also often in circumstances making their extraction extremely dif-
ficult and, therefore, costly. The deeper the resource below the surface, the greater
the problems involved. The lower the degree of purity, the greater the cost involved
in extraction and processing to the point where it becomes uneconomic. In the
case of oil, for example,

variations in the quality of crude include its density (lighter grades …
are more highly valued than heavier grades because they contain a
higher gasoline and kerosene fraction), the lack of sulphur compounds
(a ‘sweet’ oil is more highly valued than a ‘sour’ oil because sulphur
compounds require additional ‘cleaning’ for transportation and refin-
ing), the pouring point (related to the wax or bitumen content) and
the presence of salt or metal (vanadium, nickel, iron).21

There is, inevitably, a close connection between explorative activity and market
(i.e. price) conditions. Periods of high prices for oil and minerals stimulate a wave
of exploration and the bringing into use of what are, in less favourable market con-
ditions, marginal supplies. Conversely, when prices fall – especially when they fall
very steeply and rapidly, as happened in 2008 – investors pull back from such risky
ventures. A notable example is the Canadian oil sands project in Alberta:

Until recently, Canada’s oil sands were the venue for one of the most
spectacular races for profit of modern times. The remote, boggy land-
scape contains between 1.7tn and 2.5tn barrels of oil, of which an
estimated 173bn can be extracted using expensive, hi-tech filtering
technology. Canada’s reserves are second only to Saudi Arabia’s, and a
year ago 60 projects were being constructed … But since oil prices
began a downward tumble, energy companies … have shelved more
than US$90bn worth of oil sands investment.22

Boom and bust is the way the extractive world works – and will no doubt con-
tinue to do so in the future. Today, much of the attention in many parts of the
world is on extracting oil and gas from shale deposits. Unlike the Canadian oil
sands, shale oil and gas are very deeply buried and have to be extracted using a

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THE EXTRACTIVE INDUSTRIES 407

method known as ‘fracking’ or hydraulic fracturing. This technique combines
deep vertical drilling with horizontal drilling. A combination of water, chemicals
and sand is injected at immensely high pressure to crack the shale strata and then
to extract the oil or gas. There are vast shale deposits in many parts of the world
that have the potential to yield huge quantities of oil and, especially, gas. It is this
technique that is revolutionizing the US energy industry and may well do the
same globally if US Department of Energy estimates are accurate:

‘technically recoverable’ shale oil resources of 345bn barrels in 42
countries [were identified, equivalent to] … 10 per cent of global
crude supplies … [the] assessment indicated that Russia had the largest
shale oil resource with 75bn barrels. Russia and the US [with 58bn
barrels] were followed by China at 32bn. The report estimated UK
shale oil resources at 700m barrels. The US report looked at techni-
cally recoverable resources without regard to profitability … ‘the
extent to which technically recoverable shale resources will prove to
be economically recoverable is not yet clear’.23

This latter caveat is the crucial one.
Both the exploration and extraction/processing of oil and mineral resources

involve very high sunk costs.24 The same is also true of the distribution stage.
Again, all industries face problems in getting their products to market. But the
particular characteristics of the extractive industries – especially their bulk and
remoteness from markets – generate the need for a massive scale of transportation
infrastructure that is virtually unique. The trade-off between increasing the scale
of production and being able to transport the outputs is a central problem in these
industries. Massive investments in pipelines, supertankers, port facilities, and the
like are a prerequisite. Not only are these costly but they, too, have a long gestation
period. They represent a very high sunk cost indeed, not least because many of
these facilities are highly specialized and not easily transferred to alternative uses.

The effects of such transience are graphically reflected in those places where
the ‘resource frontier’ has moved on, leaving behind the relics of technology:

Few sights are as impressive as the massive port works, open-pit mines,
and 500-mile railways developed to tap the natural resources of fron-
tier regions, or so bittersweet as the relic landscapes left behind in the
wake of resource booms. Abandoned mines, idle processing facilities,
vacant warehouses, empty ports, disused railroads, boarded-up build-
ings, and under-employed residents in once vibrant regions speak not
only to the capricious nature of resource economies but also to the
salience of ‘rigidities’ in investments in extractive industries.25

The environmental costs of resource exploitation are immense and long lasting.

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PART FOUR THE PICTURE IN DIFFERENT SECTORS408

THE CENTRALITY OF STATE INVOLVEMENT IN THE
EXTRACTIVE INDUSTRIES

A central argument of this book is that the state plays a major role in all GPNs.
However, nowhere is the degree of state involvement as deep or as pervasive as in
the extractive industries. In these industries, the state is absolutely central. The rea-
son, of course, lies in the unique territorial embeddedness of resources. Access to such
resources is controlled, ultimately, by the national state in which they are located.

As Figure 12.3 shows, the state operates within an extractive GPN in two main
ways:

•• as a regulator (of access, taxation, health, safety and environmental issues);
•• as an operator (an actual producer).

Where such dual roles exist, states have potentially enormous power over how
such resources are exploited. How effective that power is, and how it is exercised,
of course, depend very much on the nature of the state in question, notably its
strength (both domestically and internationally) and its political orientation. This,
of course, brings the state into sharp confrontation with private companies, espe-
cially TNCs, as well as with other states. The history of the resource extractive
industries, therefore, is one of continuously shifting power struggles between firms
and states, states and states, and firms and firms. Again, although this is true of vir-
tually all industries, it is especially evident in the extractive industries. However, its
precise form varies between different extractive industries, especially between oil
on the one hand and metal mining industries on the other.

Nationalizing the assets
The central problem facing all resource-rich states is how to exploit their resources
to achieve the maximum gain when, as we have seen, the costs of finding, develop-
ing, extracting, processing and distributing the product can be astronomically high.
Given that such a large proportion of the world’s extractive resources are located in
poorer countries, this poses immense problems. To what extent can a state develop its
own indigenous resources using domestic capital and know-how? How far must it
depend on outside investment by foreign TNCs which will, inevitably, result in some
loss of control? Over time, these problems have been approached in different ways.

In most cases, the initial development of a country’s resource industry has
depended on outside investment. Indeed,

in the early twentieth century, FDI went mostly into these industries,
reflecting the international expansion of firms that originated from the
colonial powers. The objective of TNCs in the extractive industries was to

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THE EXTRACTIVE INDUSTRIES 409

gain direct control over the mineral resources required as inputs for their
growing manufacturing and infrastructure-related industries. During the
Great Depression (1929–1933), the international expansion of oil compa-
nies continued unabated despite the crisis in other overseas investments.26

However, by the 1960s, this situation had changed radically:

As former colonies gained independence after the Second World War
and with the creation of the Organization of the Petroleum Exporting
Countries (OPEC), many governments chose to nationalize their
extractive industries, resulting in a declining involvement of the TNCs
that hitherto had been dominant.27

In fact, nationalization in the extractive industries – the complete transfer of own-
ership from a private firm to the state – has a long history. This is especially true in
the case in the oil industry:28

Outright nationalization of oil and gas … first took place in the con-
text of the Russian Revolution in 1917. This was followed by nation-
alizations in Bolivia (1937, 1969), Mexico (1938), Venezuela (1943),
Iran (1951), and Argentina, Burma, Egypt, Indonesia and Peru in the
1960s … In the 1970s, nationalizations occurred in Algeria, Iraq,
Kuwait, Libya and Nigeria and there was a gradual increase in Saudi
ownership of Aramco … [Such nationalizations] have changed the
global landscape of petroleum extraction and contributed to the
emergence and subsequent strengthening of State-owned firms.29

A clear indication of such a change in the global landscape is provided by the
prominent position of state-owned firms among the world’s largest oil companies
(see Table 12.1, p. 414). Indeed, national oil companies (NOCs) control the vast
majority of the world’s oil reserves.

Controlling prices
The nationalization of oil production makes possible (though far from inevita-
ble) collaboration between oil producing countries to control production lev-
els and, therefore, prices. The clearest example is OPEC, the Organization of the
Petroleum Exporting Countries. OPEC was set up in 1960 as a reaction to the cut
in the oil price made unilaterally by Standard Oil. Its aim was

to defend the price of oil – more precisely, to restore it to its [1960]
level. From here on, the member countries could insist that the com-
panies consult them on the pricing matters that so centrally affected
their national revenues.30

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PART FOUR THE PICTURE IN DIFFERENT SECTORS410

The original OPEC membership consisted of five oil producing countries: Iran,
Iraq, Kuwait, Saudi Arabia and Venezuela. A further seven countries subsequently
joined: Qatar (1961), Libya (1962), United Arab Emirates (1967), Algeria (1969),
Nigeria (1971), Ecuador (1973; left and rejoined 2007), Angola (2007).

OPEC’s influence was limited until the outbreak of the 1973 Arab–Israeli War when

it was the oil weapon, wielded in the form of an embargo – produc-
tion cutbacks and restrictions on exports – that … altered irrevocably
the world as it had grown up in the postwar period … The embargo
signalled a new era for world oil … The international order had been
turned upside down. OPEC’s members were courted, flattered, railed
against, and denounced. There was good reason. Oil was at the heart
of world commerce, and those who seemed to control oil prices were
regarded as the new masters of the global economy.31

Today, although OPEC’s influence is lessening in the light of new oil discoveries
elsewhere – notably shale oil – it remains highly significant and reminds us of the
highly politicized nature of the oil industry. OPEC member countries produce
around 40 per cent of the world’s crude oil; their exports account for around 60
per cent of world oil exports.

A (partial) return to privatization
Nationalization has also been a strong trend in the metal mining industries. For
example, the number of expropriations of foreign mining enterprises increased
from 32 between 1960 and 1969 to 48 between 1970 and 1976.32 As in the oil
industry, this resulted in a squeeze on the private companies:

For example, the share of the seven largest TNCs in copper mining
outside the centrally planned economies fell from 60% in 1960 to 23%
in 1981 as a result of nationalizations … By the early 1980s, the par-
ticipation of TNCs in many developing countries had become limited
to minority holdings and non-equity agreements with State-owned
enterprises. However, many of the nationalizations undertaken in
Africa and Latin America in the metal mining industry turned out to
be failures.33

As a result of such failures, the emphasis has shifted towards a greater liberalization
of the ownership/exploitation laws in many mining countries. Between 1985 and
the early 2000s, more than 90 states introduced new laws, or relaxed existing laws,
in order to attract foreign investment.34 Widespread privatization, often as part of
a broader neo-liberalization project, became the norm: ‘By the early 2000s, the

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THE EXTRACTIVE INDUSTRIES 411

privatization process in the [metal mining] industry worldwide, apart from China,
had been more or less completed.’35

Power games: states and firms; states and states
As we saw in Chapter 7, the power relationships between states and firms are highly
dynamic and contingent. In some cases, the balance of power lies one way, in other
cases it lies the other way. That balance tends to shift over time. In Chapter 7, we
met the term obsolescing bargain which refers to the situation in which once private
capital is ‘sunk’ in a fixed form the advantage tends to move away from the inves-
tor to the state that controls access to the resource. Although this situation may
not generally prevail in many sectors, it certainly applies in the extractive sector. A
detailed study of the development of the oil industry in Kazakhstan36 provides evi-
dence of how a state can learn how to renegotiate contracts with a foreign investor;
in other words, it shows how the balance of power can shift over time.

Kazakhstan achieved independence in 1991. It was rich in oil but lacked the
technology to develop its resource. It needed foreign investors. Like many other
former Soviet Republics and allies, Kazakhstan rushed into the wholesale privati-
zation of its assets, primarily its resource extraction activities. By 2002, around half
of the FDI entering Kazakhstan was concentrated in the petroleum industry. One-
quarter of the country’s oil production originates from the Tengiz oilfield in the
west. It is a rich field, but difficult to exploit:

it is the deepest high pressure deposit in the world, with oil that
emerges from the ground scalding hot, at a very high pressure, and
laden with poisonous hydrogen sulfide, which must be removed from
the oil.37

Such a challenging field required a very sophisticated technology. The US com-
pany Chevron had started negotiations with the Soviet government in 1990. After
independence, the negotiations shifted to Kazakhstan, a state with absolutely no
experience in such complex political bargaining. In contrast, Chevron, one of the
world’s biggest and oldest oil companies, was a very old hand at this game. Ten
years after the contract was signed, Kazakhstan attempted to renegotiate the terms,
based on the kinds of circumstances implied in the obsolescing bargain concept:

the agreement had been made, the investments were sunk, the oil was
beginning to turn a profit for the corporation, and the state started to
feel that the distribution of benefits were too much in favor of the
MNC. The country called for renegotiations.38

Kazakhstan had already negotiated some improvements over a period of time but
without a firm contractual basis. It was this that was now being sought:

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PART FOUR THE PICTURE IN DIFFERENT SECTORS412

In such an event, the renegotiations in question were not a simple affair
and likely did not progress as Kazakhstan had predicted. The renego-
tiations involved the financing arrangements for major gas processing
and recycling projects designed to reduce pollution as well as for pro-
jects to increase production at the TengizChevroil venture. Looking
back … it may seem surprising that Chevron would shut down its
operations in protest of the renegotiations. Yet initially it did … the
result of Chevron’s following through on its threat, and being taken by
surprise that Kazakhstan indeed demanded renegotiations. After recal-
culating its costs, expected value, and strategic play, and given the
strategy revealed by the State’s move, Chevron reversed its decision
after just two months. TengizChevroil’s operations were resumed in
January of 2003, with Chevron agreeing to some revisions in the con-
tractual terms.39

On the basis of this learning experience, Kazakhstan subsequently managed to
introduce a series of regulatory measures for its oil industry as a whole: renegotia-
tions with other companies; more stringent rules for foreign investors; a reversal of
over-generous VAT exemptions; power to cancel a contract that did not meet its
economic expectations; introduction of a new oil export duty; better environmen-
tal provisions, including the banning of all gas flaring. Eventually, in 2002, the state
set up its own NOC to ensure a more active role in its extractive sector.

This example is one of state–firm rivalry. But given the strategic importance of
extractive resources for all states, these industries are also characterized by a high
degree of state–state rivalry. This is especially true of the major users of resources:
the established industrialized countries and the newer, fast-growing countries of
Asia. For those countries possessing a substantial resource base of their own, like
the USA, for example, a major aim is to sustain as much of that resource as pos-
sible for strategic reasons while importing resources to meet their needs. In this
latter case, there is a strong incentive to attempt to control access to resources
located overseas through either state-owned or private firm investment. In other
words, it is in the resource extractive industries that direct state–state competition
is most evident.

Currently, the most obvious example concerns the involvement of both the
USA and China in the ‘scramble’ for oil and other minerals in Africa, through
direct or indirect government participation:

The US and China are competing to secure access for the oil riches of
Africa … Both the American and Chinese governments were important
in paving the way for American and Chinese oil interests in expanding
in Africa. The US government used diplomatic instruments … economic
incentives … and military aid (the largest portion of US military aid to
Africa was aimed at Nigeria and Angola). While the US government

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THE EXTRACTIVE INDUSTRIES 413

assisted private US firms in obtaining oil concessions for oil exploration
and production, the Chinese government focused instead on securing oil
supplies through bilateral agreements. As the most notable example,
Sinopec – a Chinese state-owned oil company – acquired oil concessions
in [Angola] … on the back of a US$2 billion oil-backed credit from
China’s Eximbank in 2004 to rebuild the country’s railways, government
buildings, schools, hospitals, and roads … The Angola example demon-
strates how China has adopted an aid-for-oil strategy.40

Interstate rivalry for resources is also apparent in international trade disputes. Again,
it is not surprising that the most recent cases involve China. In mid-2009, the USA
and EU initiated action in the WTO against China for its alleged restrictions on
exports of key materials, such as silicon, coke and zinc:

China imposes restrictions, including minimum export prices and tariffs
of up to 70% on a range of raw materials of which it is a major producer.
The EU claims these not only break general WTO rules on world trade,
but specific promises China made when it joined the organization in
2001, becoming a fully fledged player in global markets.41

CORPORATE STRATEGIES IN THE EXTRACTIVE
INDUSTRIES

Consolidation and concentration
The oil industry
The top 10 companies shown in Table 12.1 account for around 60 per cent of
world oil production. No fewer than 3 of the top 5, and 15 of the world’s 25 larg-
est oil producers, are fully or majority state owned, the result of the widespread
nationalizations discussed in the previous section. This is in stark contrast to the
situation that prevailed before the early 1970s:

Until the 1970s, a few major TNCs from the US and Europe domi-
nated the international oil industry. In 1972, 8 of the top 10 oil pro-
ducers were privately owned … including the so-called Seven Sisters
… These were fully integrated oil companies, active in the extraction
and transportation of oil as well as in the production and marketing of
petroleum products.42

In order to compete on what the private oil companies see as a very uneven playing
field, there has been a great deal of consolidation through merger and acquisition,
as well as a proliferation of collaborative ventures between private firms and also

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PART FOUR THE PICTURE IN DIFFERENT SECTORS414

between private firms and state-owned companies. The most recent – and biggest –
was the acquisition by the Russian company Rosneft of TNK-BP for $55 billion in
2013. This made Rosneft the largest listed oil and gas company in the world in terms
of total production and proven reserves, ahead of ExxonMobil.43 Nevertheless, the
private oil companies ‘are increasingly being squeezed by the growing power of
the national companies and by dwindling reserves and production in accessible and
mature basins outside OPEC countries. The super-majors have been struggling to
replace their proven reserves and expand production.’44 At the same time, the capital
intensity of production, refining and transportation reinforces the position of the
major companies and raises the already high barriers to entry.45

The metal mining industries
Historically, the metal mining industries have been highly fragmented, but this is
changing rapidly as a smaller number of very large companies control an increas-
ing share of world production:

Table 12.1 The world’s largest oil and gas companies, 2012

Rank 2012

Rank
1995 Company Home country

State
ownership (%)

Total
production

(million
barrels/day)

1 1 Saudi Aramco Saudi Arabia 100 12.5

2 3 Gazprom Russia 9.7

3 3 NIOC Iran 100 6.4

4 5 ExxonMobil USA 5.3

5 7 PetroChina China 100 4.4

6 13 BP UK 4.1

7 6 Royal Dutch/Shell UK/Netherlands 3.9

8 4 Pemex Mexico 100 3.6

9 16 Chevron USA 3.5

10 9 KPC Kuwait 100 3.2

11 23 ADNOC UAE 100 2.9

12 Sonatrach Algeria 100 2.7

13 33 Total France 2.7

14 20 Petrobras Brazil 100 2.6

15 Rosneft Russia 2.6

16 MoO Iraq 100 2.3

17 QP Qatar 100 2.3

18 11 Lukoil UAE 2.2

19 ENI Italy 2.2

20 Statoil Norway 100 2.1

Source: based on material in Helman, 2012; UNCTAD, 2007: Table IV.8

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THE EXTRACTIVE INDUSTRIES 415

Worldwide … there are more than 4,000 metal mining firms, mostly
engaged in exploration and extraction … Most of the 149 ‘majors’ are
TNCs, the majority of which have production facilities covering min-
ing, smelting as well as refining. These companies account for some
60% of the total value at the mining stage of all non-energy minerals
produced … The degree of concentration in the metal mining indus-
tries increased significantly between 1995 and 2005.46

The top 10 metal mining companies shown in Table 12.2 produced around one-third
of total world output in 2007. Whereas the oil industry is now dominated by national
companies, the degree of state ownership in metal mining is significantly lower. Only
one of the top 10 mining companies, the Chilean company Codelco, is fully state
owned and only one other, the Brazilian company Vale, has significant state involve-
ment. This is a consequence, as we saw in the previous section, of the widespread
adoption of privatization policies by many national resource holders in recent years.

At the same time, there has been a wave of mergers and acquisitions in the metal
mining industries, largely stimulated by the surge in commodity prices that occurred
in the mid-2000s (see Figure 12.7). In 2006 alone, the value of mergers and acquisi-
tions in these industries was $55 billion. Two of the biggest acquisitions in that year
were of Inco (Canada) by the Brazilian company Vale, and of Falconbridge (Canada)
by Xstrata, the Swiss mining company. The pace accelerated in 2007 and included
Rio Tinto’s acquisition of the alumina producer Alcan, and the attempted hostile
acquisition of Rio Tinto by BHP Billiton. This latter case turned out to be highly

Table 12.2 The world’s largest metal mining companies

Rank
2007

Rank
1995 Company Home country

State ownership
(%)

Percentage share of
world production

1 6 Vale Brazil 12 5.2

2 4 BHP Billiton

Group

Australia 4.6

3 1 Anglo American

plc

UK – 4.3

4 2 Rio Tinto plc UK – 4.0

5 5 Codelco Chile 100 3.4

6 11 Freeport

McMoran

USA – 3.3

7 7 Norislk Nickel Russian Federation -• 2.7

8 8 Xstrata plc Switzerland – 2.4

9 14 Barrick Gold

Corp.

Canada – 2.3

10 22 Grupo Mexico Mexico – 1.6

Source: based on Ericsson, 2008: Table 1; UNCTAD, 2007: Table IV.4

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PART FOUR THE PICTURE IN DIFFERENT SECTORS416

contentious and was abandoned in 2008, largely because of the collapse in commod-
ity prices. This situation was made especially complex because the Chinese state-
owned company Chinalco attempted to double its equity stake in Rio Tinto in order
to stop the BHP Billiton takeover. What would have been China’s biggest overseas
investment was acrimoniously prevented by Australian pressure. The disagreements
were exacerbated by the proposal of BHP and Rio Tinto to form an iron ore joint
venture. Again, we see the immensely political nature of the extractive industries.
Talks also began in 2009 on a possible merger between Xstrata and Anglo American
to create a rival to BHP Billiton and Rio Tinto. This venture was abandoned.

A far more revolutionary merger was concluded in 2013 between Xstrata and
Glencore. This $90 billion merger brought together one of world’s largest metal min-
ing companies (Xstrata) and the leading commodities trading company and metal
mining company (Glencore). The unique feature of this huge merger47 is its creation
of a fully vertically integrated company ‘from the shovel to the shelf ’ whereby
‘Glencore/Xstrata combined will cover all areas from exploration to marketing’ with
the intention of ‘capturing each and every dollar along the supply chain’.

Whether or not this vertically integrated model will spread to other major
companies in these industries is far from clear; if it were to do so it would dra-
matically reconfigure the mining industries. Whatever the ultimate outcome of
this and other mergers, one thing is clear:

The fragmented structure of mining is slowly disappearing … [T]he
industry is getting more and more polarised, to the one side there are
the large, established mining TNCs controlling a major share of global
metal production and on the other side are the junior exploration
companies without any production, only ‘blue sky’ hopes of future
production. There is a lack of medium and small sized producers, which
can grow organically and become major producers with time. These
companies are important in that they concentrate on smaller deposits
which often have good grades but which are discarded by the majors.48

Organizational and geographical restructuring
The geography of the extractive industries is, as we have seen, basically constrained
by the distribution of the territorially embedded resources on which they are
based, together with the need to transport outputs at each stage of the produc-
tion circuit, particularly to the final market. In the case of the oil industry, it is also
strongly influenced by the ownership of the firms involved. In general, most of the
state-owned firms have a very restricted geography, mostly limited to their home
territory. In contrast, the production spaces of the private companies are globally
extensive. However, some state companies have begun to develop more extensive
geographies. CNPC, for example, has operations in 14 foreign locations, Kuwait
Petroleum Corporation and Petrobras in 8. Figure 12.8 maps the geographical
distribution of some of the leading oil companies.

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THE EXTRACTIVE INDUSTRIES 417

B E
P R T

B C
E K TB E

P T

B C E
B K R

B C
E R

B E R T

B K R
B K R

B P T

B P T

T T
T

T
E
E
C
C

C
G

RB

E
R

R TE R

C TC RC K
E T

E T
B T

R T

C P

C P

E R T
C R T

B E T

E K T
C E R T

B C E
P R T

G
E

B
R
C
T

K
P

British Petroleum
CNPC
ExxonMobil
Gazprom
Kuwait Petroleum
Petrobras
Royal Dutch Shell
Total

Figure 12.8 Geographies of oil production by some major companies

Source: based on data in UNCTAD, 2007: Table IV.10

0
5
10
15

N
u

m
b

e
r

o
f

co
u

n
tr

ie
s

in
w

h
ic

h
co

m
p

a
n

y
is

in
v

o
lv

e
d

Exploration

Mining production

Refining/smelting

BHP
Billiton

Rio Tinto Vale Anglo
American

Grupo
México

Xstrata
plc

Glencore
International

Figure 12.9 Distribution of exploration, production and refining/smelting projects
by leading mining companies

Source: based on data in UNCTAD, 2007: Tables IV.5–IV.7

Figure 12.9 shows the distribution of some metal mining companies’ opera-
tions. Their geographical extensiveness varies considerably both by size of firm
and by type of operation (exploration, production, refining/smelting):

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PART FOUR THE PICTURE IN DIFFERENT SECTORS418

In exploration, the activities of certain TNCs, such as Anglo American
and Xstrata (present in 14 countries each) were widely spread … All
but four of the top-25 producers … were involved in exploration
activities in at least one foreign country. In terms of mining production,
Rio Tinto was the company with activities in the largest number (10)
of host countries … In smelting and refining, Glencore was the most
internationalized top metal mining company, with a presence in 13
host countries, followed by BHP Billiton (9) … Leading firms appear
to be more internationalized in exploration and mining production
than in smelting and refining.49

The major extractive companies vary enormously in their degree of product diver-
sification. Some focus on one or two specific resources; others operate as highly
diversified companies. They also differ in the extent of their functional integration
along their production circuit. Four broad types can be identified:50

•• Vertically integrated companies: active in all stages of exploration, development,
extraction, refining and distribution. In the case of oil companies such vertical
integration extends into retailing.

•• Independent producers: specialize in upstream activities with very limited down-
stream activity.

•• Independent transporters, refiners and distributors: specialize in the middle and/or
the downstream segments of the production circuit.

•• Service companies: provide ‘drilling, interpretation and logistical services to producers’.

One of the most significant developments in the organization and operation of
the extractive industries has been the huge increase in the influence of specialist
services firms. In the case of oil, for example,

drilling operations are often outsourced to a contract drilling com-
pany who may also provide the rig or drill-ship (e.g. Parker Drilling)
and who undertakes to crew the rig. Drilling tool supply may be
contracted to a specialist tool company (e.g. Baker Hughes), with data
logging, data analysis and well maintenance contracted to another
firm (e.g. Schlumberger). For many large projects, engineering, design
and project management functions may also be outsourced (e.g.
AMEC). These specialist upstream oil service companies operate on
a global scale, with patterns of inter-firm relations developed in
one geographical setting (e.g. Gulf of Mexico) often replicated
in other regional contexts (e.g. offshore West Africa or the North
Sea) … This … dramatic growth of the oil service market has led
several commentators to suggest that the balance of power is shifting away
from the majors as a number of oil service providers – Halliburton,

12_Dicken-7E_Ch-12.indd 418 19/11/2014 10:47:07 AM

THE EXTRACTIVE INDUSTRIES 419

Schlumberger, Baker Hughes – assume an increasingly dominant role
in the production chain.51

A similar trend towards the increasing importance of specialist service suppliers is
also evident in the metal mining industries:

The growing role of such suppliers is being driven by the reorganiza-
tion of global mining production and technological rejuvenation of
the industry, with continued improvements in exploration, mining and
mineral processing. Suppliers are focused on specific niches in which
they have a globally dominant position …

Examples … include large international consulting firms that integrate
engineering, project management, procurement and construction
activities, such as Kvaerner (Norway), Hatch (Canada), and Bechtel
Group (US); medium-sized specialized engineering consulting com-
panies, such as Bateman (South Africa), SRK Consulting (South
Africa), and AMC Consultants (Australia); and small- to medium-sized
mining and geological software providers, such as Maptek (Australia).52

RESOURCES, RESERVES AND FUTURES

The dilemma facing all extractive industry producers, whether state owned or pri-
vately owned, is that ‘as extractors of non-renewable resources … they necessarily
consume their resource base during production’.53 Hence, there is a continuous search for
new sources of supply and for new techniques that enable the extraction of materials
from less and less pure deposits. The big question, of course, is the extent to which
the world is running out of viable resources. On this issue, views are highly polarized.

On the one hand, there is the ‘Malthusian’ view that resource exhaustion is
inevitable; the only question is the timescale over which such exhaustion will
occur. On the other hand, there is the view that new technologies of exploration
leading to discoveries of new reserves (e.g. shale oil and gas), better means of
exploitation leading to more efficient use of the resource (including recycling),
and the development of appropriate substitutes will put off the dreadful day. Such
polarization of views is reflected clearly in the arguments about ‘peak oil’: the
assertion that oil production is about to peak and then move into inexorable
decline.54 The problem is that there are so many variables at work that it is extraor-
dinarily difficult to assess the extent of future reserves of minerals. All the estimates
of future are based on assumptions. A small change in one of the variables, whether
on the demand or the supply side, can drastically change the predictions.

Figure 12.10 provides a framework (known as a McKelvey Box) for under-
standing the complex relationships between reserves and resources:

12_Dicken-7E_Ch-12.indd 419 19/11/2014 10:47:07 AM

PART FOUR THE PICTURE IN DIFFERENT SECTORS420

The reserves category includes all geologically identified deposits that
can be economically recovered and is subdivided into proved, probable
and possible reserves on the basis of geological certainty. All other
deposits are labelled resources, either because they have not yet been
discovered or because their exploitation is not currently feasible (tech-
nical and economic problems are inhibiting their extraction) … Thus,
resources are continuously reassessed in the light of new geologic
knowledge, scientific and technical progress and changing economic
and political conditions. Known resources are therefore classified on
the basis of two types of information: geologic or physical/chemical
characteristics (grade, quality, tonnage, thickness and depth of material
in place); and financial profitability based on costs of extraction and
marketing at a given point in time.55

This way of looking at resources and reserves is essentially techno-economic. But
there are also environmental, ecological and geographical dimensions56 that relate
to the impact of continued resource exploitation on sustainable development and
the effects of resource extraction on the places where it occurs and of transporta-
tion between places of extraction, production and consumption (see Chapter 9). In

Identified Resources Undiscovered Resources
those whose location, grade, quality and quantity are known or estimated
from specific geologic evidence. This includes economic and subeconomic
components and can also be subdivided on geologic certainty grounds
into measured (proved), indicated (probable) and inferred (possible).

that part of the reserve base which could be economically extracted or
produced at the time of determination.

measured plus indicated.

assumed continuity of
data, estimates not
supported by samples
or measurements.

undiscovered resources
that are similar to known
mineral bodies and that
may reasonably be expected
to exist in the same
producing district or region
under analogous geologic
conditions.

undiscovered resources
that may occur either in
known types of deposit in
favourable geologic settings
where mineral discoveries
have not been made, or in
types of deposit as yet
unrecognized for their
economic potential.

size, shape, depth and
mineral content of the
resource are well
established.

geologic data not as
comprehensive as for
measured but still
probably good enough
to estimate the
characteristics of the
deposits.

the existence of which are only postulated, comprising
deposits that are separate from identified resources.

Demonstrated Resources Hypothetical
Resources

Speculative
Resources

Inferred
Resources

Measured Resources

SU
B

EC
O

N
O

M
IC

Indicated Resources

ECONOMIC RESERVES

RESOURCES

Increasing degree of geological assurance (chemical composition,
concentration, orientation and extent of deposits, plus constraints)

In
cr

e
a

si
n

g
d

e
g

re
e

o
f
e
co

n
o

m
ic

fe
a

si
b

il
it

y
(p

ri
ce

s,
co

st
s,

te
ch

n
o

lo
g

y
)

Figure 12.10 McKelvey Box framework for resources and reserves

Source: adapted from Turner et al., 1994: Box 16.1

12_Dicken-7E_Ch-12.indd 420 19/11/2014 10:47:07 AM

THE EXTRACTIVE INDUSTRIES 421

a sense overriding all of these considerations, however, is the fact that the ‘limits’ to
resources are, essentially, socially and, therefore, politically determined. Choices have to be
made, for example, as to how much money should be thrown at finding and extract-
ing increasingly difficult resources or over what is the acceptable degree of environ-
mental and ecological damage. The disastrous oil leakage in the BP operations in the
Gulf of Mexico in 2010 demonstrated the potential scale of environmental damage
posed by attempts to extract oil from very difficult locations. It surely will not be the
last example. Indeed, the environmental implications of shale oil and gas exploitation
are highly controversial, especially in Europe. Ultimately, then, the future shape of the
extractive sectors ‘will be determined not by natural limits but by social choice’.57

NOTES

1 Smith (2005) makes this argument in his plea for research on global commodity
chains to take the extractive sector more seriously.

2 UNCTAD (2007: 83).
3 See Bridge (2009).
4 Hudson (2001: 301).
5 Bridge (2008b: 413).
6 See, for example, Bridge (2008b), Bunker and Ciccantell (2005), Yergin (1991).
7 Bunker and Ciccantell (2005).
8 Farooki and Kaplinsky (2012).
9 UNCTAD (2007: Table III.1).
10 USGS (2013: 1).
11 Bridge (2008b: 400).
12 International Energy Agency (2012: 1–2).
13 UNCTAD (2007: 88).
14 Farooki and Kaplinsky (2012), The Economist (15 March 2008).
15 The Economist (15 March 2008).
16 UNCTAD (2007: 90–1; emphasis added).
17 UNCTAD (2007: 92).
18 Bridge (2008b: 403).
19 UNCTAD (2007: 92).
20 Smith (2005: 152).
21 Bridge (2008b: 404).
22 Guardian (7 February 2009).
23 Financial Times (11 June 2013).
24 Barham and Coomes (2005).
25 Barham and Coomes (2005: 160).
26 UNCTAD (2007: 99).
27 UNCTAD (2007: 99).
28 Yergin (1991).
29 UNCTAD (2007: 115).
30 Yergin (1991: 523).

12_Dicken-7E_Ch-12.indd 421 19/11/2014 10:47:07 AM

PART FOUR THE PICTURE IN DIFFERENT SECTORS422

31 Yergin (1991: 588, 613, 633).
32 UNCTAD (2007: 108).
33 UNCTAD (2007: 107–8).
34 Bridge (2004: 407).
35 UNCTAD (2007: 108).
36 Hosman (2009). The following section draws from this analysis.
37 Hosman (2009: 19).
38 Hosman (2009: 19).
39 Hosman (2009: 20).
40 Frynas and Paulo (2006: 229, 238–9). See also Mohan (2013), Mohan and Lampert

(2012), Power et al. (2012).
41 Guardian (24 June 2009).
42 UNCTAD (2007: 115).
43 Financial Times (3 April 2013).
44 International Energy Agency (2012: 10).
45 Bridge (2008b: 408).
46 UNCTAD (2007: 109).
47 Financial Times (8 February 2012).
48 Ericsson (2008: 114–15).
49 UNCTAD (2007: 111).
50 Bridge (2008b: 397–8). See also UNCTAD (2007: 113).
51 Bridge (2008b: 400, 408).
52 UNCTAD (2007: Box IV.3, p. 113).
53 Bridge (2004: 407).
54 See, for example, Clarke (2007), Monbiot (2012), Strahan (2007).
55 Turner et al. (1994: 222, 224).
56 Emel et al. (2002: 383–8).
57 Gavin Bridge, personal communication.

Want to know more about this chapter? Visit the companion website at
www.guilford.com/dickenGS7 for free access to author videos, suggested
reading and practice questions to further enhance your study.

12_Dicken-7E_Ch-12.indd 422 19/11/2014 10:47:07 AM

A Tale of Two Gulfs: Life, Death, and Dispossession along Two
Oil Frontiers

Michael Watts

American Quarterly, Volume 64, Number 3, September 2012, pp. 437-467
(Article)

Published by The Johns Hopkins University Press
DOI: 10.1353/aq.2012.0039

For additional information about this article

Access provided by University of California @ Berkeley (13 Jan 2014 17:18 GMT)

http://muse.jhu.edu/journals/aq/summary/v064/64.3.watts.html

http://muse.jhu.edu/journals/aq/summary/v064/64.3.watts.html

| 437The Tale of Two Gulfs

©2012 The American Studies Association

A Tale of Two Gulfs: Life, Death, and
Dispossession along Two Oil Frontiers

Michael Watts

When the drill bored down toward the stony fissures
and plunged its implacable intestine

into the subterranean estates,
and dead years, eyes of the ages,

imprisoned plants’ roots
and scaly systems

became strata of water,
fire shot up through the tubes
transformed into cold liquid,

in the customs house of the heights,
issuing from its world of sinister depth,

it encountered a pale engineer
and a title deed.

—Pablo Neruda, “Standard Oil Co.,” Canto General

O
il’s relation to modernity has been construed in three broad sorts of
ways with very little intellectual traffic between them. One focuses
on oil-producing states and, to quote the title of Michael Ross’s new

book (2012), on “how petroleum wealth shapes the development of nations.”
In Ross’s dystopian account it is the scale, source, instability, and secrecy of oil
and the attendant rise of the so-called new seven sisters—the massive national
oil companies of petrostates like Nigeria, Russia, Saudi Arabia, and Iran—which
explain the so-called paradox of plenty, namely, the state pathologies and human
developmental failures of oil-rich states (the “resource curse”). In his influential
book The Bottom Billion, the Oxford economist Paul Collier offers a version of
this thesis in which oil revenues are captured by rapacious political elites (“the
survival of the fattest”) thereby contributing to autocratic rule, and those rev-
enues are also predated or looted by rebels for whom oil finances not so much
emancipatory politics (social justice, self-determination) but organized crime
conducted as insurgency and war (in Collier’s account, greater oil dependency
produces an increased likelihood of civil war and violence). An “oil curse” ap-
pears, in analytic terms, rather like hydrocarbon determinism; or at the very

| 438 American Quarterly

least the causal powers attributed to oil are given particular sorts of meanings
and valencies. Oil here means oil money and oil politics means rents captured
by state agencies and the political class. The agency of oil corporations, or the
oil service industries or financial institutions, for example, is almost entirely
nonexistent. Put differently, in the universe of the resource curse an Exxon or
a Shell is an agent that in conceptual terms is only present as an entity to be
predated by rebels who have figured out how to make oil a profitable business
(in effect, violent accumulation through a protection racket).

Another line of reasoning—Michael Klare’s new book The Race for What’s
Left (2011) is a good exemplar—is almost entirely focused on “Big Oil” and
global geopolitics (from the vantage point of American empire, what he has
called the U.S. global oil acquisition strategy). Here the driving logic resembles
another form of commodity determinism, this time emitting a robust Mal-
thusian signal. Resources like oil are finite; industrial capitalism’s enormous
appetite for oil and gas is now spurred on by extraordinary capitalist dynamism
in South and East Asian economies—more than half of the oil consumed be-
tween 1860 and the present was accounted for in the three decades after 1980.
Peak Oil in now upon us, which necessarily amplifies the geopolitical pressures
and struggles precipitated by tight oil markets, slower rates of discovery, and
challenging operating environments (the “end of cheap and easy oil,” as the
oil industry puts it). Precisely because of its strategic qualities, oil exploration
and development has a praetorian cast, a frontier of violent accumulation
working hand in hand with militarism and empire. Haunted by the specter
of depletion, states and corporations embark on a desperate scramble for oil
(and other natural resources, as the new McKinsey report on the “resource
revolution” emphasizes),1 which is leading inexorably to a tooth and nail
struggle for both conventional and unconventional hydrocarbons (e.g., the
tar sands, shale gas, deepwater oil and gas). In this account we are about to
enter a new “thirty-years” war for resources characterized by market volatility,
ruthless resource grabs, and a sort of military neoliberalism.2 Here it is less oil
as money than oil as post–Cold War power politics (or oil as national security
in the contemporary argot). What is on offer is a Big Oil–Big Military–Big
Imperial State triumvirate. The invasion of Iraq in 2003 is, in this account, a
sort of paradigmatic case.3

Finally, there is oil as an item of mass consumption, or more properly the
relations between oil and modern forms of life, most especially the post-1945
American way of life defined, one might say, through petrochemistry. Here the
language—theoretical and empirical—is of a rather different register. Oil is
capacious, central to virtually every aspect of our lives; as the New York Times

| 439The Tale of Two Gulfs

put it, oil “oozes through your life,” showing up in everything from asphalt to
milk shakes to drugs to plastics to fertilizers.4 Oil is capacious, the lifeblood of
just about everything including, it turns out, the sorts of civic freedoms and
political liberties that most Americans have come to take for granted: unlim-
ited personal mobility, cheap food, the prospect of property ownership in the
suburbs.5 Oil underwrites modern life, but the social cost is addiction (“Drill,
baby, drill”), the terrible costs of which are now clear: carbon emissions and
global warming, the assumption of new technological and environmental risks
as unconventional sources are exploited, and continued political dependency
on parts of the world that, as Dick Cheney famously noted, do not have U.S.
interests at heart. Not only is the era of easy oil a thing of the past, but the
burdens of oil exploitation will increasingly be felt on the domestic front in
Alaska, in the Gulf of Mexico, and across the Marcellus and Barnett shales in
the mid-Atlantic and southern states. In this rendering, oil is a form of bio-
power,6 a resource central to the life of populations and to the management of
populations.7 To deploy the language of Stephen Collier and Andrew Lakoff,
oil actively constitutes a particular “regime of living”—but also, as I show, a
regime of death, of bare life.8

In much of this writing, oil has been invested with Olympian powers. Oil
distorts the organic, natural course of development; oil wealth ushers in a
bloated economy of hyperconsumption and spectacular excess: decadent shop-
ping malls in Dubai or flagrantly corrupt Russian “oilygarchs.” The danger in
all this sort of oil talk is that there is a slippage between oil as a commodity of
indisputable political, economic, and cultural significance and what one might
call commodity determinism. Oil, says Imre Szeman, is hardly incidental to
capital or to modernity, but “that is not the same as saying it is a prime mover
of all decision making.”9 Oil rarely escapes the long shadow of Malthusian
scarcity—peak oil thinking, after all, saturates much of the thinking on the
political right and left. But hugely inflated powers are vested in the thing itself:
petroleum undermines or promotes particular forms of democracy, it causes
war and rebellion, it retards economic growth, it captures political office. To see
oil in this way not only exaggerates the powers of the thing itself (as opposed
to thinking about oil capital and oil markets) but also provides too blunt, and
curiously too truncated, an accounting of the political economy of what I call
the oil assemblage.

Many of those who write about oil typically, and rather curiously, have
little to say about the materiality of oil and the political economy of what
falls within the circumference of a vast, complex industry.10 Timothy Mitchell
properly notes that most explanations of oil “have little to do with the ways oil

| 440 American Quarterly

is extracted, processed, shipped and consumed,”11 or the apparatuses by which
oil is converted into forms of affluence and influence. Often, he says, oil is an
affliction of governments that deploy petrodollars, “not of the processes by
which a wider world obtains the energy that drives its materials and technical
life.”12 I want to explore these apparatuses of oil—the oil assemblage—to ad-
dress the questions of this special issue, namely, empire, dispossession, race,
and the insecurities of neoliberal life.

To do so, I read two experiences against each other: first, the onshore oil
world in the global South (the Niger delta in Nigeria as part of the wider
Gulf of Guinea), and the offshore world of deepwater oil and gas exploration
and production in the United States (specifically, the Gulf of Mexico and the
Deepwater Horizon blowout). Both arenas can be seen as oil frontiers—fron-
tiers of accumulation and dispossession—rooted in the operations of specific
oil assemblages. I hope to do justice both to the relations between the deep
infrastructures of the oil world—pipelines, rigs, flowstations, tankers, financiers,
engineering firms, security forces, and so on—and to the regimes of life and
death in the postcolonial South and the advanced capitalist North. Mitchell
claims that the structure of the oil industry is ignored at great cost precisely
because it becomes a sort of abstraction—it can be copied or deposited from
place to place in a modular fashion—in contradistinction to the notion that
political, economic, and social relations are in fact “engineered out of the flows
of energy.”13 This fabrication is place and time specific because oil is always
“discovered” in space-time (say, Spindletop, Texas, January 10, 1901), and
subsequently inserted into a very specific localized (if more or less globalized)
political economy even if the properties of the wider oil assemblage are in some
sense generic or normalized. This insertion process is never just a reflection of
a political or economic order developed de novo by Big Oil but the outcome
of complex accommodations, compromises, complicities, oppositions, and
violence. As Mitchell puts it in regard to the Middle East, the oil industry
was “obliged to collaborate with other political forces, social energies, forms
of violence and powers of attachment.”14 As Pablo Neruda’s great poem says,
the trail of oil leads to the engineer, the title deed, and the customhouse.

Opening up these frontiers—whether in Angolan or Brazilian deepwater,
Russian Siberia or increasingly now the frozen frontiers of the Arctic—neces-
sitates engagements with place-specific social and political forces,15 none of
which necessarily or easily are compatible with some presumed set of desires of
corporate oil capital (political stability, surplus management, price control) or
indeed of imperialist oil-consuming states. In one case the terminal point is an
insurgency and combustible politics threatening the very operations of the oil

| 441The Tale of Two Gulfs

industry and the petrostate itself; in the other it is the violence of a blowout,
the loss of human and environmental life and livelihoods—and of the deadly
consequences of substituting technical and financial over political risks. But my
story has to start elsewhere, with the prosaics of the oil apparatuses themselves.

The Oil Assemblage

A key starting point is to see oil and gas as a global production network with
particular properties, actors, networks, governance structures, institutions, and
organizations (a global value chain in the industry argot) but what is, in effect,
a regime of accumulation and a mode of regulation.16 Seen in this way, oil
and gas is gargantuan on all counts. The value of the recoverable oil and gas
globally is perhaps $160 trillion (more than the value of all equity markets and
equal to the total value of all tradable financial assets); the value of the oil and
gas market alone is over US$3 trillion. Assets of the entire industry now total
over US$40 trillion. Close to 70 percent of all oil produced is traded (over 50
million barrels per day), accounting for the largest component in world trade.
Not unusually, over 1 billion barrels of oil can be traded in a day on the New
York Mercantile Exchange and the InterContinental Exchange, much of this
being “paper oil” (never delivered physically as oil), which is to say part of the
booming commodities futures market. By way of comparison, if Exxon were a
country it would be twice as large as the GDP of Nigeria (a major oil producer
and home to 150 million people) and comparable to Sweden; the largest five
oil companies’ collective revenues exceed the GDP of all of Africa.17

The production network is held together materially by a global oil infra-
structure with its own particular geography. Close to 5 million producing oil
wells puncture the surface of the earth (77,000 were drilled last year, 4,000
offshore); 3,300 are subsea, puncturing the earth’s crust on the continental
shelf in some cases thousands of meters below the sea’s surface. There are by
some estimations over 40,000 oil fields in operation. More than 2 million
kilometers of pipelines blanket the globe in a massive trunk-network (another
180,000 kilometers will be built at a capital cost of over $265 billion over the
next four years); another 75,000 kilometers of lines transport oil and gas along
the sea floor. There are 6,000 fixed platforms, and 635 offshore drillings rigs
(the international rig total for June 2011 is over 1,158, according to Baker
Hughes).18 Over four thousand oil tankers move 2.42 billion tons of oil and
oil products every year—one-third of global seaborne trade; over eighty mas-
sive, floating production and storage vessels have been installed in the last five
years. This petro-infrastructure also accounts for almost 40 percent of global
CO2 emissions. All in all, there is nothing quite like it.

| 442 American Quarterly

A seemingly unstoppable rush to discover and refine more of a resource
that everyone agrees is finite feeds this oil hardware, literally and figuratively.
Gavin Bridge calls this the technological imperative that manifests itself in
the aggressive pursuit of economies of scale in production and refining, and
in transportation.19 There is a dialectical interaction, as he sees it, between
efforts to reduce unit costs (by scaling up production) and the scaling up of
transportation (to handle increased product volumes). This imperative drives
the oil frontier to the ends of the earth, or more properly a mad gallop to the
bottom of the ocean. Deepwater exploration is the new mantra (deepwater
offshore production grew by 78 percent between 2007 and 2011). On August
2, 2007, a Russian submarine with two parliamentarians on board planted a
titanium flag two miles below the North Pole. At stake were the lucrative new
oil and gas fields—by some estimations 10 billion tons of oil equivalent—on
the Arctic seafloor. What is on offer is a great deepwater land grab, which re-
quires a vast floating and submersible infrastructure: very large crude carriers;
the floating, production, storage, and offloading vehicles; massive submers-
ible technologies linking umbilicals, risers, wellheads to floating production
and storage devices; high-capacity production rigs and refineries capable of
turning overnight 250,000 barrels of oil into 10 million gallons of gasoline,
diesel, and jet fuel.

Overlaid on the oil and gas network is an astonishing patchwork quilt of
territorial concessions. Spatial technologies and spatial representations are foun-
dational to the oil industry: seismic devices to map the contours of reservoirs,
geographic information systems to monitor and meter the flows of products
within pipeline, and of course the map to determine subterranean property
rights. Hard rock geology is a science of the vertical, but when harnessed to
the marketplace and profitability it is the map that becomes the instrument
of surveillance, control, and rule. The oil and gas industry is a cartographer’s
dream-space: a landscape of lines, axes, hubs, spokes, nodes, points, blocks,
and flows. As a space of flows and connectivity, these spatial oil networks are
unevenly visible (subsurface, virtual) in their operations.20

Mitchell’s exhortation to “closely follow the oil” means tracing the links
between pipelines and pumping stations, refineries and shipping routes, road
systems and automobile cultures, that is, across the infrastructural networks,
across the worlds of engineering and title deeds, into the charnel houses of
finance and the military and thereby to discover “how a set of relations was
engineered among oil, violence, finance, expertise and democracy.”21

In seeing oil as an assemblage and as a zone of political and economic cal-
culation, I want to emphasize the variety of actors, agents, and processes that

| 443The Tale of Two Gulfs

give shape to our contemporary iteration of hydrocarbon capitalism: this is
obviously the supermajors, the national oil companies (NOCs) and the service
companies (Halliburton, Schlumberger) and the massive oil critical infra-
structures, but also the apparatuses of the petrostates themselves, the massive
engineering companies and financial groups, the shadow economies (theft,
money laundering, drugs, organized crime), the rafts of nongovernmental or-
ganizations (human rights organizations, monitoring agencies, corporate social
responsibility groups, voluntary regulatory agencies), the research institutes
and lobbying groups, the landscape of oil consumption (from SUVs to phar-
maceuticals), and not least the oil communities, the military and paramilitary
groups, and the social movements that surround the operations of, and shape
the functioning of, the oil industry narrowly construed. But this is only a start.
The financial sector is key both in terms of project financing but also as oil
itself becomes a financialized asset reflecting a radical change in the oil market
itself in the last decade or so. This opens the door to securitization, speculation,
and the question of regulatory agencies and the lack thereof. These governance
institutions include the commodity exchanges but also the newly emerging
global governance mechanisms such as the International Energy Forum. And
not least for every barrel of oil produced, moved, refined, and consumed there
are carbon emissions (and thereby carbon trading, carbon credits, offsets, and
carbon markets), which is itself a complex market with its own politics and
dynamics. The connectivities between oil, finance, the military and defense
industries, petrochemicals, and the new life science industries only hints at
the circumference of this vast assemblage.

The oil assemblage resembles, in some respects, what Andrew Barry has
called a “technological zone,” a space within which “differences between tech-
nical practices, procedures or forms have been reduced, or common standards
have been established.”22 Barry sees such a zone as containing or producing
different and multiple spaces (some of which have no boundaries as such)
through the operations of metrological (measurement), infrastructural (con-
nection), and qualificatory (assessment) standards. To pursue the analogy, an
oil assemblage is what Mitchell calls a coordinated but dispersed set of regula-
tions, calculative arrangements, infrastructural and technical procedures that
render certain objects or flows governable.23 An oil assemblage is a sort of vast
governable, and occasionally very ungovernable, space.24 If the oil assemblage
is a space of standardization, its operations, however, are always temporally and
geographically contingent. One of the assemblage’s structuring forces, always
constituted locally, is what I call the permanent frontier.

| 444 American Quarterly

Frontiers of Dispossession: A Tale of Two Gulfs

At roughly 10 p.m. on April 20, 2010, mud and water shot up and out of
the derrick of BP’s drilling rig Deepwater Horizon, located in deepwater in
the Gulf of Mexico (GOM), and was followed shortly by a massive explosion
instantly converting the rig into a raging inferno. Located almost fifty miles
off the coast of southern Louisiana, Deepwater Horizon sank two days later
to the ocean floor, resting one mile below the sea’s surface. As the rig sank, it
ruptured the risers (the marine drilling riser connects the floating rig to the
subsea wellhead), and a mixture of oil and gas, under extreme pressure, was
released into the warm and biologically rich waters of the Gulf. By mid-May
2010, the Macondo well discharge was hemorrhaging at a rate of over 200,000
gallons per day; surface oil covered 3,850 square miles. When it was all over
almost 5 million barrels had been released and 35 percent of the Gulf Coast
affected. Rarely noted during the crisis was the long and deep history of spills
and blowouts in the Gulf, and the systematic destruction of the Gulf coastline,
especially in the Mississippi delta, over the previous century.25

In the midst of the Deepwater Horizon catastrophe, Royal Dutch Shell
released a report on its activities in Nigeria, the jewel in the crown of the West
African Gulf of Guinea, an oil-producing region of global significance and
a major supplier of high quality “sweet and light” crude to U.S. markets.26
During 2009 Shell confirmed that it had spilled roughly 14,000 tons of crude
oil into the creeks of the Niger delta, the heart of Nigeria’s oil economy. In
other words, in one year, a single oil company (Shell, incidentally, currently
accounts for roughly one-third of Nigerian national output) was responsible
for 4.2 million gallons of spilled oil; in 2008 the figure was close to 3 mil-
lion gallons. In related figures released in April 2010, the Federal Ministry of
the Environment released a tally sheet of 2,045 recorded spill sites between
2006 and 2009. Since the late 1950s when oil became commercially viable,
over seven thousand oil spills have occurred across the Niger delta oil fields.
Cumulatively over a fifty-year period, 1.5 million tons (4 billion gallons) of
crude oil has been discharged in an area roughly one-tenth the size of the
federal waters of the GOM. As an Amnesty International report put it, this
spillage is “on par with [an] Exxon Valdez [spill] every year.”27 Since 1960, to
put it more concretely, each acre of the Niger delta has been the recipient of
40 gallons of spilled crude oil.

These two instances of petrocalamity—each centered on exploration and
production at different points in the global value chain but with common
points of reference in the history of the Black Atlantic—provide an opportu-

| 445The Tale of Two Gulfs

nity to explore the instabilities and contradictions in the oil assemblage. Both
are oil frontiers, understood not simply as a territory peripheral to, or at the
margins of the state in some way, but as a particular space—at once political,
economic, cultural, and social—in which the conditions for a new phase of
(extractive) accumulation are being put in place (the establishment, in short,
of the conditions of possibility for a new phase of capital accumulation).

In the world of big oil, a frontier has a specific set of connotations. A geo-
logical province, a large area often of several thousand square kilometers with
a common geological history, becomes a petroleum province when a “working
petroleum system” has been discovered.28 A commercial petroleum system (or
“play”) consists of several core features: a source rock with rich carbon content
and a geological depth capable of converting organic carbon to petroleum; a
sedimentary reservoir rock with sufficient pore space to hold significant volumes
of petroleum and permeability to permit petroleum to flow to a well bore; a
nonporous sedimentary rock as effective barrier to petroleum migration; and
a structural trapping mechanism to capture and retain petroleum. Once these
preconditions are met, the oil frontier comes to life in the play.

The discovery of a petroleum field—a play with commercial potential—trig-
gers a process of appraisal and development, namely, drilling many new wells to
confirm the extent and properties of the reservoirs and fluids and to determine
whether the configuration warrants further investment. The development
of the initial fields in a new province is replete with technical uncertainties
that collectively shape the ultimate volume of oil that can be recovered. The
properties of reservoir rock, the fluids it contains, and the fluid dynamics
in the rock are key, but so too are the fluids that vary in their composition,
specific gravity, and viscosity. As Peter Nolan and Mark Thurber point out,29
uncertainties around each of these field variables translate into uncertainty in
ultimate recovery volumes, peak production, the life of the field, and so on.

The frontier, in sum, refers to the spatiotemporal dynamics in which fields,
in a petroleum province, are discovered, developed, and recovered; the pro-
cess from so-called primary reserve creation to tertiary recovery from existing
“mature” reservoirs. With the development of one or more commercial fields,
a frontier becomes “proven” and some uncertainties are reduced, which often
induces an influx of new entrant companies that were deterred when entry
barriers were high, which includes state companies and smaller independents.
Another frontier emerges—a function of new technologies and aging reser-
voirs—as aging oil fields attract investments through tertiary recovery. But
the idea of the frontier captures something else, namely, a process, covering
many decades, through which the industry has seen the continual discovery,

| 446 American Quarterly

exploitation, and extension of the oil frontier from onshore sedimentary basins
through shallow offshore basins and into the deep and ultradeepwater basins.
Recent and emergent frontiers include the challenges of very deep Arctic water
and the commercialization of vast resources of unconventional oil and gas
like Canadian tar sands and the U.S. oil and gas shales. The frontier within
and between provinces is thus permanent and dynamic, both geographi-
cally expansionary and, as it were, involutionary. Frontiers are customarily
seen as spaces “beyond the sphere of the routine action of centrally located
violence-producing enterprises,” in which typically land and property rights
are contested, the rule of law is in question, and frontier populations (often
racialized and excluded because of the coercive forms of capital accumulation
in train) inhabit a zone in which “violence and political negotiation [are]
. . . at the center of social and economic life.”30 Frontiers, as I deploy the term
for oil, possess all of these qualities rather than be confined to the technical
relations of resource exploitation (as the industry understands frontiers). The
permanent frontier marks the ongoing recursive construction of new spaces
of accumulation (whether the discovery of first oil in the 1950s in Nigeria or
the explosion of offshore oil development off coastal Louisiana after 1938)
and the creation of the conditions of possibility for the local operation of the
oil assemblage.31

Oil frontiers have their own temporalities and spatialities—shaped naturally
by technological considerations unique to oil—but like frontiers everywhere,
questions of access to and control of land, property, the state as a prerequi-
site for accumulation is key. As a territorial resource, oil is constantly in the
business of creating new—and refiguring old—frontiers; complex processes
of dispossession, compromise, violence, and engagement mark them. As a
technologically dynamic industry, the frontiers so created are “deep, shifting,
fragmented and elastic territories.”32 Eyal Weizman’s extraordinary account of
the Israeli occupation of Palestine comes close to what I have in mind:

The dynamic morphology of the frontier resembles an incessant sea dotted with multiplying
archipelagoes of externally alienated and internally homogenous . . . enclaves. . . . [It is] a
unique territorial ecosystem (in which) various other zones—political piracy, barbaric violence,
. . . of weak citizenship—exist adjacent to, within or over each other.33

These oil frontiers are textbook cases of what Henri Lefebvre calls the “hyper-
complexity” of global space in which social space fissions and fragments, pro-
ducing multiple, overlapping, and intertwined subnational spaces with their
own complex internal boundaries and frontiers.34

| 447The Tale of Two Gulfs

Frontier Dispossession and
Insurgent Oil: The Niger Delta

Nigeria, the eleventh-largest producer
and the eighth-largest exporter of crude
oil in the world, typically produces
over 2.4 million barrels per day (b/d)
of oil and natural gas liquids. The oil-

producing Niger delta in the southeast of the country has provided “sweet”
(low sulphur) oil to the world market for over half a century, during which
time the Nigerian state has captured close to $1 trillion. Nigeria’s petrofuture
is very much in question. The vertiginous descent of the Niger delta oil fields
into a strange and terrifying underworld of armed insurgency, organized crime,
state violence, mercenaries and shady politicians, and massive oil theft casts a
long shadow over Nigeria’s purportedly rosy oil future. A powerful insurgent
group called the Movement for the Emancipation of the Niger Delta (MEND)
emerged from the creeks in 2006, an insurgency that reflected a much deeper
history of growing militancy since the 1980s. Within two years of taking office
in 2007 the new President saw oil revenues fall by 40 percent because of auda-
cious and well-organized attacks on the oil sector; Shell, the largest operator
and accounting for almost half of all oil output, had alone lost US$10.6 billion

Figure 1.
An oil spill from an abandoned Shell Petroleum
Development Company well in Oloibiri, Niger
Delta. Wellhead 14 was closed in 1977 but
has been leaking for years, and in June of 2004
it finally released an oil spill of over 20,000
barrels of crude. Workers subcontracted by Shell
Oil Company cleaned it up without adequate
protection. Photo by Ed Kashi.

| 448 American Quarterly

since late 2005. In the Port Harcourt and Warri regions—the two hubs of the oil
industry—there were over five thousand pipeline breaks and ruptures in 2007
and 2008 perpetrated by insurgents and self-proclaimed militants. An article in
the International Herald Tribune captures vividly the brave new world ushered
in by the violent struggle over oil: “[Oil] companies now confine employees
to heavily fortified compounds, allowing them to travel only by armored car
or helicopter. . . . One company has outfitted bathrooms with steel bolts to
turn them into ‘panic’ rooms . . . another has coated the pylons of a giant oil-
production platform 130 kilometers, or 80 miles, offshore with waterproof
grease to prevent attackers from climbing the rig. . . . Larry Johnson, a former
U.S. Army officer who was recently hired . . . by Eni, said ‘Even Angola during
the civil war wasn’t as bad.’”35 According to a report released in late 2008, in
the first nine months of 2008 the Nigerian government lost a staggering $23.7
billion in oil revenues because of militant attacks and sabotage. By the summer
of 2009 Shell’s western operations were in effect closed down, and more than
1 million barrels of oil were shut in. Ken Saro-Wiwa’s desolate prediction in
1990 of a “coming war” had seemingly come to pass.36

Nigeria is a petrostate with a vast shadow economy and shadow politi-
cal apparatuses in which the lines between public and the private, state and
market, government and organized crime are blurred and porous. The delta’s
coastal waters are, according to the International Maritime Bureau, a pirate
haven, comparable to the lawless seas of Somalia and the Moluccas. A new
study, Transnational Trafficking and the Rule of Law in West Africa by the UN
Office for Drugs and Crime, estimates that 55 million barrels of oil are stolen
each year from the Niger delta, a shadow economy in which high-ranking
military officials and politicians are deeply involved. Amnesty International’s
report Petroleum, Pollution, and Poverty in the Niger Delta, released in June
2009, grimly inventories the massive environmental despoliation caused by
1.5 million tons of spilled oil, describing the record of the slick alliance of the
international oil companies and the Nigerian state as a “human rights tragedy.”
A United Nations study of Ogoniland—a small four-hundred-square-mile area
within the oil fields—discovered systematic contamination by the oil firms and
estimated that it will take thirty years and $1 billion to clean up.37 Nigeria’s oil
complex is a vast and increasingly ungovernable space, a frontier of primitive
accumulation, what Mike Rogin, describing Jacksonian America, called the
“heroic age of capitalism.”38 Nigeria’s spectacular petrocapitalism combines
the most brutal forms of capitalist dispossession and racialized accumulation
with the ecological wreckage of a modern high-tech global oil and gas industry.
Corrupt politicians, wealthy contractors, corporate executives, and the feared

| 449The Tale of Two Gulfs

security forces stand, cheek by jowl, with poor fisherfolk, uneducated and
sick children, angry youths, and the massive detritus of the industry itself.
Inevitably, it is a world that is combustible and explosive.

Nigeria is a relative latecomer as an “oil-state” and delivered its first oil
exports to the world market in 1958. Now, the enormity of the oil presence
in the Niger delta is hard to fully appreciate. Virtually every inch of the region
has been touched by the industry directly through its operations or indirectly
through neglect. Over six thousand wells have been sunk, roughly one well for
every ten-square-kilometer quadrant in the core oil states. There are 606 oil
fields (355 on shore) and 1,500 “host communities” with some sort of oil or
gas facility or infrastructure. There are seven thousand kilometers of pipelines,
275 flow stations, ten gas plants, fourteen exports terminals, four refineries, and
a massive gas supply complex. The national oil company (Nigerian National
Petroleum Company) and its joint-venture partners (Shell, Exxon, Mobil, Agip,
and TOTAL) directly employ an estimated one hundred thousand people.

A half century of oil wealth has propelled Nigeria into the ranks of the oil
rich at the same time as much of the petrowealth has been squandered, stolen,
and channeled to largely political, as opposed to productive, ends. Nigeria
has long had its 1% versus 99% politics (85 percent of oil revenues accrue
to 1 percent of the population). According to former World Bank president
Paul Wolfowitz, around $300 billion of oil revenues accrued since 1960 have
simply “gone missing.” Nigerian anticorruption czar Nuhu Ribadu claimed
that in 2003, 70 percent of the country’s oil wealth was stolen or wasted; by
2005 it was “only” 40 percent. The state, he said, was organized crime. The
Wikileaks U.S. Department of State cables released in November 2010 revealed
extraordinary corruption, including a $20 million payment for basic contract
signatures and oil-lifting decisions made by politicians and cronies within
the presidency; all in all, a model felonious state. Between 1970 and 2000
the number of income poor grew 19 million to a staggering 90 million. Over
the last decade GDP per capita and life expectancy have, according to World
Bank estimates, both fallen. According to the United Nations Development
Program (UNDP),39 Nigeria ranks in terms of the human development index
below Haiti and Congo. It is not a pretty picture.

Nowhere are the failures more profound and visible than across the oil
fields of the Niger delta, an impoverished and politically marginalized multi-
ethnic region (now encompassing nine states of the thirty-six state federation)
composed of what are euphemistically referred to as “minorities.” The current
population of the oil-producing states is 28 million (of the total population of
160 million Nigerians), but for the vast majority, oil has brought only misery,

| 450 American Quarterly

violence, and a dying ecosystem. A United Nations report concluded that the
vast resources from an international industry have barely touched pervasive
local poverty.40 The majority of the oil wealth is captured by the federal state
and allocated to the so-called ethnic majorities in the politically dominant
northern and western states. By almost any measure of social achievement, the
core oil states are a calamity. Between 1996 and 2002 the human development
indexes actually fell in the delta states.41 Literacy rates are barely 40 percent,
the proportion of primary school children enrolled is, according to a Niger
Delta Environmental Survey, 39 percent. There is one secondary health care
facility for every 131,000 people serving an area of 583 square kilometers. The
number of persons per hospital bed is three times higher than the already ap-
palling national average. Electricity is a running joke. Canalization dredging,
gas flaring, large-scale effluent release, mangrove clearance, massive pollution
of surface and groundwater, these are the hallmarks of a half century of oil
and gas extraction. The region’s delicate ecosystems now constitute one of the
most polluted places on the face of the earth.

Nigeria’s oil frontier began in 1956 when the first helicopters landed in
Oloibiri in Bayelsa State near St Michael’s Church to the astonishment of local
residents. A camp was quickly built for workers; prefabricated houses, electric-
ity, water and a new road followed. Shell-BP (as it then was) sunk seventeen
more wells in Oloibiri, and the field came to yield, during its lifetime, over
20 million barrels of crude oil before oil operations came to a close twenty
years after the first discovery. Misery, scorched earth, and capped wellheads
are all that remain now. In the decade that followed, the Nigerian oil industry
grew quickly in scale and complexity. A giant field was quickly discovered at
Bomu in Ogoniland, west of Port Harcourt in 1958, and Shell-BP, which had
acquired forty-six oil mining leases covering fifteen thousand square miles,
rapidly expanded its operations across the oil basin. Ten years of feverish
activity saw the opening of the Bonny tanker terminal in April 1961 and the
extension of the pipeline system including the completion of the Trans Niger
Pipeline in 1965. Oil tankers lined the Cawthorne Channel like participants
in a local regatta, plying the same waterways that, in the distant past, housed
slave ships in the sixteenth century and the palm oil hulks in the nineteenth.
The petroleum frontier followed the slave and palm oil frontiers.

The onshore oil frontier—the offshore frontier began much later and the first
deepwater oil production only commenced in 2005—operated in a distinctive
fashion. Oil-bearing lands were in effect nationalized, and leases and licenses
awarded (typically with little or no transparency) to oil companies that were
compelled to participate in joint ventures with a Nigerian state. A memoran-

| 451The Tale of Two Gulfs

dum of understanding determined, among other things, the very substantial
government take on every barrel of oil produced. Local communities across
the delta lost access to their lands. They were typically compensated (in an ad
hoc and disorganized fashion) for loss of land rights and for the cost of spill-
age. Communities—there are over 1,500—deemed “host communities” by
virtue of having oil in their customary territories or being directly affected by
oil infrastructure were to receive “community benefits” from the oil companies
that, in the absence of an effective local state, came to be seen as local govern-
ment. Oil companies built alliances with local political powers, which in effect
meant dealing directly with powerful chiefs and chieftaincy systems marked by
the exercise of lineage-based gerontocratic powers. For the better part of three
decades the companies could operate with impunity, cutting deals with chiefs
and elders who through direct cash payments and community funds acquired
considerable wealth. Meaningful community development was nonexistent,
and locals benefited only minimally from employment, since the oil industry
is labor intensive only in its construction phase. With the 1980s came the first
protests from the oil-field communities—women groups protesting lost of
livelihoods, youth protesting lack of employment—and then the electrifying
impact of Saro-Wiwa and the Ogoni movement during the 1990s.

The history of oil development in Nigeria is largely the history of the vicious
political struggles surrounding the distribution of oil revenues. Since 1960 the
shifting geometry of the politics of revenue allocation has a clear trend-line.
A process of radical fiscal centralism by the state, which now controls all oil
revenues through various statutory monopolies, diverts oil to powerful regional
constituencies in the thirty-six-state Nigerian federation (dominated by so-
called ethnic majorities). As a consequence, the oil-producing states (populated
by so-called ethnic minorities) have lost, and the non–oil producing ethnic
majority states and the federal government have gained. Currently, roughly
half of all the oil wealth is captured by the federal government through about
fifty oil laws that allow the state to establish a statutory monopoly over oil and
dispossess local communities; roughly one-third is devoted to the states, but
until the late 1990s a disproportionately high share of this revenue allocation
ended up in non–oil producing states. In 1960 the oil-producing states, through
a principle of “derivation,” took at least half of all the oil revenues produced
in their state; by the 1980s this had fallen to 1 percent. Driven by the popular
pressures for “resource control,” Niger delta states were able to roll back the
secular decline in derivation income. As oil prices rose after 2001, enhanced
derivation inserted a vast quantum of monies (driven by high oil prices and
the increase in derivation from 1 to 13 percent) into the oil-producing states
through the machinery of state and local government.

| 452 American Quarterly

This fiscal system since the return to civilian rule in 1999 has produced new
political alignments on the ground. First, corruption has flowed downward—in
effect, it has been decentralized—with the vast local takings to be had as more
oil revenues flowed to the major oil-producing states, especially Delta, Bayelsa,
and Rivers States. Second, there has been something like a democratization
of the means of violence, as militants of various political and criminal stripes,
often armed by politicians and a porous military, now control large swaths of
territory in the creeks and disrupt the operations of the oil and gas industry
at will. And third, expanded increased derivation income has fueled the rise
of a hugely powerful political class—“godfathers,” as they are called—that is
not only a counterweight to the federal center but also has its own machine
politicians. It from this trio of forces that the current wave of violence since the
return to civilian rule in 1999 has emerged.42 The reservoir of political rage and
alienation is deep in Niger delta communities. A large survey of Niger delta
oil communities by the World Bank in 2007 discovered that an astonishing
36.23 percent of youth interviewed revealed a “willingness or propensity to
take up arms against the state”43

The current crisis extends beyond a guerrilla struggle against the alliance
of the state and the oil companies. According to a UNDP report, there are
currently 120–150 “high risk and active violent conflicts” in the three core
oil-producing states.44 The field of violence operates at a number of levels.
Insurgent groups like MEND are engaged in armed struggle against the state
and the oil companies. There are also intercommunity (both interethnic and
intra-ethnic) conflicts often driven by land and jurisdictional disputes over oil-
bearing lands (and correspondingly over access to cash payments and rents from
the oil companies). There is also urban interethnic warfare—most dramatically
seen in the decade-long battles between Ijaw, Urhobo, and Itsekeri ethnic com-
munities in Warri over “who owns Warri.” Central to these struggles in which
perhaps 700,000 people have been displaced and thousands killed is the ethnic
delineation of electoral wards and local government councils (undertaken by
the states but with federal backing), which are the means for urban ethnic
communities to access oil wealth, either as rents paid by oil companies for land
used for oil infrastructure (such as pipelines, refineries, and flowstations) or as
part of the revenue allocation process that now ensures that local government
coffers are awash with so-called excess oil profits. Other communities are torn
apart by intracommunity youth violence—the famed city-state of Nembe is
a case in point—in which armed youth groups battle one another and their
chiefs to provide protection services to the oil companies and get access to
various sorts of standby (a salary for doing nothing) and cash payments doled
out in the name of “community development.”

| 453The Tale of Two Gulfs

By the summer of 2009 the oil frontier had become a space of extraordinary
violence and political turbulence. According to a report released in late 2008—
prepared by a forty-three person government commission and titled The Report
of the Technical Committee of the Niger Delta—in the first nine months of 2008
the Nigerian government lost a staggering $23.7 billion in oil revenues because
of militant attacks and sabotage. As oil production plummeted still further in
2009, on May 13, 2009, federal troops launched a full-scale counterinsurgency
against what the government saw as violent organized criminals who have
crippled the oil and gas industry. The militants in return launched ferocious
reprisal attacks, gutting Chevon’s Okan manifold, which controls 80 percent of
the company’ shipments of oil. Over two months, from mid-May to mid-July,
twelve attacks were launched against Nigeria’s $120 billion oil infrastructure,
and 124 of the Nigeria’s 300 operating oil fields were shut by mid-July. Then
late in the night of July 12, fifteen MEND gunboats launched an audacious and
devastating assault on Atlas Cove, a major oil facility in Lagos, the economic
heart of the country, three hundred miles from the Niger delta oil fields (a
year earlier, to accentuate both their strike capability and the ineptitude of
the naval security forces, MEND overran and compromised the large float-
ing production and storage on the massive Shell-owned Bonga field seventy
miles offshore). Overall the oil and gas industry, on- and off-shore, has been
crippled. By late 2009 Shell has closed its western operations completely, and
the eastern region is barely producing 100,000 b/d. Many of the engineering,
construction, and oil service companies have withdrawn core personnel and
in some cases withdrawn completely. In three years the oil industry in effect
came to a standstill.

As the situation deteriorated, the oil companies, which had in effect at-
tempted to keep the oil flowing by cutting local deals with corrupt chiefs,
now discovered that a generation of youth—many armed and all without job
prospects of any kind—challenged the corrupt oil-fueled chieftaincy system
itself, which by the 1990s was in deep crisis. The effects of dispossession in short
were turned inward into the heart of customary rule. Armed youth groups in
some cases rejected chiefly rule violently and in other cases asserted themselves
as middlemen and brokers providing protection services to the companies and
interposing themselves between the local oil operations and the chiefs.

Along the oil frontier three processes were at work. The first is what one
might call local petronationalisms—the process by which the ethnic minori-
ties of the delta became “oil minorities” with a political project for resource
control. Over the last decade this has been most visible in the deepening of
Ijaw nationalism and a popular mobilization of youth, especially in the wake

| 454 American Quarterly

of the state repression of the Ogoni during the 1990s. The Ijaw are the largest
ethnic oil minority in the delta and are distributed across the heart of the oil
fields, especially in Rivers and Bayelsa states. Their exclusion from the oil wealth
(and the federal revenue allocation process), to say nothing of their bearing the
costs of oil operations across the oil fields, became central to the emergence of
a new sort of youth politics (in effect, a disenfranchised generation). Kathryn
Nwajiaku has traced the origins of Ijaw nationalism to the 1920s and 1930s,45
but it was overtaken during the 1990s by youth politics and the rise of the
Ijaw Youth Council in 1998 and its radical founding document, the Kaiama
Declaration,46 which marked a watershed in the growth of popular mobiliza-
tion from below and in the gradual turn to direct actions against both the
federal state and the international oil companies. Control of oil in relation to
what local peoples saw as a deep history of theft, appropriation, and unjust
exploitation provided a powerful idiom to mobilize Ijaw claims and a discourse
of rights (including legal, constitutional, and fiscal reforms). Ijaw nationalism
proved to be a complicated category because of the internal heterogeneity of
so-called Ijaw peoples (differing clan and community structures, differing
language and cultural histories). Oil, as Nwajiaku points out, provided a way
to draw Ijaw together but also generated other local forms of identity at the
clan, village, or local territorial levels. What was true for the Ijaw was as true
for every oil minority.

Second, the militant groups themselves were often the products, if not the
creation, of state-supported electoral thuggery. A welter of so-called militias,
cults, organized criminals were bankrolled and in many cases armed by ambi-
tious corrupt politicians and local political godfathers, especially during the
electoral cycles of 1999 and 2003. Two important militias, which arose be-
fore MEND, namely, the Niger Delta Vigilante and the Niger Delta People’s
Vigilante Force, were both funded by machine politicians and the local state.
After a decade of deepening militancy, the boundaries between states and
militants was blurred, and the reality on the ground is one of a dizzying and
bewildering array of militant groups, militias, and so-called cults—the Niger
Delta Militant Force Squad, Niger Delta Coastal Guerillas, South-South Lib-
eration Movement, Movement for the Sovereign State of the Niger Delta, the
Meinbutus, the November 1895 Movement, the Arogbo Freedom Fighters,
Iduwini Volunteer Force, the Niger Delta People’s Salvation Front, COMA
(Coalition for Military Action), the Greenlanders, Deebam, Bush Boys, KKK,
Black Braziers, Icelanders, and a raft of others. Nonstate armed groups often
got their start as a way of doing violent oil politics for the Nigerian oil elites
and then took on a life of their own, redeployed into other pursuits as the oil
frontier advanced.

| 455The Tale of Two Gulfs

And finally, the proliferation of a massive oil theft business (“bunkering,” as
it is dubbed locally) in which insurgent groups were able to insert themselves
(typically as underlings beneath high-ranking military officials and politicians).
Local illegal refineries in the creeks produced refined fuel from oil tapped
from pipelines, but the serious money lay elsewhere, in the larger quantities
of oil moved offshore in barges and sold internationally. It is, and remains, a
massive business (Wikileaks revelations again pointed to high-ranking mili-
tary, politicians, and business people as central to the operations of what in
2011 was estimated to be a bunkering trade of $20 billion, perhaps running
at 250,000 barrels per day) that nevertheless enabled youth groups and local
criminal operatives to acquire arms and embolden their military offensive (and
their popular appeal to a generation of enraged youth). Of course, the line
between crime and politics here is murky and difficult to determine. Some
bunkerers may have articulated the rhetoric of “popular appropriation” but
were clearly part of criminal syndicates, which included the military, business-
men, and politicians. In others, the bunkering business was indeed a way in
which insurgency could be financed. In both cases it produced a class of violent
entrepreneurs—the militias resembled the mafias of mid-nineteenth-century
Sicily who stood between a weak state and deep class struggles surrounding
the latifundia—and a ferocious battle over bunkering territories.47

Oil wealth in Nigeria has helped produced a multiplicity of overlapping
spaces of oil, from the new states and local government areas bankrolled by
the oil revenue process to reconfigured spaces of chieftainship and ethnicity
in which a panoply of political movements (youth groups, ethnic militias, oil
thieves) struggles for control of different sorts of territory, to the violent spaces
of the creeks controlled by insurgents and federal military forces. These spaces,
often unruly, and deeply conflicted, represent a ferocious struggle over how na-
tion building—in this case fueled by the centralized control over oil wealth—is
to proceed and in whose name and interests. These political struggles over
who has access to oil and by what means reflect the complex politics—what
Mitchell called engineering political relations for energy flows—that attends
the movement of the onshore oil frontier across the Niger delta. On its face,
the oil assemblage in Nigeria appears to be in question: supermajors like Shell
are selling assets and acreage, others move offshore in the vain hope of avoid-
ing the militants, while the prospects of a military conflagration unsettles the
oil markets. At the same time, with prices at $100 a barrel, the entire rickety
structure can stagger on: the Nigerian government, the rebels, the supermajors,
the oil bunkerers, and the political godfathers can all get their cut despite,
and because of, the ungovernability of the entire system. Violent racialized

| 456 American Quarterly

accumulation in the oil assemblage can, paradoxically, be self-producing as
an economy of violence.

Deepwater Horizon: Finance Capital, Neoliberalized Risk,
and the Louisiana–Gulf of Mexico Frontier

The outer continental shelf (OCS) in the GOM is the largest U.S. oil-producing
region. Not unexpectedly, the Gulf ’s oil complex—the assemblage of firms, the
state, and communities that shape the character of oil and gas extraction—is
massive by any accounting. With over four thousand currently operating
wells, the Gulf accounts for one-third of U.S. crude oil production and over
40 percent of U.S. refining capacity. Over the past century, companies have
drilled over fifty thousand wells in the Gulf (twenty-seven thousand have been
plugged), almost four thousand of them in deepwater (more than one thousand
feet). In the last fifteen years more than sixty wells have been drilled in the
ultradeepwater zones—in more than five thousand feet of water—deploying
dynamic positioning systems that use computers and satellites to keep rigs
and supply vessels steady in rough seas and high winds. By 2001 deepwater
oil production surpassed the shallow-water shelf extraction. There are 3,020
platforms currently operating, but they represent only a small part of the
Gulf ’s oil and gas infrastructure: thirty-three thousand miles of pipeline on-
and offshore connected with a network of terminals, as well as a huge capital
investment of refineries, storage facilities, shipyards, and construction facilities
stringing the coast from Mississippi to Texas. It is a massive industrial cluster
directly employing more than four hundred thousand people in Louisiana,
Texas, Alabama, and Mississippi, generating $70 billion annually in economic
value and $20 billion annually in tax revenue and royalty payments to local,
state, and federal government. The total fixed capital in the Gulf oil complex
is now valued at an estimated $2 trillion.48

Louisiana’s section of the Gulf, which contains many of the nation’s largest oil
fields, holds more than nine-tenths of the crude-oil reserves in that region. As of
2011, Louisiana was the fifth-largest producer of crude oil and the fourth-largest
producer of natural gas in the United States. More than 228,000 wells have
been drilled searching for oil and gas in the state since the first commercial oil
well was drilled in 1901 in Jennings. The Louisiana OCS oil and gas produc-
tion is greater than any other federally regulated offshore area in the United
States. Including federal reserves, Louisiana has nearly one-fifth of total U.S.
oil reserves, one-tenth of natural gas reserves, and historically has produced
about 88 percent of the 17.9 billion barrels of oil and 80 percent of the 170

| 457The Tale of Two Gulfs

trillion cubic feet of natural gas extracted from all federal OCS territories. The
industry’s history in the state is synonymous with the history of U.S. offshore
frontier development. While the first onshore well was drilled in the state in
1901, much of the subsequent developments were in shallow water along the
coast. Since 1938 the state inner and outer continental shelf has become the
driving force for the development of deepwater and ultradeepwater oil and
gas production.

Louisiana’s deep connection to oil means it is also America’s very own
petrostate, a living testimony to the petropopulism and oil-based human and
ecological development failures that have typically afflicted oil-producing states
in the global South.49 Petrocorruption and the shady politics of oil development
were there from the beginning, as the oil industry emerged on the backs of an
extractive economy (timber, sulfur, rice, salt, furs). Local businessmen snapped
up land and threw themselves into a chaotic land grab backed by Texas drillers
and operators with little regard for the law. Wildcatting sprung up with no
regulation; leases, especially along the coast wetlands, were allocated behind
closed doors. Huey P. Long famously launched his career with an attack on
Standard Oil and then proceeded to build his own subterranean oil empire.50
While senator, Long and his political cronies established the Win or Lose Cor-
poration, which acquired cut-rate mineral leases through the government and
resold them at a healthy profit. At the same time he used oil severance taxes to
begin a populist program of public service provision, which integrated a white
working class (and subsequently African American petrochemical workers) into
a program of economic modernization.51

In the 1920s and 1930s the wetlands leases opened up a new frontier as
companies built a sprawling network of roads, canals, platforms, and wells, all
of which left an indelible mark on the wetlands. By the 1970s, when oil was
providing 40 percent of state revenues, Louisiana ranked at the very bottom of
the heap in terms of basic development indicators. According to the Measure of
America Report on Louisiana,52 currently the state ranks forty-eighth (only Mis-
sissippi and West Virginia are lower) in terms of human development indexes.
Massive inequalities between white and black populations mark all measures
of human well-being; infant mortality and homicide rates are comparable to
parts of Central America and sub-Saharan Africa. In some parishes well-being
is roughly at the average level of the United States in 1950. The report points
out that 80 percent of wetland losses in the United States over the last cen-
tury have been in Louisiana. As the Tulane law professor Oliver Houck put
it: “What oil and gas did is replace the agricultural plantation culture with an
oil and gas plantation culture.”53

| 458 American Quarterly

The history of the oil industry is a textbook case of frontier dispossession
and reckless accumulation running far in advance of state oversight and effec-
tive regulation.54 Off-shore drilling technology was in effect born and nurtured
in Louisiana with an assist from Venezuela—the former along the shallow
coastal waters, the latter on Lake Maracaibo. Technology quickly developed
from oil derricks on piers to stationary, mobile, and, by the 1930s, submers-
ible drilling barges. All of this was propelled by new seismic technologies,
which uncovered numerous salt domes across the coast and offshore region.
Between 1937 and 1977 almost twenty-seven thousand wells were drilled in
the coastal parishes including shallow offshore. It was the first wave of leases
and backroom petropopulism that unleashed a torrent of canal construction,
dredging, and pipeline corridor construction (to say nothing of the emerging
petrochemical complex in what became “Cancer Alley”) and permitted large-
scale salt intrusion and rapid coastal degradation.

Off-shore development is customarily dated to 1905 in Louisiana but began
in earnest in 1938 with a Brown and Root–constructed freestanding structure
1.5 miles from shore in fourteen feet of water, the so-called Creole Field. In
1945 Louisiana offered the first lease sale, and one year later a platform was built
five miles out in shallow water and, in a move repeated many times over, drew
on the local fishing industry to assist in construction and ferrying workers to
the “floating hotels.”55 By 1947 Kerr-McGhee had drilled the first well “out of
sight of land” using war-surplus barges and other equipment to house drilling
and workers, thereby reducing the size and cost of the self-contained drilling
and production platform. These first, tentative developments precipitated,
however, a titanic seven-year struggle over jurisdiction of the outer continental
shelf in which the oil companies supported states rights (to continue the lax,
or rather nonexistent, regulation) over federal claims. Finally resolved in 1953
through two key pieces of legislation—the Submerged Lands Act and the Outer
Continental Shelf Lands Act—which authorized the secretary of the interior
to offer leases for competitive bidding beyond the three-mile limit. By 1957
there were 446 platforms in federal and state waters, and the rush was on.56

In practice, the moving offshore frontier was transformed through four giant
waves of frontier development, a quartet of land grabs and dispossession. The
first was almost wholly unregulated during the late 1940s and 1950s prior to
and immediately after the resolution of the state jurisdiction question. A sec-
ond occurred in the wake of the oil import quotas of 1959, which unleashed
another round of major leasing; 2 million acres were leased in 1962, in water
depths up to 125 feet, more than all previous sales combined. Oil produc-
tion almost tripled between 1962 and 1968, and deepwater operations had

| 459The Tale of Two Gulfs

by this time reached 300 feet. The first subsea well was drilled in 1966. As
the National Commission on the BP Deepwater Horizon Oil Spill noted,57
this period was associated with massive hurricane damage and serial accidents
including blowouts, injuries, and helicopter crashes. A 1973 National Science
Foundation report noted what was clear to everyone, namely, widespread col-
lusion between industry and government and very light government oversight.
The U.S. Geological Service freely granted waivers from complying with the
limited regulations and inspection demands while the regulatory agencies were
hopelessly underfunded and understaffed (twelve people in the lease manage-
ment office oversaw 1,500 platforms).

In the wake of the Santa Barbara spill in 1969, OCS development nationally
was stymied, but the Gulf of Mexico proved to be a striking exception to the
larger national trend. Exploration proceeded apace with the first deepwater
(one thousand feet and more) play made by Shell in 1975 in the Mississippi
Canyon. The landmark 1978 National Energy Act and the OCS Lands Act
Amendments in the same year fundamentally transformed offshore leasing by
vesting expanded power in the secretary of the interior, developing an explo-
ration and production planning process expressly requiring the secretary to
demand environmental and safety studies, a requirement, however, that the
secretary could override if “incremental costs” were deemed high.58 In short, the
good news was that finally—three decades after the beginning of the offshore
boom—there was something like an effort to provide serious government
regulatory oversight (though the Oil Pollution Act was not passed until 1990);
the bad news was that the Gulf of Mexico was granted an exemption from
all of the review and oversight legislation. The 1978 Lands Act Amendments
expressly identifies the GOM “for less rigorous environmental oversight under
NEPA”;59 three years later in 1981 the Interior Department categorically ex-
cluded from NEPA review applications to drill wells in the central and western
Gulf. The 1980s provided in a sense an ideological resolution to the issue: the
environmental enforcement capacities were eviscerated, and what emerged was
a “culture of revenue maximization,” as the National Commission on the BP
Deepwater Horizon Oil Spill put it.60

The election of Ronald Reagan in 1981 marked not just the third round of
leasing but an assault on the Carter reforms, and a full-fledged neoliberaliza-
tion of the Gulf deploying the now-expanded powers of Interior Department.
Under the leadership of Secretary of the Interior James Watt came a promise to
open up the OCS to areawide leasing; he placed 1 billion acres on the block.
He began by establishing a new agency in 1982—the Minerals Management
Service (MMS)—which created eighteen large planning areas rather than the

| 460 American Quarterly

traditional three-mile-square blocks. While Watts subsequently resigned amid
controversy and congressional opposition to OCS development on the east and
west coasts, the Gulf was exempt, and the result was a land rush and massive
exploration and production that constituted the third deepwater frontier wave
(the record lease sale prior to 1982 was 2.8 million acres; the first areawide lease
in the Gulf produced a sale of 37 million acres!). Seven sales between 1983 and
1985 leased more acreages than all previous leases combined since 1962; 25
percent were located in deepwater, and the lion’s share was captured by Shell,
the leading innovator and player in offshore technology and production. At
the same time, the reforms provided for radically reduced royalties and federal
bonus bids, with the consequence that companies paid 30 percent less despite
a sixfold acreage expansion (average lease prices per acre fell from $2,224 to
$263). In 1987 the MMS reduced the minimum bid for deepwater tracts (from
$900,000 to $150,000), enabling a few companies to lock up entire basins for
ten years for almost nothing. The fruits of this frontier expansion were visible
a decade later: in that period deepwater (one thousand feet and more) wells
grew from 4 to over 45 percent of all Gulf production.61

The 1990s proved to be nothing short of a “stampede.”62 Seismic innova-
tions, a new generation of drilling vessels capable of drilling in ten thousand
feet of water and through thirty thousand feet of sediments (tension-leg,
SPAR, and semisubmersible platforms), and new drilling techniques (“down-
hole steerable motors”) pushed the deepwater frontier to the so-called subsalt
plays. Ten years later the Gingrich revolution ushered in another reform to lay
the basis for another round of accumulation by dispossession: the OCS Deep
Water Royalty Relief Act of 1995 suspended all royalties to be paid by the
companies for five years. In turn, this produced another land grab in which
2,840 leases were sold in three years. By 2000 deepwater production topped
shallow-water output for the first time. At the same time, the ascendant BP
was increasingly displacing Shell’s hegemony in the Gulf. By using new 3-D
seismic technologies, BP had made a series of remarkable discoveries and by
2002 was the largest acreage holder in deepwater (accounting for over one-
third of all deepwater reserves). The MMS budget reached its budgetary nadir
precisely during this boom (a record number of wells were drilled in 1997).
The Houston Chronicle reported that over the 1990s there was an 81 percent
increase in offshore fires, explosions, and blowouts. In the following decade
it increased fourfold.

The final wave of frontier accumulation was triggered by the election of
George Bush in 2001 and the events of September 11. On May 18, two days
after Cheney’s Energy Task Force report was delivered, Bush issued Executive

| 461The Tale of Two Gulfs

Order 13212 (titled Actions to Expedite Energy Related Projects) the purpose
of which was to “expedite [the] review of permits or other actions necessary to
complete the completion of such projects.”63 The language was, as a number
of commentators pointed out, almost identical to that of a memorandum on
the “streamlining” of development in the OCS submitted by the American
Gas Association to the Cheney Task Force. The MMS was already laboring
under a congressionally mandated rule to limit permit review to an impossibly
confining thirty days, but the new order pushed things much farther: in its
wake four hundred waivers were granted every year for offshore development.
As offshore exploration and production stepped into historically unprecedented
ultradeepwater, the permitting process and enforcement were laughable. MMS
was not simply toothless and staffed by the sorts of oilmen it was designed to
regulate but, according to a 2008 inspector general report, was a hothouse of
among other things a culture of substance abuse and promiscuity. To round
out the abandonment of anything like supervision, in June 2008 Bush removed
the ban on offshore drilling. Oversight deteriorated to the point where NOAA
was publicly accusing MMS of purposefully understating the likelihood and
consequences of major offshore spills and blowouts. Watt’s new system was
nothing more than “tossing a few darts at a huge map of the Gulf.”64

Shell announced the birth the new “neoliberal frontier” in 2009. The Per-
dido platform, located two hundred miles offshore in water two miles deep,
is nearly as tall as the Empire State Building, drawing in oil from thirty-five
wells in three fields over twenty-seven square miles of ocean.65 Sitting atop an
“elephant” field rumored to contain as much as 600 billion gallons of oil, the
scramble was on. In similar fashion BP pushed forward on a hugely ambitious
program to develop multiple fields in the most demanding and unforgiving of
environments, pushing deeper into old Paleogene and Lower Tertiary strata.
The likes of Thunder Horse—BP’s massive semisubmersible production facility
almost destroyed by Hurricane Dennis in 2005—located in the Mississippi
Canyon 252 Lease and the Macondo well (forty miles distant) represented,
as the National Commission on the BP Deepwater Horizon Oil Spill put it,
“formidable tests.”66

Viewed on the larger canvas of the longue durée of offshore development,
Perdido and Macondo were the expressions of what one might call the accu-
mulation of insecurity, and the neoliberal production of systemic risks in the
Gulf of Mexico—each rooted in the politics of substituting technological and
financial for political risk. BP and Shell were drilling in five to ten thousand feet
of water fifty miles offshore to produce deepwater oil close to the U.S. market
offering a regulatory framework that can best be characterized as producer

| 462 American Quarterly

friendly, which, especially in the wake of September 11, produced a much
better risk audit than dealing with the Russians in Siberia or the Angolans in
the Gulf of Guinea.

The Deepwater Horizon catastrophe was overdetermined by the vast accu-
mulation of risks fabricated along the shifting frontier of offshore accumulation.
The Macondo well—named after Gabriel García Márquez’s famous fictional
town in One Hundred Years of Solitude—was drilled from a semisubmersible
mobile rig owned by Transocean, while BP as the field operator (as is often the
case in the Gulf ) shared the field with Anadarko Petroleum and Mitsui Oil
Exploration. Halliburton completed the cementing of the well, but on the day
of the explosion there were indications of flow into the well. A large blowout
of methane gas traveled up the drilling pipe and ignited the platform, leading
to an explosion and a fire, which sank the rig. The disaster happened on the
same day that BP executives visited the rig to congratulate management on a
job well done. It was coincidentally the fortieth anniversary of Earth Day.67

Nowhere are the links between deregulation and neoliberal capitalism clearer
than in the 2011 report by the Deepwater Horizon Study Group.68 In its dev-
astating assessment, the catastrophic failure resulted from multiple violations
of the laws of public resource development, and its proper regulatory oversight,
by a BP safety culture compromised by management’s desire to “close the
competitive gap” and to save time and money—and make money—by making
trade-offs for the certainty of production. Because there were perceived to be
no downsides, BP’s corporate culture embedded in risk taking and cost cutting,
and not least the histories and cultures of the offshore oil and gas industry and
the governance provided by the associated public regulatory agencies.

The Deepwater Horizon disaster has more than a family resemblance to the
2008 financial crisis. And it is financialization, in fact, that adds yet another
dimension to the oil frontier. At the time of the disaster, BP was one of the
largest traders in the emerging oil futures and securitization markets. Standing
at the heart of this financialization is the shift to oil as an asset class.69 Oil prices
have not always depended on the futures markets. In the 1970s and 1980s,
before the advent of active crude-oil futures trading in the New York and Lon-
don markets, most of the oil produced was traded via long-term contracts.70 In
the last twenty years oil has broken its relation to “market fundamentals” and
is dominated by the flow of money and by the investment banks, as seen in
unprecedented price volatility. Behind this newfound volatility and the specu-
lative role of paper oil was the fact that “innovations in the financial industry
made it possible for paper oil to be a financial asset in a very complete way.
Once that was accomplished, a speculative bubble became possible. Oil is no

| 463The Tale of Two Gulfs

different from equities or housing in this regard.”71 The volume of unregulated
over-the-counter commodity transactions had grown enormously since 2000, a
development made possible largely by the Commodity Futures Modernization
Act of December 2000. These changes and what Dan Dicker calls assetization
(the rise of commodity index funds and exchange traded funds), financializa-
tion (new and mostly over-the-counter customized energy products similar
to the derivative markets), and electronic access to oil markets collectively not
only made oil into an asset class similar to equities and bonds but also gave
the commodities market a massive boost.72 As a result, it was not so much
minor speculators as large institutional investors who sought exposure to the
commodities market. They regarded commodities as an alternative investment
category in their portfolio allocations and invested a significant proportion
of their assets accordingly. The new actors in the oil trade have produced a
situation in which, according to Kent Moors,73 60 percent of the oil futures
market is coming from speculators. Oil has become a source or store of liquidity
sometimes preferable to the dollar because the oil market allows a better hedge
against the loss in dollar value in foreign exchange. The movement into crude
oil and oil product futures contracts as a flight to liquidity, which is a barely a
decade old, has decisive implications for oil volatility. This is the heart of the
so-called oil vega problem: the increasing inability to determine the genuine
value of crude oil based on its market price. The inability to plan, predict,
and compensate indicates that “we have a developing market (dis) order—a
pervasive and endemic disequilibrium masquerading as the ‘new order’ in the
oil market.”74

An assemblage generating massive new systemic risks of financial and market
volatility is one new expression that throws the “formidable tests” of deepwater
oil into sharp relief. Others risks are biophysical and would include of course
the potentially catastrophic costs of hurricane damage, which are endemic
to the region but seemingly now are rendered even more devastating by the
products of the oil industry itself (carbon emissions, global warming, and
extreme climatic events). The 2005 hurricane season crippled the Gulf energy
sector and left $120 billion in losses. Of course this is what the insurance and
reinsurance industries are, in theory, in the business of protecting. But the
2005 season consumed the entirety of global premiums insurers had collected
from energy underwriting.75 The Gulf “wind market”—major underwriters
already have high rates and have capped coverage—is a big question mark.
Gulf oil seems to combine the worst of Wall Street, the worst of corporate
rapaciousness, and the worst of technological hubris all running headlong into
the global climate crisis. A perfect storm of catastrophic risk: the unrelenting
accumulation of insecurity.

| 464 American Quarterly

The dynamics along these two oil frontiers—one onshore, one offshore—
have family resemblances, but each also highlights quite different, and often
contradictory, dynamics in the local operations of the oil assemblage. Both
produce a sort of ecological slow death,76 but each also manufactures radical
turbulence (one political and military, the other financial and economic) that
threaten the very operations of the industry itself. Accumulation by dispos-
session along the oil frontier is key to both. If the Niger delta frontier reveals
one explosive dynamic in the oil assemblage that resembles a combination of
violent accumulation with fragmented sovereignties, the Deepwater Horizon
suggests another. The Macondo well disaster reveals the deadly intersection of
the aggressive enclosure of a new technologically risky resource frontier (the
deepwater continental shelf in the Gulf ), with the operations of what one can
call neoliberalized risk, a lethal product of cutthroat corporate cost cutting, the
collapse of government oversight and regulatory authority, and the deepening
financialization and securitization of the oil market. These two local pockets of
disorder and catastrophe in the oil assemblage point to, and are expressions of,
the deep pathologies and vulnerabilities in the operations of imperial oil. If the
onshore frontier in Nigeria ends in insurgency, in Louisiana and the Gulf the
political story ends with class action suits, a reorganization of the regulatory
but ultimately the abandonment of President Obama’s moratorium and the
gradual resumption of deepwater drilling. In both Gulfs, the oil assemblage
lurches forward, simultaneously advancing the frontier and multiplying—and
amplifying—the production of profit and risk.

Notes
1. Richard Dobbs, Jeremy Oppenheim, Fraser Thompson, Marcel Brinkman, and Marc Zornes, Revolu-

tion in Resources (London: McKinsey, 2011), www.mckinsey.com/Features/Resource_revolution.
2. Michael Klare, The Race for What’s Left (New York: Metropolitan Books, 2012).
3. For an argument against the “blood for oil” thesis, see RETORT, Afflicted Powers (London: Verso,

2005).
4. Stephanie Clifford, “Oil Oozes through Your Life,” New York Times, June 25, 2011.
5. Matt Huber, “Enforcing Scarcity: Oil, Violence, and the Making of the Market,” Annals of the As-

sociation of American Geographers 101.4 (2011): 816–26 (special issue on energy); Peter Hitchcock,
“Oil in the American Imaginary,” New Formations 10 (2009): 810–97.

6. Michel Foucault, Society Must Be Defended (London: Allen Lane, 2003).
7. David Campbell, “The Biopolitics of Security,” American Quarterly (2005): 943–71; Huber, “Enforcing

Scarcity.”
8. Stephen Collier and Andrew Lakoff, “On Regimes of Living,” in Global Assemblages, ed. Aihwa Ong

and Stephen Collier (Oxford: Wiley, 2004), 22.
9. Imre Szeman, “System Failure: Oil, Futurity, and the Anticipation of Disaster,” South Atlantic Quarterly

106.4 (2007): 819.

| 465The Tale of Two Gulfs

10. See Gavin Bridge, “Global Production Networks and the Extractive Sector,” Journal of Economic
Geography 8 (2008): 389–419.

11. Timothy Mitchell, Carbon Democracy (London: Verso, 2012), 2.
12. Ibid.
13. Ibid., 2, 5.
14. Ibid., 230.
15. See John Broder and Clifford Kraus, “Offshore Oil Drilling’s New and Frozen Frontier,” New York

Times, May 24, 2012.
16. See Oystein Noreng, Crude Power (London: Taurus, 2006); Paul Roberts, The End of Oil (London:

Taurus, 2005).
17. Steve Coll, Private Empire: ExxonMobil and American Power (New York: Penguin, 2012).
18. More than 478 offshore platforms and 7,888 wells will require decommissioning in the period to 2041

that involves the removal of some 4 million tons of steel and other materials; the lowest cost estimate
for this decommissioning, according to Douglas-Westwood Associates, is a staggering $65 billion.

19. Bridge, “Global Production Networks.”
20. Andrew Barry, “Visible Invisibility,” New Geographies 2 (2009): 67–74.
21. Timothy Mitchell, “Carbon Democracy,” Economy and Society 38.3 (2009): 399–432.
22. Andrew Barry, “Technological Zones,” European Journal of Social Theory 9.2 (2006): 239.
23. Mitchell, “Carbon Democracy.”
24. Nikolas Rose, Powers of Freedom (London: Cambridge University Press, 1999).
25. National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, Deep Water:

the Gulf Disaster and the Future of Offshore Drilling (Washington, D.C.: Oil Spill Commission, U.S.
Congress, 2011), www.oilspillcommission.gov/final-report; James Theriot, “America’s First Energy
Corridor” (PhD diss., University of Houston, 2011).

26. Ricardo de Oliveira, Oil and Politics in the Gulf of Guinea (London: Hurst, 2007).
27. Amnesty International, Petroleum, Pollution, and Poverty in the Niger Delta (London: Amnesty Inter-

national, 2009), 16.
28. Peter Nolan and Mark Thurber, On the State’s Choice of Oil Company, Working Paper No. 99 (Stanford,

Calif.: Stanford Program on Energy and Sustainable Development, Stanford University, 2010).
29. Ibid.
30. Silvio Beretta and John Markoff, “Civilization and Barbarism,” in States of Violence, ed. Fernando

Coronil and Julie Skurski (Ann Arbor: University of Michigan Press, 2006), 36.
31. Ibid., 38.
32. Gavin Wright and Jesse Czelusta see this moving frontier as compelling evidence for innovation and

economic growth rather than the oil curse. They have absolutely nothing to say about the political
and human developmental costs of the process (“The Myth of the Resource Curse,” Challenge 47
[March–April 2004]: 6–38).

33. Eyal Weizman, Hollow Land (London: Verso, 2007), 4.
34. Henri Lefebvre, The Production of Space (Oxford: Blackwell, 1978); Manu Goswami, Producing India

(Chicago: University of Chicago Press, 2004).
35. Jad Mouawad, “Oil Companies in the Niger Delta Face a Growing List of Dangers,” New York Times,

April 22, 2007, www.nytimes.com/2007/04/22/business/worldbusiness/22iht-oil.1.5388689.html.
36. On May 19, 2009, the government launched a counterinsurgency against MEND in the region around

Gbaramatu, southwest of the oil city of Warri in Delta State, an area known to harbor a number of
militant encampments. The militants in return launched ferocious reprisal attacks. A state-brokered
amnesty was struck in late 2009—over twenty thousand militants and their commanders signed
up—but the situation remains utterly precarious, marked by the dramatic car bombing in the capital
of Abuja in October 2010 attributed to delta militants.

37. United Nations Environment Program (UNEP), Environmental Assessment of Ogoniland (Nairobi:
UNEP, 2011).

38. Mike Rogin, Fathers and Children (Trenton, N.J.: Transaction, 1991).
39. United Nations Development Project (UNDP), Niger Delta, Situation Assessment and Opportunities

for Engagement (Port Harcourt/Abuja: UNDP, 2007).
40. United Nations Development Project (UNDP), Niger Delta Human Development Report (Abuja:

UNDP, 2005).

| 466 American Quarterly

41. Human Rights Watch, Chop Fine (New York: Human Rights Watch, 2007); International Crisis
Group, Swamps of Insurgency, Report No. 115 (Dakar: International Crisis Group, 2006).

42. Human Rights Watch, Rivers and Blood (New York: Human Rights Watch, 2005); Human Rights
Watch, Chop Fine.

43. Aderoju Oyefusi, “Oil and the Propensity for Armed Struggle in Niger Delta Region of Nigeria,” Post
Conflict Transitions Papers No. 8 (WPS4194) (Washington, D.C.: World Bank, 2007).

44. UNDP, Niger Delta, Situation Assessment.
45. Kathryn Nwajiaku, “Oil Politics and Identity Transformation in Nigeria” (PhD diss., Oxford University,

2005).
46. Ike Okonta and Oronto Douglas, Where Vultures Feast (London: Verso, 2002).
47. Ellis Goldberg, Erik Wibbels, and Eric Mvukiyehe, “Lessons from Strange Cases: Democracy, Devel-

opment, and the Resource Curse in the US,” Comparative Politics 41.4 (2008): 477–514.
48. For new research on the Gulf petrochemical industry, race and organized labor, and landscapes of

risk, see the June 2012 special issue of the Journal of American History, especially Craig Colten, “An
Incomplete Solution,” Journal of American History 99 (2012): 91–99; and Tyler Priest and Michael
Botson, “Bucking the Odds,” Journal of American History 99 (2012): 100–110.

49. Allan Sindler, Huey Long’s Louisiana: State Politics, 1920–1952 (Baltimore, Md.: Johns Hopkins Press,
1956); Adam Fairclough, Race and Democracy: The Civil Rights Struggle in Louisiana, 1915–1972
(Athens: University of Georgia Press, 1999).

50. Anton Blok, Violent Entrepreneurs (New York: Harper, 1974).
51. Brady Banta, “Money, Resources, and Gentlemen: Petroleum Severance Taxation, 1910–1925,” in

Louisiana Politics and the Paradoxes of Reaction and Reform, 1877–1928, ed. Matthew Schott, vol.
7 of Louisiana Purchase Bicentennial Series in Louisiana History (Lafayette: Center for Louisiana
Studies, 2000), 624–45; Roman Heleniak, “Local Reaction to the Great Depression in New Orleans,
1929–1933,” in The Age of the Longs: Louisiana, 1928–1960, ed. Edward Haas, vol. 8 of Louisiana
Purchase Bicentennial Series in Louisiana History (Lafayette: Center for Louisiana Studies, 2001).

52. Sarah Lewis Burd-Sharp, Kristin Lewis, and Eduardo Martins, A Portrait of Louisiana, American Hu-
man Development Project (New York: Social Science Research Council, 2009).

53. Cited in Steve Mufson, “Oil Spills, Poverty, Corruption: Why Louisiana Is America’s Petrostate,”
Washington Post, July 18, 2010, www.washingtonpost.com/wp-dyn/content/article/2010/07/16/
AR2010071602721.html?hpid=opinionsbox10.

54. Robert Cavnar, Disaster on the Horizon (White River Junction, Vt.: Chelsea Green, 2011).
55 William Freudenburg and Robert Gramling, Blowout in the Gulf (Cambridge, Mass: MIT Press, 2011).
56. Diane Auston, Bob Carriker, Tom McQuire, Joseph Pratt, Tyler Priest, and Allan Pulsipher, History

of the Offshore Oil and Gas Industry in Southern Louisiana, vol. 1 (Baton Rouge: Center for Energy
Studies, Louisiana State University, 2001); Robert Gramling, Oil on the Edge (Albany: State University
of New York Press, 1996).

57. Freudenburg and Gramling, Blowout in the Gulf, 28.
58. National Commission, Deep Water, 62.
59. Ibid., 80.
60. Ibid., 76.
61. Peter Lehner, In Deep Water (New York: OR Books, 2010), 88.
62. National Commission, Deep Water, 39.
63. Cavnar, Disaster on the Horizon, 156.
64. Freudenberg and Gramling, Blowout in the Gulf, 148.
65. Lehner, In Deep Water, 92.
66. National Commission, Deep Water.
67. See John Konrad and Tom Shroder, Fire on the Horizon (New York: Harper Collins, 2011); Lauren

Steffy, Drowning in Oil (New York: McGraw Hill, 2011).
68. Deepwater Horizon Study Group, Final Report on the Macondo Well Blowout (Berkeley: University of

California, 2011), 510.
69. Kent Moors, Oil Vega (New York: Wiley, 2011); D. O’Sullivan, Petromania (Petersfield, N.H.: Har-

riman House, 2009); Leah Goodman, The Asylum (New York: Morrow, 2011).
70. Dan Dicker, Oil’s Endless Bid (Hoboken, N.J.: John Wiley, 2011).
71. John Parsons, “Black Gold and Fools Gold,” Economia 10.2 (2010): 82.

| 467The Tale of Two Gulfs

72. Dicker, Oil’s Endless Bid.
73. Moors, Oil Vega, 98.
74. Ibid., 6.
75. Rob Nixon, Slow Violence and the Environmentalism of the Poor (Cambridge, Mass: Harvard University

Press, 2011).
76. Leigh Johnson, “Financializing Energy and Climate Risks” (unpublished manuscript, Geography

Department, University of Zurich, 2012), 3.