Vol. 1, Issue 2, May 2007

Global Climate Change Threatens National Security

Global climate change presents a serious national security threat which could impact Americans at home, impact United States military operations and heighten global tensions, according to a new study released by a blue-ribbon panel of retired admirals and generals from all branches of the armed services. The study, “National Security and the Threat of Climate Change,” http://securityandclimate.cna.org, explores ways projected climate change is a threat multiplier in already fragile regions, exacerbating conditions that lead to failed states — the breeding grounds for extremism and terrorism.

These conclusions potentially impact the private sector as well. Do outsourcing decisions consider the effects of climate change in the regions where a company seeks to transfer production and procurement? Are metrics available to perform a cost/benefit analysis to assess the full cost of outsourcing?

The report includes several formal findings:

• Projected climate change poses a serious threat to America's national security.
• Climate change acts as a threat multiplier for instability in some of the most volatile regions of the world.
• Projected climate change will add to tensions even in stable regions of the world.
• Climate change, national security and energy dependence are a related set of global challenges.

The report offered specific recommendations directed at the Dept of Defense to reengineer its business processes to improve its energy efficiency as it improves its combat power.

Mutual aid agreements for Universities

The Virginia Tech massacre is a stark reminder of the need for campus disaster plans, said Hartford-area college officials who signed a mutual emergency aid pact Wednesday.

Although the pact was planned long before this week's shootings, the events on the Blacksburg, Va., campus were on the minds of officials from the five private colleges that signed the mutual aid agreement.

St. Joseph, Goodwin College, Trinity College, the University of Hartford and Wesleyan University agreed to help each other in the event of disasters such as fires, epidemics or hurricanes. The agreement is believed to be among the first of its kind in the nation, he said. It calls on the five colleges to maintain communications, coordinate transportation, provide aid such as housing and food if needed, and, if possible, accept students from other campuses during an emergency.

Have you considered Mutual Aid agreements with your business neighbors and/or competitors? Business sustainability delivers customer reliability. These agreements do not require the release of proprietary information. Their goal is to assure customers that the products or services being delivered by the industry does not possess a threat against the public if one competitor has been affected. It is in the interest of all the competitors in an industry to assure the public of the safety of their industry and thereby safeguard against industry-wide panic.

(Hartford Courant, April 19, 2007)

Mexican oil field dying?

We certainly are well aware of the uncertainties of matching future energy demand with future supply. How quickly will the uncertainties become certain? How will your business be affected? The Wall St Journal reports on this development:

AKAL C OIL PLATFORM, Gulf of Mexico, April 5 -- In March 1971, a Mexican fisherman named Rudesindo Cantarell took a few geologists from state-run oil company Petroleos Mexicanos to this spot, where he had seen oil slicks. Mr. Cantarell didn't know it, but he had stumbled across one of the largest offshore oil fields ever found.

A few decades and 12 billion barrels of oil later, the field that bears Mr. Cantarell's name is dying, and Pemex, as the state-owned company is known, is struggling to stave off the field's demise. From January 2006 though February 2007, Cantarell lost a staggering one-fifth of its production, with daily output falling to 1.6 million barrels from two million.

The oil industry was stunned. Cantarell, which currently produces one of every 50 barrels of oil on the world market, is fading so fast analysts believe Mexico may become an oil importer in eight years. That would batter Mexico's economy, which depends on oil exports to fund 40% of its government spending.

The continued deterioration of the world's second-biggest field by output would also put pressure on prices on the global oil market, where supplies are barely keeping up with growing demand as it is. And it would leave the U.S. even more dependent on Middle Eastern supplies -- and that much more vulnerable to political tumult in that region.

The demise of Cantarell highlights a global issue: Nearly a quarter of the world's daily oil output of 85 million barrels is pumped from the biggest 20 fields, according to estimates from Wood Mackenzie, a Scotland-based oil consulting firm. And many of those fields, discovered decades ago, could soon follow in Cantarell's footsteps.

It's widely believed that the world's biggest oil fields have already been found. In the decades leading up to the 1970s, the world discovered eight big fields that produced between 500,000 to one million barrels a day, according to Matthew Simmons, a veteran oil industry banker. During the 1970s and 1980s, only two were found. Since then, only one -- the Kashagan field in Kazakhstan -- has the potential to easily top the 500,000 barrel-a-day mark.

Two decades ago, about a dozen fields produced more than a million barrels a day. Now there are only four, one of which is Cantarell. The future of two others, discovered more than 50 years ago, remains in question. Some analysts speculate Saudi Arabia's Ghawar, the biggest field by far, could begin a gradual decline within a decade or so. Another, Kuwait's Burgan, is showing signs of maturity. In November of 2005, Kuwait Oil Co. lowered its estimate of the field's sustainable production level to 1.7 million barrels a day from 1.9 million a day.

Replacing big gushers is difficult. Industrialized countries, which tapped out their big fields years earlier, haven't been able to maintain output despite finding large numbers of smaller fields and investing heavily in technology. Alaska production, hurt by declines at the giant Prudhoe Bay field, dropped from 2 million barrels a day in 1988 to a current rate of about 900,000 a day.

"The world faces a situation where we have production from smaller and smaller fields trying to keep up with declines from the big fields like Cantarell," says Mike Rodgers, a partner at industry consulting firm PFC Energy in Houston. "You're on a treadmill trying to keep up, and you get to a point where you can't make any more forward progress."

Copyright (c) 2007 Dow Jones & Company, Inc.