THE RACE FOR WHAT'S LEFT (Chapter One)1 Driven by Depletion

In 1971, a Mexican fisherman named Rudesino Cantarell encountered an annoying problem while plying his trade off the Yucatán Peninsula: clots of oil, apparently seeping from underground seams in the Bay of Campeche, were clinging to his nets and reducing his catch. After putting up with this inconvenience for some time, Cantarell described his difficulties to officials of the government-owned oil company Petróleos Mexicanos, known as Pemex. This prompted Pemex to conduct an exploratory survey of the area where Cantarell's nets had been contaminated--and at this spot, in 1976, the company found the second most prolific oil field in the world. Whether the fisherman ever received any financial reward for his role in the discovery is not recorded, but the giant field was called "Cantarell" in his honor.1

For nearly three decades, the oil gushing from the Cantarell field was a veritable fountain of gold for the Mexican government. By 1981 the field was yielding an impressive 1.2 million barrels per day, and that amount continued to rise in the years that followed. Cantarell's prolific output allowed the Mexican state to significantly increase public spending and helped ensure the extended tenure of the Institutional Revolutionary Party (known as PRI for its initials in Spanish). Indeed, no other asset has contributed more to Mexico's economic vigor in modern times than the discovery and exploitation of Cantarell.2

>CANTARELL OIL FIELD, MEXICO

Lying under shallow water some fifty miles off the western coast of the Yucatán Peninsula, the Cantarell field is located in the Chicxulub Crater, produced by a giant asteroid that struck the Earth some 65 million years ago. (Many scientists believe that this asteroid, one of the largest ever to hit the Earth, produced a global cloud of ashes and dust that blocked sunlight and destroyed the food supply for many species, including the dinosaurs, leading to their extinction.)3 The crater is filled with shattered rock and rubble, and this highly fractured geology has made it easy to extract the field's extensive oil reserves. In its best years, Cantarell yielded over 2.1 million barrels of oil per day--more than any other field in the world except the colossal Ghawar deposit in Saudi Arabia.4

But the same conditions that made it easy to pump out Cantarell's petroleum bounty also contributed to its rapid decline. As more and more petroleum was drawn from Cantarell, the field's underground cavities emptied out and the ambient pressure dropped, reducing the outflow of oil. By 1995, the yield had fallen to 1 million barrels per day, the lowest recorded in more than fifteen years. To restore higher levels of production, Pemex spent $6 billion on a daring scheme to inject massive volumes of nitrogen into the Cantarell reservoir, intending to boost the underground pressure. For a time, the plan worked as designed, and output rose again--reaching just over 2 million barrels a day in 2003 and 2004. But the use of extraordinary means to increase production only hastened the depletion of the field. By 2005, Cantarell was again in sharp decline, and in 2010 the field produced only 558,000 barrels per day--an astonishing 74 percent reduction from its 2004 peak. At this point, engineers at Pemex possess few options to reverse the slide, and so Cantarell's output is expected to keep falling.5

The rapid decline of the Cantarell field has profound implications for Mexico, the United States, and the world at large. In Mexico, the reduction in oil profits has meant a substantial loss of state revenue just as the government is trying to grapple with the global economic crisis and an escalating drug war. The problem is all the greater because Cantarell provided such a large share of Mexico's total oil output. With no other fields capable of replacing it, the country's total oil production has fallen from an average of 3.8 million barrels per day in 2003-06 to 2.9 million barrels in 2010.6 Since Mexican demand for oil is rising even as the production levels continue to fall, sometime before 2015 the country will switch from being a net oil exporter to a net importer, significantly damaging the country's economy.7 Meanwhile, the United States, which imported much of the oil produced at Cantarell, faces the loss of one of its most trusted and reliable sources of energy; as a result, more and more of America's imports will have to come from distant, unreliable suppliers in the Middle East and Africa.

The magnitude of Cantarell's decline--and the speed with which it has occurred--has understandably been a shock for Mexican officials, who must now grapple with the consequences. "I don't recall seeing anything in the industry as dramatic as Cantarell," said Mark Thurber, an energy researcher at Stanford University.8 But the field's degeneration also troubles global oil experts, who see in it a premonition of production declines at other major reservoirs, including Ghawar and similar "supergiants" in the Middle East. "The demise of Cantarell highlights a global issue," noted David Luhnow of the Wall Street Journal. "Nearly a quarter of the world's daily oil output of 85 million barrels is pumped from the biggest 20 fields.... And many of those fields, discovered decades ago, could soon follow in Cantarell's footsteps."9

In many ways, the story of Cantarell's rise and fall provides a microcosm of the global resource dilemma. Many of the world's principal sources of oil--and of coal, natural gas, uranium, copper, and assorted other vital materials--were, like Cantarell, discovered several decades ago and are now becoming less and less productive. According to the International Energy Agency (IEA), all but a few large oil fields have already reached their peak output levels and now face long-term decline.10 Unless new reservoirs of comparable size and productivity are discovered in the years ahead, the global supply of oil will inevitably contract. The outlook is similar for other raw materials, even if the details vary slightly case by case. Since few discoveries can be expected in the world's existing, well-explored resource zones, any increase in worldwide output will require the development of untapped reserves in new and often inhospitable locations.

The decline of existing sources of supply and the hunt for new reserves in more remote and more dangerous areas is not a new phenomenon. Virtually all of the minerals and fossil fuels at the core of modern industrial civilization are finite materials that exist in deposits of varying degrees of size, richness, and accessibility. Almost always, producers begin by drawing on the deposits that are the easiest to find and exploit--typically, those that lie close to the surface, are located near major markets, and require minimal refining and processing. When these high-quality, easily accessed deposits are exhausted, resource firms inevitably must seek fresh reserves in places that are less convenient--usually deeper underground, farther offshore, in smaller and less concentrated deposits, or in far-flung areas of the globe. For a time, the development of new technology allows resources to be profitably extracted from these harsher, more difficult locations. But the logic of depletion is unyielding. Every fresh advance in mining and drilling techniques leads to the exploitation of hard-to-reach reserves, until those deposits, too, are exhausted--and then the cycle of exploration and production begins anew in even more demanding circumstances.

The depletion of existing resource deposits and the search for new sources of supply was in large measure the driving force behind European colonialism in Africa, Asia, and the Americas from the fifteenth century onward. But what occurred in the past over a lengthy span of time is now happening very rapidly: many of the world's main reservoirs of vital materials are facing systemic depletion at the same time, leaving corporations and governments urgently scrambling to find replacements. As the wholesale exhaustion of the world's natural resource base coincides with unprecedented demand for these materials, the race for what's left is set in motion.

The Great Postwar Resource Boom

The Cantarell oil field in Mexico, the Ghawar field in Saudi Arabia, and many of the other giant oil reservoirs that we rely on today for a large share of our petroleum supply--along with the biggest reserves of natural gas, copper ore, and other vital materials that we depend on--were mostly discovered in the decades after World War II, when giant energy and mining companies scoured the world in search of new reserves to supply the booming world economy. Between 1950 and 2001, the world's combined gross domestic product (GDP) increased by 600 percent in real terms, jumping from $5.3 to $37.2 trillion in 1990 dollars.11 This extraordinary surge in global economic activity produced an insatiable need for resources of all types: energy for transportation, manufacturing, and electricity generation; minerals for buildings, infrastructure, and consumer products; and food and water to sustain a growing (and increasingly urbanized) global population. As Table 1.1 shows, production of most of the basic resources rose dramatically during the postwar years. The amount of copper mined in 2000 was almost five times what it had been in 1950; the production of natural gas increased nearly twelvefold; and other natural resources showed similarly impressive gains during those decades.12

>TABLE 1.1: PRODUCTION OF SELECTED COMMODITIES, 1950, 1975, AND 2000
(In thousand metric tons, unless otherwise noted)

Source: U.S. Geological Survey, Minerals Yearbook 2000, vol. 1; and editions for 1976 and 1952. Oil and gas data for 2000 from BP, Statistical Review of World Energy 2009.

To achieve these mammoth increases in resource output, the world's extractive industries had to expand beyond the well-established reservoirs that they had been exploiting at the end of World War II--reservoirs located largely in North America, Europe, and the Soviet Union. Those existing mines, oil fields, and gas reserves were not remotely large enough to support the ever-increasing levels of output demanded by the burgeoning world economy, so the resource firms were obliged to seek new reserves in other parts of the world. As a result of this drive, many resource-rich areas were explored and brought into production for the first time.

In the case of oil, for instance, more than half of the world's production in 1950 was derived from wells in the United States--with much of that oil coming from onshore sources in Texas, Oklahoma, Louisiana, and California. But U.S. reserves had grown by very little since the 1930s, and most geologists believed that it would be difficult to find significant amounts of oil elsewhere in North America. Accordingly, petroleum firms set out to develop new reserves in other oil-producing regions--or "provinces," as they are termed by oilmen--seeking to locate and exploit fields previously thought beyond their reach.13

This effort had its greatest initial successes in Saudi Arabia and neighboring areas of the Middle East. Although British geologists who first studied the region believed that there was little petroleum in Saudi Arabia, a number of American prospectors had higher hopes for the kingdom, and in 1933 the Standard Oil Company of California (SOCAL) acquired a concession to a large chunk of Saudi Arabia's Eastern Province, on the southern rim of the Persian Gulf. The outbreak of World War II made full-scale exploration of the area impossible, but once the war ended, SOCAL teamed up with Texaco, Mobil, and Exxon to form the Arabian-American Oil Company (Aramco) and began intensive development of the concession.14 In 1948, the joint venture made the greatest find in the entire history of oil: Ghawar, the world's largest field, which at its peak produced 5.6 million barrels per day. Three years later, Aramco found Safaniya, the world's third largest field (after Ghawar and Cantarell), with peak output of 2.1 million barrels per day.15

Eager to duplicate Aramco's great success, other oil producers undertook concentrated drives to find petroleum deposits in new producing areas. The French government, wary of excessive reliance on "Anglo-Saxon" oil firms like Aramco, British Petroleum, and Royal Dutch Shell, created oil companies of its own, which soon made major discoveries in the French colonies of Gabon and Algeria. Russian efforts to find more oil, meanwhile, succeeded in locating the giant Samotlor field in western Siberia, a major new producing area.16 Other large oil fields were also found during the 1950s in Libya, British-controlled Nigeria, and the Neutral Zone between Saudi Arabia and Kuwait.17

Even with these new fields gushing oil, however, the continuous growth in international demand kept pushing the energy firms to seek out additional deposits. With many of the most promising landward sites already fully explored by 1960, they began exploiting oil reserves in coastal waters, usually adjacent to existing onshore fields. Major reservoirs of this kind were developed in the Gulf of Mexico and the Persian Gulf.18 Over time, improvements in technology gradually allowed the companies to venture deeper; in 1969, the North Sea field, one of the world's largest offshore oil deposits, was discovered in an area of that ocean shared by Norway and the United Kingdom.19

Technological innovation was also crucial for a few other petroleum projects at the time, such as the effort to exploit the mammoth Prudhoe Bay field in Alaska's North Slope area. Transporting the oil by pipeline from ice-clogged Prudhoe Bay to an open port in southern Alaska proved unusually challenging. Because the Prudhoe Bay crude oil is warmer than the Alaskan permafrost, any conduit laid directly on the ground could turn the frozen soil into mush, risking a rupture in the line and massive oil spills; to overcome this danger, much of the 800-mile Trans-Alaska Pipeline eventually had to be built on stilts.20 But throughout the twentieth century, such elaborate, costly efforts were very much the exception rather than the rule. For the most part, the newly discovered fields were located in fairly accessible territories, with most new oil wells being installed on shore or in relatively shallow waters.

A similar pattern is evident in the development of natural gas over the second half of the twentieth century, with production spreading from a mere handful of suppliers to a much larger constellation of major players. In 1950, the United States, a pioneer in the development of natural gas, accounted for an astonishing 85 percent of total worldwide output.21 But as the demand for gas rose, new fields were developed in Europe, Asia, Africa, and especially the Soviet Union.

In 1952, Soviet gas output was only 258 billion cubic feet, or roughly 3 percent of the 8 trillion cubic feet produced that year in the United States.22 Soon, though, Soviet energy commissars launched a systematic campaign to locate additional sources of natural gas--focusing in particular on western Siberia, where many of Russia's newest oil deposits had been discovered. In the 1960s, this search resulted in the discovery of a number of enormous fields, including Urengoy and Yamburg, currently the world's second and third largest gas reservoirs (exceeded only by the mammoth South Pars/North Dome field that is shared by Iran and Qatar). Major discoveries were also made in the Kazakh and Turkmen Soviet Socialist Republics (now the independent nations of Kazakhstan and Turkmenistan). As these fields were brought on line, Soviet production soared, reaching 21.1 trillion cubic feet in 1990, just before the breakup of the USSR.23

The search for natural gas also led prospectors to North Africa and the Middle East, producing major discoveries in Algeria, Iran, and Saudi Arabia. The discovery of giant fields in the North Sea area, meanwhile, made Europe a leading gas producer for the first time. By 1975, gas wells in the Dutch, British, and Norwegian sectors of the North Sea allowed those three countries to produce about 4.5 trillion cubic feet of gas altogether; in 2000, their combined total had reached 7.6 trillion cubic feet.24

And the pattern was the same when it came to industrial minerals. The great upsurge in industrial output after World War II encouraged mining firms to seek and develop fresh reserves around the world. This was true both for common industrial ores, such as copper, iron, and bauxite (used to make aluminum), as well as for rare specialty metals needed by the aerospace and electronics industries. Whereas the production of most basic ores was once concentrated at historic mines in North America, Europe, and certain colonies in Africa, before long mining companies began expanding their search to remote areas of the world. The hunt for new sources of copper, for example, led prospectors to Irian Jaya, the Indonesian half of the island of New Guinea. In 1969, the American firm Freeport-McMoRan began development of the Ertsberg mine, a mammoth copper and gold deposit found near the summit of Irian Jaya's 16,535-foot Puncak Jaya peak; later, Freeport developed a second mine, Grasberg, on an adjacent mountain.25

The specialty metals needed by burgeoning high-tech industries--such as titanium, a strong, lightweight metal widely used in aircraft and missile manufacture--were initially produced in only a handful of mines. But soon new sources of these minerals were being ferreted out worldwide. To satisfy the rising demand for titanium, for example, new or expanded mines for ilmenite and rutile (the ores containing titanium) were established in Australia, Egypt, India, and South Africa.26 A similar effort was conducted to develop new sources of cobalt, nickel, and manganese.

Mining companies paid special attention to columbium and tantalum, two rare minerals used in the production of high-strength steel alloys. The U.S. Bureau of Mines observed that these materials were "among the rare metals most vital in 1952 to the United States defense program," thus justifying special government efforts to secure adequate supplies of them.27 In subsequent years, tantalum also found increasing use in the manufacture of compact capacitors for lightweight electronic devices, including laptop computers and cellular telephones.28 To satisfy this growing need, new deposits were developed in Australia, Brazil, British Guyana, Mozambique, and South-West Africa (later Namibia).29

The development of the nuclear power industry, along with the continuing manufacture of nuclear weapons, produced a frantic search for new sources of uranium--the principal fuel for both reactors and bombs. In the postwar years, the United States obtained much of its uranium from the Belgian Congo and the Union of South Africa, two problematic areas (one the site of civil strife and UN intervention, the other ruled by a white supremacist regime) whose importance to the American nuclear program played a significant role in early Cold War politics.30 France, determined to secure uranium under its own control for both military and electricity-generating purposes, scoured its colonies in Africa, eventually finding rich deposits in Niger.

Whether petroleum or natural gas, copper ore or cobalt, tantalum or uranium, the pattern over the second half of the twentieth century was the same: growing worldwide demand prompted a global search for additional sources of supply, leading to the development of new deposits in previously unexplored areas. Between 1950 and 2000, these efforts led to a substantial increase in the production of raw materials of all kinds, allowing for the tremendous expansion in industrial activity around the world.

Wholesale Depletion

Today, the demand for natural resources continues to trend upward, driven in large part by surging economic growth in China, India, and other Asian dynamos. As before, this increasing demand places enormous pressure on producers to increase their output of raw materials. But while some of the existing reservoirs may prove capable of increased output, many are showing signs of starkly diminishing capacity.

The most worrisome signs concern the future availability of oil. Between 1950 and 2000, the discovery of giant new fields in Africa, Alaska, Iran, Kuwait, Mexico, Russia, Saudi Arabia, and the North Sea led to a nearly eightfold increase in oil output, from 10 million to 76 million barrels per day. As this period drew to a close, however, it became increasingly clear that many of these fields had passed the moment of maximum production--their "peak"--and were now in decline.

The first major oil province to exhibit signs of profound enfeeblement was the United States. Up until 1970, ever-increasing production in California, Louisiana, Oklahoma, and Texas allowed this country to lead the world in total oil output. That year, total oil production in the Lower 48 states reached 9.4 million barrels per day--an impressive amount even by today's standards. After 1970, though, crude oil production in the Lower 48 suddenly stopped growing and then began a rapid decline, dropping to 7.1 million barrels in 1985 and a mere 4.9 million barrels in 2000.31 For a time, increased production at Prudhoe Bay in Alaska helped stem the decline in total U.S. crude output. But in 1988, Alaskan petroleum production reached its own peak, and then also began to drop off. Total Alaskan yield fell below 1.0 million barrels per day in 2000, and was running at about 650,000 barrels per day in 2009.32

Other oil-producing regions around the world have followed a very similar pattern: steady gains after World War II, an eventual peak in output, followed by relentless decline. The diminishing production at the Cantarell field in Mexico, for example, has been paralleled by a slide in output in Venezuela, another major exporter to the United States. Venezuela's oil production reached a peak of 3.5 million barrels per day in 1998, but it fell to 2.4 million barrels in 2009, and further declines are likely.33 Production in Russia, meanwhile, reached a peak of 12.5 million barrels per day in 1988, dropped to less than half that level following the collapse of the USSR, and has never fully recovered since then. While the introduction of fresh capital and advanced technologies has restored some of the lost capacity--Russian oil wells produced 9.9 million barrels per day in 2008, and their output has edged up slightly since then--many of the country's giant fields are not capable of further increases.34

Signs of exhaustion are also widespread in the North Sea area, one of the greatest discoveries of the postwar era. Combined production in the British and Norwegian sectors of the region peaked in 1999 at 6.1 million barrels per day,35 but it is expected to drop to less than half that level in the near future. According to the most recent projections from the U.S. Department of Energy, the total British and Norwegian output is expected to fall to 2.8 million barrels per day in 2020 and only 2.6 million barrels per day in 2030.36

The decline in these and other major producing areas has generated considerable alarm among energy officials, since it means that the world will require new sources of petroleum on a large enough scale to both satisfy growing demand and compensate for the loss of output from existing fields. To calculate just how much additional production will be needed to offset the decline at existing fields, the International Energy Agency recently conducted a systematic analysis of the world's major producing reservoirs. The study examined historical production records at nearly all of the world's oil fields containing proven and probable reserves in excess of 500 million barrels; together, these reservoirs accounted for more than two-thirds of global crude output in 2007. The results, published in the 2008 edition of the World Energy Outlook, were startling.37

Extrapolating from their sample to calculate the average decline rate for all fields, the IEA concluded that between 2003 and 2007 the average "natural" decline rate for reservoirs that have passed their peak production was approximately 9.0 percent per year--substantially greater than many had assumed. Because oil companies often employ artificial means to boost production rates at declining fields (the way nitrogen was injected into Cantarell), the actual, "observed" rate of decline was somewhat smaller, an estimated 6.7 percent per year. Still, even the lower "observed" rate means that in the IEA's baseline year of 2007, the net decline from existing fields was about 4.7 million barrels per day, out of a total output of 82 million barrels. This is the amount of new production that had to be obtained from new fields in 2007 simply to maintain consumption at current levels; a like amount, of course, will be needed in every forthcoming year to replace lost output.38

Not only is production at existing fields declining more than previously suspected, the IEA discovered, but this rate of decline is itself getting faster every year. In 2003, the natural rate of decline was 8.7 percent per year, whereas by 2007 it had risen a full percentage point, to 9.7 percent annually.39 IEA analysts attributed this increase in the rate of decline to the progressive depletion of the world's giant oil fields and the resultant reliance on newer and generally smaller fields--which typically reach their peak and start declining much more swiftly than bigger fields.40 All in all, their analysis points to an inescapable conclusion: the major oil finds of the postwar era--those mammoth discoveries whose prolific output sustained rising global energy needs for nearly half a century--are no longer capable of satisfying the world's requirements. The combined output of the world's ten biggest oil fields (see Table 1.2) has already fallen by 30 percent, and this decline appears irreversible.41

The accelerating depletion of existing oil fields, along with doubts about how many new deposits the oil companies will find in frontier regions, has led to growing reliance on "unconventional" oil--Canadian tar sands, shale oil, extra-heavy crude, and other materials obtained from nonstandard petroleum deposits. According to the IEA, such materials will constitute 9 percent of the total world supply in 2035, up from a mere 3 percent in 2009.42 If this forecast proves accurate, the unconventionals will add 7.2 million barrels per day to global production. But this is not nearly enough to compensate for the expected decline in conventional production from known reserves, so pressure to develop new fields in problematic areas--such as the Arctic, Siberia, and the deep oceans--will only continue to grow.

>TABLE 1.2: THE WORLD'S TEN BIGGEST OIL FIELDS BY PRODUCTION
(As of 2007)

Source: International Energy Agency, World Energy Outlook 2008, Table 10.1. Kb/d = thousand barrels per day

A Consistent Pattern

The same pattern seen in the case of oil--a substantial increase in production in the second half of the twentieth century, followed by the wholesale depletion of existing reserves in the early years of the twenty-first--also holds true for many other resources, including natural gas and numerous key minerals.

Because natural gas was developed as an energy source later than petroleum and because the technology to exploit it has lagged behind that of oil, many of the large gas fields discovered in the second half of the twentieth century still retain a large share of their initial supply. Huge quantities of "unconventional" gas can also be extracted from shale rock and other challenging deposits. Even so, a number of the world's most intensely developed natural gas fields are now showing signs of pronounced decline.

The European producers are seeing some of the most dramatic indications of gas-field depletion. In 2000, the United Kingdom produced 3.8 trillion cubic feet of gas, making it the world's fourth largest producer (after Russia, the United States, and Canada). But UK production has diminished steadily since then, falling to 2.1 trillion cubic feet in 2009. The Netherlands, another major North Sea producer, has also experienced declining output as the giant Groningen field has been exhausted. The development of the Snøhvit field, located above the Arctic Circle in the Barents Sea, has so far allowed Norway to compensate for the decline in its other fields, but even with the addition of Arctic gas, net production in western Europe is expected to remain flat over the next five to ten years and then commence a long-term decline.43

Parallel declines have been occurring in many key Russian fields. Although Russia's net output continues to grow through the development of previously untapped reserves, the country's two largest gas fields, Urengoy and Yamburg, are clearly becoming depleted. Engineers from Gazprom, the Russian state natural gas monopoly, are trying to sustain output at these fields by drilling deeper into the earth and employing sophisticated production technologies, but this cannot halt their continuing decline. This means that Russia, too, will be able to increase its gas output in the future only if it develops new fields in the Barents Sea, the Kara Sea, and remote, nearly inaccessible regions of Siberia.44

The picture is roughly similar in the case of many key minerals. The worldwide hunt for new reserves that accompanied the great economic boom of the postwar era resulted in the discovery and development of rich deposits around the globe, substantially adding to international supplies. But many of these mineral deposits have been so intensively exploited over the past half century that--just like gas fields and oil reservoirs--they are now facing wholesale depletion.

Take the case of copper, one of the world's most important industrial materials. Propelled by soaring demand from China, world copper output jumped from 8.1 million metric tons in 1985 to 15.4 million in 2007.45 But many existing mines are showing signs of significant decline, often characterized by the exhaustion of high-grade ores and a growing reliance on less-productive, lower-quality supplies. Chile, the world's leading copper producer--accounting for as much as 36 percent of the world's total supply in recent years--has seen its total copper output level off even as world demand continues to grow.46 With ore qualities in steady decline, the Chilean Copper Commission predicted in 2008 that the country's net output would face an inevitable downturn.47

The situation in Indonesia is even more dire. In 2005, Indonesia produced 1.1 million metric tons of copper ore, nearly as much as the United States, the world's second leading producer after Chile. But production has fallen substantially since then, largely as a result of diminishing yields at Freeport-McMoRan's giant Grasberg mine. According to the U.S. Geological Survey, Indonesia's net output in 2008 was just 650,000 metric tons, down more than 40 percent in only three years.48 With the quality of ores in Grasberg continuing to decline, it is unlikely that Indonesia will be able to reverse this slide. A similar reduction in ore quality and net output has also been recorded in other key copper-producing countries, including Australia, Canada, Mexico, and South Africa.49 Several other suppliers, including Peru and Zambia, have so far succeeded in boosting their output, but any future expansion of the world copper supply will require the development of new mines in less-explored areas.

What is true for copper is true for other vital minerals, including bauxite, cobalt, nickel, titanium, and specialty metals such as tantalum and platinum. Existing supplies of these minerals may be sufficient for current requirements, but many key sources of supply are in decline even as worldwide demand is rising. Cobalt and nickel, for instance, are increasingly being used as alloys in steel manufacture; both are also used for making long-lasting batteries for hybrid and all-electric cars. Yet even with production of both minerals achieving record highs in recent years, their supply is barely sufficient to satisfy international demand.50 The hunt for new supplies of these metals has already sent miners to Cameroon, Kazakhstan, Madagascar, New Caledonia, and Papua New Guinea, among other places, and the scope of the search can only increase.51

The global demand for titanium is also likely to outpace supply. Prized by many industries for its low weight and high strength, titanium is derived from ilmenite and rutile, which are found in just a handful of locations. At present, the leading suppliers of these ores are Australia, Canada, China, India, Norway, and South Africa. But with many existing mines approaching depletion, production from current titanium sources is not considered sufficient to satisfy future requirements, inspiring efforts to develop new mines in Kenya, Madagascar, Mozambique, and a number of other countries.52 The situation is roughly the same for lithium, tantalum, and the platinum group metals: demand is rising, output from existing mines is falling, and new reserves will inevitably have to be found in the future.53

Looming shortages of rare earth elements--cerium, europium, lanthanum, neodymium, and other exotic metals critical for many high-tech applications--are a particularly worrisome matter. At one time these minerals were produced in significant quantities in the United States, but extracting them from their constituent ores typically requires using large amounts of acids and other toxic chemicals, so most U.S. rare earth mines have now been closed due to environmental concerns. In recent years, China has accounted for more than 95 percent of the world's rare earth supplies, but now it, too, is curbing production out of environmental (and other) concerns. That means that these indispensable minerals will be consistently scarce until new mines can be opened in such locations as Australia, Mongolia, and Greenland.54

Not every single mineral is destined to face depletion in the years immediately ahead; modern industrial societies consume a wide variety of metals, and some of them are not currently in short supply. By and large, however, the world's stockpiles of the most widely used minerals are facing a significant risk of contraction. As the Hague Centre for Strategic Studies suggested in a 2010 assessment, "there is no denying that the exhaustion of many existing mines and the shrinking size, increasing remoteness, greater depth, and lower ore grade of new mineable deposits pose a significant challenge to expanding global supplies" of many essential minerals.55

Unrelenting Demand

Wherever one looks, therefore, the picture remains the same: the key resource stockpiles that have sustained global economic expansion for the past sixty-five years are approaching wholesale exhaustion. Even if the global economy suddenly stopped growing altogether, the world would be on its way to painful shortages of critical materials. But aside from occasional bouts of recession, the world economy is likely to continue growing in the years ahead. According to a projection by the U.S. Department of Energy, worldwide GDP will grow by an estimated 3.4 percent per year between 2008 and 2035, climbing from $66 trillion to $162 trillion over the course of this period (in constant 2005 dollars).56 Demand for basic resources is bound to expand at a comparable pace, placing extraordinary pressure on energy and mineral producers to find and develop new sources of supply.

This search will be driven most urgently by the need for added supplies of energy, especially oil and natural gas. According to the most recent projections from the DoE, between 2008 and 2035 the world's consumption of liquid fuels will rise by 31 percent (to a total of 112 million barrels per day) and the consumption of natural gas will grow by 52 percent (to 169 trillion cubic feet per year).57 To meet this rise in demand, the energy industry must substantially increase the production of these resources. Some of the additional oil and gas will be extracted from fields in existing hydrocarbon provinces, such as the Persian Gulf and West Africa, but much of it will have to come from newly developed fields in the Arctic, Siberia, and ultra-deep waters.

The need to develop new sources of oil and natural gas will be particularly important for China and the United States, the world's leading consumers of energy. In 2035, the DoE predicts, China and the United States will jointly consume 39 million barrels of oil per day, or about 35 percent of total world consumption.58 Neither country is capable of satisfying its energy requirements from existing domestic sources, so both China and the United States will have to develop as-yet-untapped reservoirs within their own territories and gain access to new deposits abroad. To a considerable degree, the need for supplemental energy sources will push these countries to develop reserves in remote and challenging areas, and to place greater weight on unconventional hydrocarbons such as oil sands and shale gas.

The task of finding and exploiting these new deposits will be carried out to a large extent by the major private energy companies, which have long taken the lead in seeking out new sources of supply. Giant corporations such as BP, Chevron, ExxonMobil, and Royal Dutch Shell are set to spend hundreds of billions of dollars over the next few decades to explore promising reservoirs in the Arctic, the deep oceans, and other formerly inaccessible areas. But governments, too, will become involved in the hunt for fresh reserves. Chinese leaders, wary of depending too much on Western-owned private firms for access to new sources of energy, have been pushing state-owned Chinese energy firms to undertake similar searches. This will mean a more conspicuous international role for the China National Petroleum Corporation (CNPC), the China National Offshore Oil Corporation (CNOOC), and the China National Petrochemical Corporation (Sinopec).59

A similar pattern is emerging in the case of industrial minerals. As with oil and gas, the demand for mineral ores is growing rapidly: in the first decade of the twenty-first century the global consumption of copper rose by 23 percent, while iron ore and aluminum each increased by 68 percent.60 With industrialization and urbanization continuing apace in much of the developing world, there is every reason to assume that such demand will continue to grow at comparable rates in the years ahead. The consumption of many specialty minerals--including lithium, platinum, tantalum, and the rare earth elements--is likely to experience even faster rates of growth, as various high-tech devices that rely on these metals become increasingly popular.61

Here, too, as in so much else, China is expected to play a dominant role. In recent years, the Chinese have been the first or second leading consumers of aluminum, copper, iron ore, nickel, tin, tungsten, and other vital minerals.62 While some of China's mineral requirements can be satisfied by its domestic mines, such rapidly growing demand has meant that an ever-growing share of the country's supplies must come from foreign sources.63 Many of the world's leading mining firms--BHP Billiton, Rio Tinto, and Vale of Brazil, among others--are scouring the world for new ore deposits in order to satisfy China's soaring mineral requirements. Just as in the energy field, however, the Chinese government is seeking to ensure a prominent role in these endeavors for the country's state-owned firms, such as the Aluminum Corporation of China (Chinalco) and the China Metallurgical Group Corporation (MCC).

But China is hardly alone in relying on government-backed enterprises to spearhead the search for vital resources. With demand growing for many critical materials and supply often failing to keep pace, other countries have also created special programs to enhance or supplement the endeavors of private companies. The Japanese government, for example, has established the Japan Oil, Gas, and Metals National Corporation (JOGMEC), whose stated aim is to ensure "a stable supply of natural resources for Japan." Among its principal functions is to finance efforts by Japanese mining companies to produce key minerals needed by the nation's industries, including copper, uranium, and the rare earth elements. Recognizing that Japan itself possesses few of these materials and that many traditional sources of supply have been exhausted, JOGMEC encourages Japanese firms to pursue mining opportunities in remote and unfamiliar locations abroad.64

Even the most basic necessities of life are not exempt from this hunt for the world's remaining resources. With world population expected to increase from approximately 7 billion people in 2011 to more than 9 billion in 2050,65 simply meeting the world's minimum food requirements will prove an extraordinary challenge. Currently existing farmland is wholly inadequate to support population growth on this scale, so new lands will have to be cultivated. Meanwhile, existing fields will be pressed to produce bigger yields--increasing the global demand for water, fertilizer, pesticides, and other inputs. All this will add to the pressure on commodity suppliers to seek out and develop new deposits of natural resources wherever they can be found.

As in the case of energy and minerals, the hunt for prime farmland and other ingredients in the production of food is being spearheaded by large private companies with particular expertise in the field. In recent years, vast tracts of agricultural land have been bought by such firms as Black River Asset Management, Bunge North America, Emergent Asset Management, and Hancock Agricultural Investment Group--companies that regard cropland as yet another dwindling natural resource, every bit as valuable as oil fields, copper mines, and the like. But here, too, government-backed entities are playing a conspicuous role. Fearing that their nations' domestic food output will prove inadequate to feed growing populations, the leaders of some countries--particularly in the water-scarce Persian Gulf area--have established special agencies to acquire farmland abroad. For the most part, these lands are being sought in poor and war-torn African countries, whose own leaders are desperate to attract fresh investment no matter how problematic the circumstances.66

This, then, is where we stand: many of the major resource reserves that have sustained global economic growth over the past sixty years are facing systemic depletion. Merely replacing the lost output from these exhausted deposits will require a major effort of exploration and development, while achieving any further growth will demand a truly unprecedented and often perilous undertaking. Because most of the world has already been scoured for readily accessible resource reserves, the only hope for finding more oil, natural gas, minerals, and farmland will lie in extending the search to previously inaccessible or inhospitable areas--the Arctic, the deep oceans, and countries long torn by war and internal strife.