other half went to reparations and to fund the U.N. inspections. Thereafter Iraqi production recovered to something over two million barrels per day, with significant output smuggled into Jordan, Syria, and Iran. In addition, Saddam’s regime benefitted from billions of dollars of secret kickbacks from those who had been granted contracts to sell Iraqi oil, ranging from mysterious Russian middlemen to a Texas oil tycoon to officials from countries seen as friendly to Iraq.5
But the program always seemed at risk. Would Saddam continue to cooperate with the U.N. program this time? Or would he break off cooperation, reducing or cutting off altogether Iraqi exports—thus abruptly sending the price up? The uncertainty created considerable price volatility.
By the end of the 1990s, the U.S. policy of containment was clearly fraying. Sentiment was growing in the Middle East and Europe that the sanctions were hurting not Saddam and his clique, and the Republican Guard that kept them in power, but the general Iraqi population. In 1998 Saddam permanently expelled the U.N. weapons inspectors. A 1998 U.S. National Intelligence Estimate concluded that Saddam’s ambitions for weapons of mass destruction were unchecked.6
Yet Saddam had been contained, and it appeared that he would never again be able to renew his bid to control the Persian Gulf. Next door in Iran, in 1997, Mohammad Khatami, regarded as a reformer and a relative moderate, was elected president, and there seemed a possibility to reduce the mutual hostility that had so dominated relations between Washington and Tehran. With all these changes, Middle East petroleum now appeared much more secure—and that meant that the world’s oil supply was more secure. Given this stability, it was thought that the price would circle around $20 or so a barrel. For American motorists, that meant relatively low gasoline prices, which they assumed were part of the natural order.
NEW HORIZONS AND THE “QUIET REVOLUTION”
At the same time, technology was increasing the security of oil supplies in a different way—by expanding the range of the drill bit and increasing recoverable reserves. The petroleum industry was going through a period of innovation, capitalizing on the advances in communications, computers, and information technology to find resources and develop them, whether on land or farther and farther out into the sea.
So often, over the history of the oil industry, it is said that technology has gone about as far as it can and that the “end of the road” for the oil industry is in sight. And then, new innovations dramatically expand capabilities. This pattern would be repeated again and again.
The rapid advances in microprocessing made possible the analysis of vastly more data, enabling geophysicists to greatly improve their interpretation of underground structures and thus improve exploration success. Enhanced computing power meant that the seismic mapping of the underground structures—the strata, the faults, the cap rocks, the traps—could now be done in three dimensions, rather than two. This 3-D seismic mapping, though far from infallible, enabled explorationists to much improve their understanding of the geology deep underground.
The second advance was the advent of horizontal drilling. Instead of the traditional vertical well that went straight down, wells could now be drilled vertically for the first few thousand feet and then driven at an angle or even sideways with drilling progress tightly controlled and measured every few feet with very sophisticated tools. This meant that much more of the reservoir could be accessed, thus increasing production.
The third breakthrough was the development of software and computer visualization that was becoming standard throughout the construction and engineering industries. Applied to the oil industry, this CAD/CAM (computer-aided design, computer-aided manufacturing) technology enabled a billiondollar offshore production platform to be designed down to the tiniest detail on a computer screen, and its resilience and efficiency tested in multiple ways, even before welding began on the first piece of steel.
As the 1990s progressed, the spread of information and communications technology and the extraordinary fall in communication costs meant that geoscientists could work as virtual teams in different parts of the world. Experience and learning from a field in one part of the world could instantly be shared with those trying to solve similar problems in analogous fields in other parts of the world. As a result, the CEO of one company said at the time with only some exaggeration, scientists and engineers “would go up the learning curve only once.”
These and other technological advances meant that companies could do things that had only recently been unattainable—whether in terms of identifying new prospects, tackling fields that