Contracting US Oil Supply

We have reached the point in which the rock of demand is meeting the hard place of supply.  Quite bluntly our secure (or as secure as politically possible) suppliers are now falling from the tree.  We are now relying on the oil industry (remember them?) to bail us out by magically cranking up production somewhere else.

Strangely enough, rapid development in Iraq can likely fill this looming gap pretty quickly and quite a bit more besides.  The catch is when might this can be made to happen.

We are actually living through the first wave of scrambling in the face of the reality of peak oil as the industry today tries to just replace production losses.  I do not know now successful they will be or how long this can be kept up.  However, I am much more optimistic today than I was two years ago.

Part of the reason is that we are finding huge fields in the deep sea that can supply a lot of that soon to be missing production.  More importantly, the Iraqi fields are turning out to be much better than anyone knew and can supply the first flush of the developing shortfall.  Much more critically, the THAI production method appears to be working and can be applied in Canada and some locales in the USA and is plausibly able to single handedly displace all North America’s import needs.  This will be like the abrupt change in our gas fortunes due to shale gas drilling.

I do not know if we will drill up another few decades of supply as that seems unreasonable, but we are certainly going to bring on a lot of fresh production in the short term to alleviate the developing shortfalls.

Expect rationing.  Markets will do their share, but the consumer will not have priority for much longer.  The electric car is now becoming a necessity even if we have to wait a long time for the magical ultra capacitor.  After all, if you have to, most of you can live with a car that only gives you a range of say fifty miles.  It means a lot of personal planning but we can go there.

What amazes me is how little the press is onto this issue. 

The Oil Export Crisis Has Unofficially Arrived

By Chris Nelder | Friday, February 5th, 2010

Last March, my study of the effect of peak oil on U.S. imports had brought Mexico to the forefront. As our #3 source of imports, the crashing of its supergiant Cantarell field had put the future of our oil supply in serious jeopardy.

The possibility that Mexico's oil and gas exports to the U.S. could go to zero within seven years looked very real.

As I explained in that piece, rising domestic consumption coupled with declining supply puts an ever-tightening squeeze on imports. I have found no evidence that policymakers are paying any attention to this critically important dynamic, but it is the very point of the peak oil spear.

Were it not for the market meltdown and recession, it would have pierced our vital organs. Instead we felt a pinprick. Hardly anybody realized what it really was, and most ran off on a wild goose chase for evil oil speculators.

Now Venezuela has appeared on my radar for similar reasons... only this time, we're really going to feel it.

Let's begin with a review of Mexico's exports.

Mexico

Shortly after publishing that article, I casually remarked to my friend and fellow energy analyst Gregor Macdonald that Cantarell's production could fall to under 0.5 million barrels per day (mbpd) by the end of the year.

I arrived at this somewhat startling conclusion by calculating the effect of its decline rate — 38% at the time and accelerating — on production of 0.77 mbpd in January, down precipitously from its 2.1 mbpd peak in 2003.

Gregor's recent data sleuthing on Cantarell found its production in December 2009 was 0.527688 mbpd, just a hair above my estimate.

To update the data on Mexico, it's now our #2 source of imported petroleum because Saudi Arabia has fallen from #2 to #4.

As of November 2009 (the latest data available) the U.S. imported 1.08 mbpd of crude and finished petroleum products from Mexico. Its exports to the U.S. peaked at 1.46 mbpd in 2004, the same year as its production peaked. Net exports (production minus consumption) fell to 1.06 mbpd in 2008.

For the years 2005-2008, Mexico's exports to the U.S. declined by 0.51 barrels per day. In 2010, supply is expected to fall to 2.5 mbpd — nearly half a million barrels per day less than 2009.

Mexico nationalized its petroleum operations in 1938 in a constitutional amendment and handed over total control to the state oil company Petróleos Mexicanos (PEMEX), with predictable results.

Oil now provides more than 40% of the country's revenues, which have been used to pay for a vast array of public services and line the pockets of the oligarchy while starving investment in both upstream activities (new oil supply) and downstream (finished products).

Consequently, Mexico's oil reserves have decreased by more than 75% in two decades (owing partly to the correction of a previous, ridiculously inflated figure), production has begun to decline and exports are falling fast.

It now imports $4.5 billion a year worth of gasoline, $10 billion a year in petrochemicals, and 25% of its natural gas, mostly from the U.S. This despite having nearly 13 billion barrels of proven oil reserves and more than 50 billion barrels of (unproven) reserve potential.

Mexico would be in a far better position, were it not for its hostile stance on foreign participation. PEMEX simply lacks the technical ability to develop its more difficult, remaining resources — particularly deep water.

Venezuela

As of November, the U.S. was importing 0.9 mbpd from Venezuela, making it our #3 source. Its exports to the U.S. peaked at 1.8 mbpd in 1997, the same year as its production peaked. Net exports (production minus consumption) have fallen 38% from the 1997 peak of 3.1 mbpd to 1.9 mbpd in 2008.

Venezuela's oil exports to the U.S. have been declining markedly since 2004, after a long period of relative stability. From 2004 through 2009, Venezuelan petroleum exports fell 0.7 mbpd.

Like Mexico, Venezuela is endowed with enormous energy resources and could be producing at a far higher level. Estimates of its oil reserves range from 153 billion barrels of certified proven; to 513 billion barrels technically recoverable in the USGS' January estimate; to 1.5 trillion barrels in offshore potential, if you believe the effervescent Dr. Marcio Mello of Brazil.

Most of it is heavy oil, a low-grade which must be upgraded to synthetic crude.

And like Mexico, President Hugo Chavez has exiled the Western oil companies who might have made the investment to bring those resources to market.

A Nation in Free Fall

The good times rolled for Chavez in the first years after his election in 1998. His socialist programs to rebuild the country and raise its standard of living were popular but expensive, and soon began to fail under the crush of declining energy supply.

Oil revenues make up 90% of Venezuela's foreign earnings, so its dependence on oil exports is extreme.

Billions of dollars in profits from the national oil company, Petroleos de Venezuela SA (PDVSA) were diverted to welfare programs and into the pockets of oligarchs, while investment in future petroleum and power supply languished.

The precipitous drop in oil prices since mid-2008 only compounded the revenue shortfall.

Oil production has fallen 25% since Chavez was elected, and a long, devastating drought has cut into its hydropower supply, of which 73% comes from the massive Guri Dam.

Chavez responded by nationalizing most of its petroleum operations and its grid in 2007.

In 2009, another 76 oil services companies on the Maracaibo Lake were taken over. The projects now sit abandoned, waiting for PDVSA to compensate the displaced operators and put them back into operation.

Almost half a million hectares of land were seized in 2009 with the rationalization that it was underused.

Measures to counter the declining hydro supply have been implemented in a haphazard fashion, resulting in frequent, unscheduled blackouts, including seven national blackouts since 2007. Malls and government offices have had their hours of operation cut and water rationing has been imposed.

"Some people sing in the bath for half an hour,'' Chávez cried at a cabinet session in October. "What kind of communism is that? Three minutes is more than enough!''

In January, a wave of public protest erupted, prompting Chavez to implement a rapid series of desperate measures.

• Rolling blackouts were imposed in the capital city of Caracas. After a few days of protests, Chavez lifted the blackouts and fired the electricity minister. Blackouts are expected to be reinstated in an effort to keep hydro reservoir levels from falling to the point of collapse.
• A recent report gave the power shortage a paradoxical twist, indicating that power from one of the state refineries may have to be diverted to the grid, cutting distillate output by 200,000 barrels per day — or more. This will result in less heating oil for China, who will make up the loss by burning more coal.
• Chavez devalued Venezuela's bolivar currency by half; the president went on to nationalize a chain of French-owned supermarkets over alleged price gouging.
• He ordered cutbacks in the operation of state-run steel and aluminum manufacturing operations, which account for up to 20% of the country's power demand.
• This week he turned to Cuba for help on how to cope with the power shortage, since Cuba has been through similar problems. The island nation is providing tens of thousands of energy-efficient lightbulbs and cloud-seeding technology to Venezuela.
• Last weekend, he forced six television channels off the air for failing to broadcast one of his speeches — up to six hours in length — in a continuation of his campaign for "communicational hegemony." Since December, all radio and television networks are required by law to broadcast his speeches live, whenever he chooses to make one.
• Nationwide student marches have been met by troops armed with rubber bullets, and at least two deaths have been recorded.

Chavez has said he's prepared to take "radical measures" should the situation worsen, begging the unsettling question of what could be more radical than what he has already done.

Looking East, Not North

Now Chavez is turning east for help in developing his nation's oil and gas resources. Recent agreements include a $20 billion joint venture with Russia to develop the Junin 6 field in the Orinoco oil belt, with a potential top production rate of 450,000 barrels per day.

China has agreed to build a refinery and develop the Orinoco heavy oil fields, and Venezuela has guaranteed 560,000 barrels per day to China this year.

Venezuela has launched its first major auction for drilling rights in more than a decade, for access to areas east of the existing operations in the Orinoco. Developing the leases will be expensive because of their distance from the existing infrastructure, and winning bidders are expected to make offers in the $10 billion-plus range including early payments of at least $1 billion, financing plans, and commitments to build the necessary roads, pipelines, ports, and upgraders. Potential bidders include Spain's Repsol, Japan's Mitsubishi, the UK's BP, and Chevron.

Given the sheer size of its resources, it's too soon to declare the end of Venezuela's glory days in the oil patch. However, it does seem likely that the new barrels it brings to market will be headed east — not north — and Western producers will have very little stake in the projects.

Chavez will put exports to the U.S. on a short path to zero the first chance he gets.

Oh Imports, Where Art Thou?

The combined decline in imports from Mexico and Venezuela for 2005 through 2008 is 0.89 mbpd. If the trend continues in 2009, then over 1 mbpd will have disappeared from the U.S. import stream in the last five years — a decline of 8% from 2004 levels.

Since 2007, the loss of production from Cantarell alone was 0.7 mbpd, but the recession cut U.S. demand by 2 mbpd, effectively masking the decline. This raises the question: If U.S. demand rises from here, where will those barrels come from... and how much will they cost?

The U.S. is not only in first place worldwide in its demand for oil, but in paying the market rate for it. Nobody else buys 8.5 mbpd of crude at retail.

Drivers in Venezuela are still filling up for 25 cents a gallon, even as their exports decline.

Mexico's gasoline prices are more on par with the U.S., but its consumption has been rising steadily since 1997 and continues to cut into exports.

Saudi Arabia's domestic consumption is currently growing at the rate of 7% per year, following a trend of more than three decades. It uses a whopping 1.5 mbpd — 1.8% of total world oil supply! — to desalinate water, at the equivalent of 7 cents a gallon.

Before the OPEC cuts of 2009, its exports to the U.S. had essentially flatlined at 1.5 mbpd since 2004.

Exports from our #5 source, Nigeria, have also declined — from 1.17 mbpd in 2005 to 0.98 mbpd in 2008.

In fact, of the top five oil exporting countries to the U.S., representing 63% of our crude imports, only Canada posted an increase (of 0.2 mbpd).

The combined annual net oil exports from our top three exporting countries — Canada, Mexico and Venezuela — illustrate our situation:

http://images.angelpub.com/2010/05/3895/oil-exports-us-canada-mexico.jpg

Combined Annual Net Oil Exports From Canada, Mexico and Venezuela. Source: Jeffrey J. Brown, Samuel Foucher, PhD, Jorge Silveus.

Given the very modest increases from unconventional domestic production and Canada, the decline of imports from Mexico and Venezuela means the U.S. will be increasingly forced to depend on suppliers farther afield — the very same suppliers that China has been buying into in size. The "collision course with China" that I wrote about in July 2005 has nearly reached the point of impact.

It also means that when oil prices rise again, the pain will be far greater for the U.S. than it is for our top suppliers. Next time, the spear of declining oil exports will puncture a lung.

The oil export crisis has arrived... We just haven't felt it yet.

Production, consumption, and export data herein is the latest available from the EIA.

WILD9 Symposium in Merida

The WILD Foundation is having this conference in Merida Mexico, the week after next. It is a natural fit as wildlife photography is very much the handmaiden of the whole conservation movement from early days.

It is certainly something that I wholeheartedly support.

I am presently investigating the prospects of running a fourth post everyday consisting of outtakes from twenty five live wildlife cams set up professionally throughout the world. We would likely use a set of thumbnails to access the sites live and provide a single item of interest every day.

That way my readers can track eagles hatching and spirit bears fishing and many other sites my friends have organized.

Obvious a site interested in terraforming the earth is just as keenly interested in conservation as one supports the other. Both require the active participation of citizens.

To properly restore the salmon fishery of the Fraser river needs not only the application of municipal equipment, but the ongoing involvement of volunteers in their thousands in order to maximize the results.

This conference should generate some good coverage and we will try to capture whatever shows up.

WILD9 Launches WiLD SPEAK Inaugural Global Environmental Communications Symposium Draws Largest Gathering of Conservation Photographers

World-class photographers will gather November 6-13, 2009 in Merida, Mexico, during the 9th World Wilderness Congress (WILD9) to present and discuss their work and its contribution to conservation efforts. The congress will debut the inaugural WiLD SPEAK, a Conservation Communications Symposium Nov. 9-12 organized by the International League of Conservation Photographers (iLCP). WiLD SPEAK will feature some 40 distinguished conservation photographers including exhibits and presentations by luminaries Art Wolfe, Nick Nichols, Tom Mangelsen, David Doubilet, Jim Balog and others.

Boulder, CO (PRWEB) August 26, 2009 -- World-class photographers will gather in Merida, Mexico, during the 9th World Wilderness Congress (WILD9) to present and discuss their work and its contribution to conservation efforts. They will join writers, filmmakers and conservation experts at the inaugural WiLD SPEAK, a Conservation Communications Symposium Nov. 9-12 organized by the International League of Conservation Photographers (iLCP). WiLD SPEAK provides a forum for media professionals to discuss environmental issues and themes, share strategies and technologies, and explore how their work can raise awareness and realize conservation objectives.

WiLD SPEAK will feature some 40 distinguished conservation photographers including exhibits and presentations by luminaries Art Wolfe (Window to Himalayas), Nick Nichols (Window to Africa), Tom Mangelsen (Window to North America), David Doubilet (Window to the Sea) and Jim Balog (Extreme Ice Expedition). WILD9 Expo, in the Yucatan Convention Center, will feature curated photography exhibits open to the public, and the YourSpace gallery, sponsored by Fujifilm, where attendees can print their photos and display them in a communal gallery.

"WiLD SPEAK will be the largest gathering of conservation photographers in history. They are coming because the World Wilderness Congress recognizes the unique role and impact of visual media to document, stimulate and motivate -- all fundamental to conservation efforts," said iLCP Executive Director Cristina Mittermeier.

WiLD SPEAK will include plenary sessions and discussions on strategies and issues relevant to conservation communications including trends in photojournalism, building partnerships with non-governmental organizations and leveraging new social media platforms.

WiLD SPEAK will also mark the iLCP's fourth anniversary. Kathy Moran, National Geographic Magazine senior editor for natural history, said, "Since the founding of iLCP in 2005, National Geographic has published 55 stories related to conservation that were photographed by an iLCP member -an extraordinary number that shows the commitment of the magazine to conservation, and the high-caliber of iLCP photographers. National Geographic strongly believes in the mission and effectiveness of the World Wilderness Congress and will be participating in WiLD SPEAK and other aspects of WILD9."

Other components of WiLD SPEAK include a writers' workshop and Wildscreen, a nature/environmental film festival, which will tour through Mexico ending in Merida with screenings and a closing finale.

"Photographers, filmmakers, journalists and other conservation media professionals will find WiLD SPEAK and WILD9 to be extremely compelling and informative, not to mention entertaining," said Justin Black, iLCP director and chief of staff. "It is a forum of diverse and expert perspectives on critical wilderness conservation issues, and an opportunity for media professionals to articulate what our contribution to conservation has been and can be," he added.

Register Here for WiLD SPEAK and WILD9!

Images by iLCP photographers are available for journalistic use exclusively as related to the news of this release. Please send requests to media contacts below.

WILD9 is a partnership between The WILD Foundation and Unidos para la Conservación and relies on the support and participation of many partner organizations.

iLCP (www.ilcp.com) Our mission is to further environmental and cultural conservation through ethical photography. The iLCP is a project-driven organization, with a vision to translate conservation science into compelling visual messages targeted to specific audiences.

iLCP works with leading scientists, policy makers, government leaders and conservation groups to produce the highest-quality documentary images of both the beauty and wonder of the natural world and the challenges facing it. From poaching to global warming, from habitat loss to cultural erosion, from sustainability to biological corridors, the work of conservation photographers covers the entire range of threats to biodiversity and is indeed a critical component in the conservation toolbox.

The WILD Foundation (www.wild.org) Founded in 1974, WILD is the only international organization dedicated entirely and explicitly to wilderness protection around the world. WILD works to protect the planet's last wild places and the wildlife and people who depend upon them, because wilderness areas provide essential social, spiritual, biological and economic benefits. We believe that intact wilderness areas are an essential core element of a healthy modern society.

Unidos para la Conservación (www.unidosparalaconservacion.org) Founded in 1992, Unidos is a nonprofit Mexican conservation organization that has actively promoted the concept of wilderness conservation in Mexico. Its working strategy combines the establishment of alliances with government, non-profit and corporate partners with the promotion of a conservation culture through publications and films in a search of conservation solutions through specific action.

Media Contacts:

Susan Bruce (Boulder, CO) susan (at) wild9 (dot) org 1 404 593 6391
Mikael Castro (Arlington, VA) mikael (at) ilcp (dot) com 1 301 538 2358
Silvia Casellas (Barcelona, Spain) silvia (at) wild9 (dot) org 34 934 343 715
Karin Ridgers (Essex, UK) info (at) mad-promotions (dot) com 44 (0)1277 653603
Daniela Palma (Mexico City) daniela (at) wild9 (dot) org 52 55 5615 9650

Urban Mini Farms

This is more a human interest story than any wave of the future. What it underlines is that the members of a community who are semi retired are more than happy to engage in garden agriculture. Youths are more inclined to assist for financial rewards, however modest.

It was on that basis that I have posted on the idea that our culture needs to integrate the convenience of urban life with the social utility the agricultural world. This allows our populations to be distributed over the agricultural lands at no cost to the land itself as the ratio is low enough as to accommodate simple soil transfers, while ultimately perhaps shrinking or at least diverting urban growth in such a way as to support the urban tax base and improve lifestyles.

Active gardening is solid physical therapy for all individuals no longer in their prime. It needs to be both encouraged and supported as part of our overall lifeway. In China, they made the decision to retire everyone at the age of fifty. Many return to their home villages and invest in the development of that village as well as take care of their grandchildren. This is sound social practice and needs to be lauded.

We have not created a working protocol for our society as yet that is particularly satisfactory. Rather than attempt to have it evolve, a debate is needed that will help sort it out. My suggestion of combining a high rise condo village integrated with farm ownership is one such possible option. Variations on this are all attractive if they also support childcare, childhood economic development and the active role of the semi retired. They are attractive because the urban environment handles these aspects of our lifeway rather expensively.

So these stories represent a yearning to have this form of personal lifestyle and will be well received once initiated. We may have to simply find a farm and build and show to prove it all out.

Mini-farms sprout up in Mexican megalopolis

by Staff Writers

Mexico City (AFP) Oct 5, 2009

A low-budget scheme has transformed a rubbish dump in an impoverished part of Mexico City into an urban garden, raising hopes for a new shade of green revolution.

Iztapalapa, a bustling borough of two million people within the greater sprawl of Mexico City's 20 million people, is an unlikely place to find an agricultural revolution.

But on a patch of land once strewn with the detritus associated with one of the world's largest cities, there now sits a 400 square meter (4,305 square feet) garden.

It is maintained by 40-year-old Irma Diaz as part of the district council's "agricultural development" program.

"We started in 2007 with 20 projects, we now have 82," said Edgar Duran, coordinator of the scheme, which has invested just 131,000 pesos, or around 10,000 dollars, and relies largely on volunteers to farm mini-plots where they are available.

In Iztapalapa fruit and vegetables are grown in mini-gardens, on roofs and even on the walls of buildings.

The natural produce is in demand from the many chic restaurants that dot the capital.

"We grow tomatoes and dozens of vegetables: lettuce, beets, carrots, radishes, and all without fertilizers or pesticides," said Diaz, a nurse who entered the scheme with some friends.

"Everything is natural, 'bio', as they say. It is for our use, but we sell a little," she said.

Susana Duran, a project coordinator for Iztapalapa, explained the transformation of a shady area of the capital.

"Here people were throwing their garbage, young people were using drugs," she said.

Juanita Galeana, 60, comes to work in the garden twice a week with her husband. They sell a portion of production with Diaz on Wednesdays and Fridays.

"I lived in the country until I was 16. Like any kid, I planted seeds and I loved to harvest with my father."

Now, she said, she sometimes sells the produce for a nominal sum of around 80 pesos (six dollars).

Eugenio Varga is at the plot every morning. He is responsible for watering, which he takes care to conserve because supply is frequently cut.

"It distracted me," the 75-year-old said. "I am a widower, I live with my nephews. I take a few vegetables at home, they are tasty, fresh," he said.

Today, with Irma and Juanita, he is preparing a succulent salad of beets and tomatoes.

When the two women want to sell something they go to regular clients, who appreciate the freshness of the products and a slightly lower price than in the market.

"More than money, it's satisfying to take home good quality food, or when our customers tell us they had only seen carrots with their green stalks, as we sell them, in drawings," Irma Diaz said smiling.

She has one regret though, young people show little interest in the project, including her own son. It may not be a agricultural revolution just yet.

Bronze Age Economic Scope

One of my most interesting findings from my extensive digging is the actual scale and scope of the Bronze Age economy. It emerged and evolved over two millennia and in time certainly poked into every nook and cranny in its search for sources of copper and tin. That is a pretty powerful assertion, yet it is both consistent with capabilities and extant evidence.

The presence of traders and ultimately of miners triggered localized imitation of the parent cultures just as to day urban centers worldwide imitate the major centers. During the Bronze Age these centers were palace oriented polities. In Mycenae, these palaces were made of stone, elsewhere mostly of wood and earth. Regardless, a trader could arrive knowing what to expect and to have solid security for his goods.

Transportation was by sea, and since sea raiding would be uncontrolled, the centers had to be typically built inland unless the center was very large. Subsistence agriculture surrounded all such facilities and provided support. Lack of land mobility limited raiding to reasonable levels and kept a slight control on the regular barbarism normally experienced. However, any reading of the Iliad shows us that every palace maintained a seagoing capacity to meet and fend of challenges from the seas.

Thus the copper economy was both global and focal to every community and organized polity of earth unless completely removed as the Pacific Northwest. The great river basins were not so removed and certainly supported some level of occasional commerce that supported large settled populations.

Over and over the archeology shows extensive artifacts related to the era in question often followed by demise and proceeded by little at all typical of a less organized polity.

Yesterday, I was looking at masses of dinosaur like figurines from Mexico, again dated to the Bronze Age. The numbers were huge suggesting a huge market far in excess of local needs. The images portrayed had also come from a distance and needed explanation. All the problems of a multinational manufactory are sitting there. They likely even had a brand to protect.

Thus we have millions of pounds of copper from Lake Superior and thousands of clay figurines from Mexico. This all represents generational effort carried on with a fair sense of security.

There is a serious need to reconstruct historic population of the basis of likelihood rather than the basis of evidence. Most of the evidence has yet to be found and maps showing a high possibility will inspire study. Recall that pre contact populations in the Americas may have reached 100,000,000. And when we look, we are finding evidence although the need for tribal separation likely kept it much lower; it certainly was very dense in many districts.