The Dark Side of Nitrogen

Those who have followed my postings know that the solution to this problem (and it is impossible to underestimate the problem) is understood in these pages and been slowly advanced around the globe by an expanding group of individuals.

This article does an excellent job to help you get your mind around the extent of the environmental calamity been produced by nitrogen fertilizer.  The other components are way less a problem. It is mostly about soluble nitrogen and its great mobility.

I have posted that adding biochar which is mainly elemental carbon or strongly reduced organics at the least will certainly grab and hold nitrogen ions in place in the soil until it is freed by plant roots.

This was and is the magic of terra preta in the Amazon jungle.

All American farm land needs to build up the biochar content of its soils to plausibly five percent and perhaps higher to even fifteen percent until the soil optimized as to growing ability.  As I have recently posted it is as simple as producing corn stover to run through a simple kiln heated by a high temperature burner fueled by the emitted volatiles.  There are lots of ways to make it more complicated but that can wait a few years while we treat our soils just as fast as possible.

The Amazonian Indians built stone age civilizations on soils we all thought impossible to work.  They had dense populations for over two thousand years on these soils.  That was totally impossible unless nitrogen was preserved.

The dark side of nitrogen

4 FEB 2010 3:00 PM

BY STEPHANIE OGBURN

http://www.grist.org/article/2009-11-11-the-dark-side-of-nitrogen

Few people spare a thought for nitrogen.  But with every bite we take—of an apple, a chicken leg, a leaf of spinach—we are consuming nitrogen. Plants, including food crops, can’t thrive without a ready supply of available nitrogen in the soil.

The amount of food a farmer could grow was once limited by his or her ability to supplement soil nitrogen, either by planting cover crops, applying manure, or moving on to a new, more fertile field. Then, about 100 years ago, a technical innovation enabled us to produce a cheap synthetic form of nitrogen, and voila! Agriculture’s nitrogen limitation problem was solved.  The age of industrial nitrogen fertilizers had begun. 

The breakthrough, by German chemists Fritz Haber and Carl Bosch (rhymes with posh), made it possible to grow many, many, many more crops per acre. For the last 50 years, farmers around the world have used synthetic nitrogen fertilizers to boost their crop yields and drive the 20^th century’s rapid agricultural intensification.

But in their fervor to increase yields, farmers often dose their crops with more nitrogen than the plants can absorb. The excess is now causing serious air and water pollution and threatening human health. Ironically, all that fertilizer may even be ruining the very soil it was meant to enrich.

Nitrogen, it seems, has a dark side, and it has created serious problems that we are only now beginning to reckon with.

Nitrogen kills a bay

To see nitrogen’s ill effects up close head to the mid-Atlantic coast and visit the Chesapeake Bay, the nation’s largest estuary. Once the site of a highly productive fishery and renowned for its oysters, crabs, and clams, today the bay is most famous for its ecological ruin.

On Dec. 9, 2008, the Environmental Protection Agency’s restoration program for the Chesapeake Bay marked its 25th anniversary. Other than the passing of the years, there wasn’t much to celebrate. TheChesapeake Bay Program’s goal is rehabilitation of the vastly polluted estuary, yet its 2008 “Bay Barometer” assessment found that “despite small successes in certain parts of the ecosystem and specific geographic areas, the overall health of the Chesapeake Bay did not improve in 2008.” (The fight to save the Chesapeake continues; in 2009, President Obama ordered the federal EPA to lead the ongoing cleanup efforts, but groups involved are still arguing over the details.)

A significant portion of the Chesapeake Bay pollution comes from agricultural operations whose nutrient-rich runoff—in the form of excess nitrogen and phosphorus—fills the Bay’s waters, leading to algal blooms, fish kills, habitat degradation, and bacteria proliferations that endanger human health.

The nitrogen runoff comes from the synthetic fertilizer applied to farm fields, as well as the manure generated from the intensive chicken farming on the east bay. Of course, the nitrogen in that chicken manure—some 650 million pounds per year, according to The New York Times— can largely be traced to synthetic nitrogen; the chickens are merely recycling the synthetic fertilizer that was originally applied to feed crops.

This type of reactive nutrient pollution is now so common that the dead zones, acidified lakes, and major habitat degradation it can cause are occurring with greater frequency, not just in the Chesapeake Bay, but in other parts of the United States and around the world.

Bombs away: Synthetic nitrogen comes of age

Nitrogen is ubiquitous. It makes up 78 percent of the earth’s atmosphere. But atmospheric nitrogen is inert. It exists in a stable, gaseous form (N2), which plants cannot use. Unless nitrogen is made available to plants, either by nitrogen-fixing bacteria in the soil or by the application of fertilizer, crops won’t grow as productively.

The German chemists Haber and Bosch found a way around this availability problem. Originally conceived as a way to make explosives for war, their technique turned inert nitrogen gas into highly reactive ammonia (NH3), a form of nitrogen that can be applied to soil and absorbed by plants. With their discovery, nitrogen ceased to be a limiting factor in agriculture.

The widespread use of synthetic fertilizer took off after World War II when innovations allowed nitrogen fertilizer to be produced inexpensively and on a grand scale. When Norman Borlaug, a leader of the Green Revolution, and other plant breeders began developing and exporting dwarf, high-yielding, fertilizer-loving varieties of corn and wheat, the new chemical fertilizer addiction went global. In 1960, farmers in developed and developing countries applied about 10 million metric tons of nitrogen fertilizer to their fields. In 2005, they applied 100 million metric tons.

This order of magnitude increase coincided with the Green Revolution. Indeed, nitrogen fertilizer is largely responsible for the phenomenal crop yield increases of the past 45 years. Without the additional food production fueled by nitrogen fertilizer, researchers estimate that two billion fewer people would be alive today.

Shifting shapes, getting around

Modern agriculture—and, consequently, present-day human society—depends on the widespread availability of cheap nitrogen fertilizer, the ingredient that makes our high-yielding food system possible. But the industrialization of this synthetic nitrogen fertilizer has come with costs.

The high temperatures and very high pressures needed to transform N2 to NH3 are energy intensive. About one percent of the world’s annual energy consumption is used to produce ammonia, most of which becomes nitrogen fertilizer. That’s about 80 million metric tons (or roughly one percent) of annual global CO2 emissions—a significant carbon footprint.

Nearly half that fertilizer is used to grow feed for livestock. Herds then return the nitrogen to the landscape, where it contributes to several different kinds of pollution—the second cost of synthetic nitrogen.

Synthetic fertilizer is made with reactive nitrogen—that’s what makes the fertilizer easy for plants to use. As it turns out, though, reactive nitrogen doesn’t always stay where you put it. Farmers may apply this synthetic fertilizer to their cornfields, but the nitrogen in it will happily engage with the soil carbon, oxygen, and water in its environment. This is the essential problem with reactive nitrogen—its ability to morph and move around, often to unhealthy ends (see illustration).

http://www.grist.org/phpThumb/phpThumb.php?src=http://www.grist.org/phpThumb/phpThumb.php?src=http://www.grist.org/i/assets/infographics/nitrogen_pathway.jpg&w=615&q=90&w=615

Estimates vary on just how much nitrogen escapes from fields and remains reactive and potentially harmful, but it’s not unreasonable to assume that plants absorb 30 to 50 percent of the nitrogen in the soil. So if a farmer applies 125 pounds of nitrogen fertilizer to an acre of corn, 30-50 percent of it will end up in the corn; as much as 70 percent—or 87 pounds per acre—could end up somewhere else.

‘N’ stands for ‘Needs to improve’

There is an obvious way around this nitrogen problem: use less fertilizer more efficiently. But there’s not much incentive to cut back.

Farmers get paid by the ton, which makes yields the driving force of modern agriculture. Most agronomists agree that farmers can get the same yields without applying as much fertilizer and manure as they now do. But few farmers are willing to take that chance. Many farmers use fertilizer as a form of insurance; better to apply a little too much and get high yields than apply too little and risk yield (and profit) declines.

 The challenge then is to find a way to provide plants with enough nutrients to maintain high yields while also minimizing nitrogen leakages. This may sound straightforward, but it’s tough to find mainstream farmers who are using nitrogen efficiently and safely. There simply aren’t incentives to do so. Fertilizer is cheap, and polluters don’t pay.

The situation might change if nitrous oxide becomes regulated under climate legislation. But in the climate bills currently making their way through Congress, agricultural emissions are explicitly exempted from any cap. Even if ag-related nitrous oxide emissions did get capped, policies would have to address efficiency directly. Otherwise, a climate-focused policy risks encouraging farmers to adopt practices that simply force the reactive nitrogen in another direction—into ground and surface water, for example.

Farmers don’t over-apply nitrogen on purpose. Nor do they want to contribute to estuary pollution and dead zones. But for 40 years, we’ve invested in a type of agriculture that rewards high yields over all other considerations.

U.S. grain farmers operate under pressure to generate volume, and have little or no incentive to conserve synthetic nitrogen along the way. Under the Farm Bill, commodity farmers get subsidies based on how many bushels they churn out, not how efficiently they use nitrogen. Even when fertilizer prices spiked in 2008, synthetic nitrogen remained a remarkably cheap resource—and corn farmers had every economic reason to lay it on liberally.

In their 2009 paper in the Annual Review of Environment and Resources, researchers G. Philip Robertson from the University of Michigan and Peter M. Vitousek from Stanford noted that the cost of applying a little additional nitrogen to a cornfield is more than paid for by the marginal gains in yield. In other words, corn is really cheap—but nitrogen is even cheaper.

Scientists now know that this arrangement can’t last forever—agricultural intensification has come with enormous costs. They also know there are other ways to manage crops and reward farmers. The Rodale Institute’s research on high yield production using cover crops to build soil organic matter and biologically fix nitrogen provides one example of a potential alternative to current practices. But the incentive structure around farming must change.

No longer can farm-support policy blindly push maximum yield. Farmers should be rewarded at least as much for conserving nitrogen and building the organic matter in soil. Rodale’s research suggests that those goals can be achieved without sacrificing much in the way of long-term yield.

Twenty-five years ago, the Commonwealths of Pennsylvania and Virginia, the state of Maryland, and the District of Columbia formally agreed to cooperate with the United States Environmental Protection Agency, in order “to fully address the extent, complexity, and sources of pollutants entering the [Chesapeake] Bay.” As it turns out, the Bay and other nitrogen-threatened ecosystems need more than cooperation to get healthy. They need the kind of political will that will take nitrogen efficiency and impacts seriously—and force actual changes to agricultural practices. And endangered ecosystems need for those changes to happen soon. We don’t have another quarter century to spare.

Agrarian writer Stephanie Ogburn currently lives in Oakland, Cali

Sea Ice Collapse Accelerating

Two and a half years ago in mid 2007 I posted very clearly that the sea ice was entering its final collapse phase and should be largely eliminated during the summer of 2012.  No one else had made such a comment to that point.  I was bemused a couple of months later when NASA made the exact same statement in a quietly released item.

The only reasonable explanation was that someone had made the exact same calculation that I had made and had came to the exact same conclusion, possibly a lot sooner since it might have been made in 2000 and he or they had been muzzled.  Of course, my release on the 2012 date was ignored as I reasonably expected then, but I wanted to get it on the record and obviously so did that lonely NASA researcher.  My release simply freed his hand so that he would not appear a dunce a few short years later. 

We have just got the first reporting coming of the Amundsen from this season’s cruise in the high Arctic.  You do not see it here, but on the clip shown on CBC television, the spokesman said that the ice will be gone in two years.  Sounds like 2012 to me.  They were definitely trying to draw attention to the now visible loss of sea ice even in the depths of winter.

When I made my remarks, naturally I conditioned it with comments to the effect that a sharp change in weather may slow the process down.  I now understand that this process is not driven by weather conditions at all except as to accelerate the underlying process itself.  Now we see more storms breaking up the ice and speeding the mixing process.

This process is driven by the increased influx of warmer Atlantic surface waters into the Arctic likely caused by a changing of the circumpolar current underlying the surface waters that is compensating by slowing the Gulf Stream thus expanding the total volume.  The change was noted a decade ago and could have only two outcomes.  Either more heat or less heat would be pushed into the Arctic.  Obviously it is more heat and it is pretty constant year after year.

I remark that the heat content of the top two hundred meters of surface water through the thermocline puts that of the atmosphere to shame and the transfer of atmospheric heat must be comparatively minor.   Yet I was misled to take it seriously.  We really have it wrong.  The Arctic is warming and this has helped modify the weather of the temperate zone.  It is the real elephant in the closet.

Our scientists have now been rudely awakened and I suspect a new consensus is about to emerge. Better late than never, considering the damage it will do to ones standing if you continue to push the idea that we have decades to wait.

Anyway it is good to see good data now showing up with all these eyeballs looking.  When no one cared and changes were still small and incremental the data was sparse and mostly meaningless.  No longer.

 Arctic ice melting faster than feared: study

Last Updated: Friday, February 5, 2010 | 9:24 PM CT 

Comments416Recommend142

By John Bowman, CBC News

http://www.cbc.ca/canada/north/story/2010/02/05/tech-climate-arctic-ice.html

The head of the largest climate change study ever undertaken in Canada says the Arctic sea ice is thinning faster than expected.

"It's happening much faster than our most pessimistic projections," said University of Manitoba Prof. David Barber, the lead investigator of the Circumpolar Flaw Lead study. A flaw lead is the term for open water between pack ice and coastal ice.

The study aboard the Canadian Coast Guard research ship Amundsen began in July 2007 and involved 370 scientists from around the world.

It was the first time a research vessel had ever remained mobile in open water in the Far North.\

Barber called the expedition climate scientists' "first opportunity to look at what the Arctic Ocean looks like in the middle of winter."

They found that Arctic sea ice is disappearing faster than scientists expected.

"We're seeing it happen more quickly than our model thought [it] would happen," said Barber.

Warning for the south

"It's an early indicator of what we can expect to happen further south," Barber said at a news conference in Winnipeg. "We can expect things to happen faster here, too."

Barber said the human impact on climate is being superimposed on the natural variation in climate and temperature.

The result is more variability in the climate: warm spells are getting warmer and the cold spells are getting colder.

The researchers also found that storms have become more frequent in the North as the sea ice thins.

"There are more storms now because there's more open oceans and those storms are having a dramatic impact on the sea ice," said Barber.

The storms drop precipitation, mostly snow, on the sea ice and the snow insulates the ice, keeping it from growing thicker.

Barber said much of the research undertaken on the Amundsen involved measuring the effects of changing climate on the Arctic.

"We know we're losing sea ice. What you're not aware of is … what the consequences of this change are," said Barber.

'Sea ice breathes'

Barber compared the impact of losing sea ice in the Arctic to the loss of trees in a tropical rain forest.

The Arctic sea ice isn't just a cap on top of the ocean, Barber said. "The sea ice breathes," he said. "It pumps carbon dioxide in and out."

The researchers also found pollutants in the sea ice.

"The Arctic is not as pristine as you would like to think it is. It's actually a dumping ground for a lot of contaminants," he said.

The Circumpolar Flaw Lead study was not only the largest climate study ever undertaken in Canada, Barber said, but the biggest study conducted during the International Polar Year.

The Canadian government provided $156 million in funding for the research during the International Polar Year from 2007-09.

The expedition involved 10 science teams, studying every aspect of the Arctic environment, from microbes to mammals to weather systems.

Barber anticipated that each one of those teams would have at least 10 papers published in peer-reviewed journals.

Barber also emphasized the role that traditional aboriginal knowledge played in the research, especially in mapping the edges of sea ice.

Barber said it's now up to governments to find solutions for climate change.

"[Scientists] don't just write for each other. We have to write for the policy-makers," said Barber.

Read more:

 http://www.cbc.ca/canada/north/story/2010/02/05/tech-climate-arctic-ice.html#ixzz0emrGFftP

Degrading Al Qaeda

The fact is that we are having a fair level of success in degrading the leadership of the Al- Qaeda movement.  What is not been diminished is their ability to recruit volunteers prepared to carry a suicide bomb.  Our press focuses on the odd such mad man aimed directly at US targets and misses the fact that they are almost daily occurrences in their own homelands were the heavy lifting is taking place.

Even then the level of activity is naturally self limiting and likely as bad as it is able to become.

The organization will continue to attempt penetration of our defenses because it is disruptive and the PR payback encourages yet more volunteers to come forward.

Thus our best strategy is to keep locating their leadership and eliminating them.  And as their command and control also degrades, their ability to avoid detection also degrades.  I suspect by now, that they are very vulnerable to basic intelligence gathering.  As they weaken, they also are far more vulnerable to simple betrayal which is why kill numbers appear to rising.

Amazingly, while they have followed a strategy of waiting for the west to get weary and go home, it appears that those who passively supported them have also become weary and want put paid of them.  I think that is why the Taliban has suddenly begun talking.

In the meantime, a new strategy is been deployed against them this coming week or so.  It was first sprung by the Canadian forces in Kandahar.  It consists of declaring to all and sundry that you will occupy a target and that you are coming loaded for bear.  This is so against standard operating procedure, that I wondered what they were thinking the first time out.

Yet the Taliban concentrated like flies to give battle.  They appear to be doing it again in Helmand province at present.  It is as if they can not stand the picture of a strategic defeat.  If this succeeds, a few hundred Taliban will die and a handful will escape and the area will suddenly be cleared.  Maybe they need to be visibly defeated in a great battle in order for the leadership to be able to negotiate a political settlement.

Anyway, it is curious.  We may actually be seeing the end game after all these years.  Keep up the pressure.

Al-Qaeda is a wounded but dangerous enemy

http://www.washingtonpost.com/wp-dyn/content/article/2010/02/07/AR2010020702984.html?hpid=topnews

By Joby Warrick and Peter Finn

Washington Post Staff Writer 

Monday, February 8, 2010

In the past six weeks, Americans have witnessed two jarringly different -- but completely accurate -- views of al-Qaeda's terrorist network. One image was that of terrorist leaders being hunted down and killed by satellite-guided, pilotless aircraft. The other was of an agile foe slipping past U.S. defenses and increasingly intent on striking inside the United States.

New assessments of al-Qaeda by the top U.S. counterterrorism experts offer grounds for both optimism and concern a year after President Obama took office. Officials say al-Qaeda's ability to wage mass-casualty terrorism has been undercut by relentless U.S. attacks on the network's leadership, finances and training camps. But even in its weakened state, the group has shifted tactics to focus on small-scale operations that are far harder to detect and disrupt, analysts say.

The deadly November shooting rampage at Fort Hood, Tex., and the failed Christmas Day attempt to bomb an airliner -- both examples of the low-tech approach -- have raised the fear level in Washington and across the country. Some terrorism experts say the worst could be still to come as a wounded jihadist movement thrashes about in search of a victory.

"The noose is tightening, and al-Qaeda's leadership is accelerating efforts that were probably in place anyway," said Andy Johnson, former staff director of the Senate intelligence committee and now national security director for the Washington think tank Third Way.

In the past year, Johnson said, the "good guys have been scoring the points," killing key al-Qaeda leaders and disrupting multiple plots. But pressure on al-Qaeda in Iraq and Pakistan has forced terrorist operatives to flee to new havens, such as Yemen, and step up the search for weaknesses in Western defenses. While battered, "the enemy is unwavering and determined," he said.

The U.S. ability to strike al-Qaeda's nerve center was on display recently with news of the apparent death of the leader of the Pakistani Taliban, a close ally to al-Qaeda in the lawless frontier along the Pakistan-Afghanistan border. Hakimullah Mehsud, who suffered severe injuries in a missile strike in mid-January, was the second leader of the group to find himself in the path of a CIA Predator aircraft in the past six months. He also was closely linked to the Dec. 30 suicide bombing that killed seven CIA officers and contractors in Afghanistan's eastern Khost province.

U.S. drones have struck al-Qaeda and Taliban targets inside Pakistan 12 times this year, putting the Obama administration on a course to surpass 2009's record-setting 53 strikes, according to a tally by the Web site Long War Journal.

In testimony before two congressional panels last week, top U.S. intelligence officials said the campaign has shaken al-Qaeda's core leadership, the small band of hardened terrorists led by Osama bin Laden. The attacks, combined with a successful squeeze on al-Qaeda's cash supply, have impeded the group's ability to launch ambitious, complex terrorist operations on the scale of the Sept. 11, 2001, strikes on the World Trade Center and the Pentagon, the officials said.

"Intelligence confirms that they are finding it difficult to be able to engage in the planning and the command-and-control operations to put together a large attack," CIA Director Leon Panetta said Tuesday in testimony before the Senate Intelligence Committee.

But intelligence officials also warned lawmakers of worrisome new evidence of al-Qaeda's ability to adapt. In an annual "threat assessment" to Congress, spy agencies described the emerging threat as more geographically dispersed and also low-tech, favoring lone operatives and conventional explosives.

'Short-term plots'

Director of National Intelligence Dennis C. Blair, who presented the assessment to House and Senate panels, said the attempted bombing of Northwest Airlines Flight 253 over Detroit is emblematic of an evolving threat that relies on "small numbers of terrorists, recently recruited and trained, and short-term plots." The new tactics are less spectacular but also much harder to detect and disrupt, he said.

The suspect, Umar Farouk Abdulmutallab, is a Western-educated young man who was apparently recruited because he had a U.S. visa and no record of ties to terrorist groups. Officials say that he was trained and equipped by one of al-Qaeda's rising affiliates, al-Qaeda in the Arabian Peninsula, and that he had a bomb made of a common military explosive sewn into his underwear, deliberately designed to thwart the kinds of safeguards put in place after 9/11.

The foiled plot came on the heels of the Fort Hood shooting rampage. That attack, and the arrest of an Army major apparently inspired by al-Qaeda, crushed the widely held perception that Americans were immune from the kind of violent home-grown extremism seen in Muslim enclaves in Western Europe. Blair acknowledged that intelligence agencies are newly concerned that Americans may be traveling overseas for training and returning to the United States to carry out terrorist strikes.

"A handful of individuals and small, discrete cells will seek to mount attacks each year, with only a small portion of that activity materializing into violence against the homeland," he said.

Blair testified that he thought another attempted strike by terrorists was "certain" in the next six months. The assertion was a response to a question by the Senate intelligence panel's chairman, Dianne Feinstein (D-Calif.), about the likelihood that al-Qaeda would try to launch a major attack on Americans in the near future. But Blair also suggested that the rash of news about terrorist plots in recent weeks has created a false impression that the threat is new.

"We have been warning since September 11 that . . . al-Qaeda-inspired terrorists remain committed to striking the United States," he said. "What is different is that we have names and faces to go with that warning. We are therefore seeing the reality."

Terrorism experts and administration officials have described the Dec. 25 bombing attempt as a wake-up call that helped expose gaps in security that are now being addressed. But some analysts say the dramatic successes against al-Qaeda in Pakistan may have led U.S. officials to miss signs that the terrorist threat was morphing in new directions. Now the administration is scrambling to respond to both threats at once, said Bruce Hoffman, a Georgetown University terrorism expert and senior scholar at the Woodrow Wilson Center.

"Until Northwest Airlines Flight 253, the prevailing assumption was that we could fight and win by drone attacks. But the threats are diverse and spreading," Hoffman said. "Both administrations -- Bush and Obama -- had a tendency to focus on one threat, one enemy, emanating from one place. The use of predators in Afghanistan and Pakistan is a very effective tactic. But it's a tactic, and it's not a substitute for a strategy."

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.