Algae: Simply the best fuel for our present and future!

You can eat it, use it in cosmetics, fertilize with it and now fuel your car or plane with it – Algae!

Why Algae? Check out the Biofuel crop yields:

Soybean 40-50 gal/acre

Rapseed 110-145 gal/acre

Mustard 140 gal/acre

Jatropha 175 gal/acre

Palm Oil 650 gal/acre

Algae 10,000-20,000 gal/acre = abundantly clear!

I heard you…What does it cost? If the annual yield is 15,000 gallons per acre, then the cost of producing algae biodiesel $18.56 per barrel of oil equivalent. Very competitive!!!

Power station and other emitters of CO2 can capture emissions to increase crop yields.

Independence Bio-Products (IBP) of Dublin, Ohio has produced algae oil, which has been converted to jet fuel and then tested by the Air Force Research Laboratory at Wright Patterson Air Force Base. The algae was grown in open ponds in Ohio and harvested with IBP’s patent pending system. This milestone is a part of a federally funded project to examine Algae to Fuel (ATF) processing strategies. IBP founder and President Ron Erd stated that testing of the algae-derived fuel sample by the Air Force Research Laboratory has confirmed that the composition of the fuel derived from the Ohio-grown algae is similar to fuel derived from other plant oils such as soybeans, Jatropha or camelina—which are already being investigated as jet fuel precursors.

Since June 2009 the Algae to Fuel (ATF) project has been exploring the best strategy for creating, cultivating, and expanding an “algaculture” industry for Ohio. This effort has been divided into examination of three main areas: 1) selection of algae suitable for optimizing oil production based on climate factors; 2) development of cultivation systems (growing locations, harvesting, dewatering, and separation techniques); and 3) cultivation strategy (algae harvesting, processing into value-added products, etc.). This public/private technical effort has been jointly led by three Ohio organizations: the Ohio Aerospace Institute (OAI) of Brook Park, the Edison Materials Technology Center (EMTEC) of Dayton, and the Center for Innovative Food Technology (CIFT) of Toledo along with several other industry and university collaborators, including IBP. The recent development by IBP represents the achievement of one goal of the federally funded initiative: to demonstrate the feasibility of deriving military fuel from Ohio-grown algae.

As we watch this play out, here are some algae biofuel firms that you should know about:

Solazyme: (SZYM) The firm uses synthetic biology and genetic engineering to tweak algal strains for better biofuel yields. Based in South San Francisco, the company grows its algae in fermentation tanks without sunlight, by feeding it sugar. The company is one of the few that have managed to do deals with a major oil company — Chevron — as well as biodiesel maker Imperium Renewables. Backers include Blue Crest Capital Finance and The Roda Group.

Blue Marble Energy: The Seattle-based company finds algae-infested polluted water systems, cleans up the environment, and turns the algae into biofuel.

Inventure Chemical: Also out of Seattle, this startup is working on an algae-to-jet fuel product, and told the Seattle PI that it has already created algae-based fuel in 5- to 10-gallon tests and plans to set up a test plant to see if it can produce between from three and 15 million gallons of biofuel each year. Investors are reported to be biodiesel company Imperium Renewables, Cedar Grove Investments, Brighton Jones Wealth Management and undisclosed angel investors.

Solena: Solena uses high temperatures to gasify algae and other organic substances with high-energy outputs. The Washington state-based company is talking with Kansas power firm Sunflower to build a 40-megawatt power plant run on gasified algae, according to the NYT; the algae would be grown in big plastic containers, and fed by a combination of sunlight and the sodium bicarbonate biproduct of the adjacent coal plant.

Live Fuels: Instead of attempting to convert algae directly into ethanol or biodiesel, this startup is trying to create green crude that could be fed directly through the nation’s current refinery system. The Menlo Park, Calif-based startup uses open-pond algae bioreactors and plans to commercialize its technology. Investors include the Quercus Trust (David Gelbaum’s well-known environmental funding group) and Sandia National Labs.

Solix Biofuels: Like Live Fuels, Solix is also working on a biocrude, but using a closed-tank bioreactor set-up. Based in Fort Collins, Colo., and founded in April 2006, the firm is backed by Colorado State University’s Engine and Energy Conversion Laboratory. The company has said that construction will begin shortly on its first, large-scale bioreactor at the nearby New Belgian Brewery, where CO2 waste produced during the beer-making process will be used to feed the algae.

Aurora Algae: Developed at the University of California at Berkeley, the company is using genetics to isolate exclusive algae strains that can efficiently create biodiesel. Aurora claims the technology can create biodiesel fuel with yields that are 125 times higher and have 50 percent lower costs than current production methods. Backers include Gabriel Venture Partners, Noventi, Oak Investment Partners (and angel investors include Auttomatic CEO Toni Schneider).

Aquaflow Binomics: The New Zealand company’s goal is to become “the first company in the world to economically produce biofuel from wild algae harvested from open-air environments.” Like Blue Marble Energy, the three-year-old startup sources its algae from algae-infested polluted water systems, cleaning the polluted environment in the process.

The publicly held Aquaflow used its algae-based biodiesel to run a Land Rover driven by New Zealand’s Minister of Climate Change. And it’s been working with Boeing on algae-to-bio-based jet fuel.

Bionavitas: Based in Snoqualmie, Wash., the company says it has developed technology for the high-volume production of algae using bioreactors. Check out their WIPO patent app for the bioreactor setup.

Bodega Algae: Roots at MIT, the firm has developed a set-up to grow algae in bioreactors with light and nutrients that it says is lower cost and more efficient than the current methods.

Seambiotic: The Israeli based firm produces algae for applications, including the budding biofuel industry, and is working with Inventure Chemical. The firm has been working with Israeli Electric Company, utilizing IEC’s smokestack for a source of CO2 and grows algae in eight open algae ponds.

In closing, with China’s appetite for energy continuing to grow and political turbulence rumbling across the world’s primary oil-producing region, oil experts say there is only so much that OPEC (the Organization of the Petroleum Exporting Countries) can do to ease prices. As history has taught us time and time again supply lines of critical feedstocks and technology must be within the sovereign’s physical domain of control -- pass me the pond scum… 

July 1 Aviation Bio-Fuel Independence Day!!!

Primary energy use will grow by nearly 40% over the next twenty years, with 93% of the growth coming from non-OECD (Organization of Economic Co-operation and Development) countries. Non-OECD countries are seen to rapidly increase their share of overall energy demand from just over half currently to two-thirds.
Global liquids demand is forecast to reach 102.4 million barrels per day (mmbpd) in 2030. The net growth of 16.5 mmbpd over the next 20 years comes exclusively from the emerging economies of the non-OECD.

Biofuels production’s (high case scenario) is expected to reach 16.7 mmbpd by 2030 from 2.3 mmbpd in 2011. Continued policy support, high oil prices, political instability (oil producers) and continued technological innovations all contribute to the rapid expansion.

Beginning July 1, 2011 (subject to regulatory delays), fuel processed from organic waste or non-food materials, such as algae or wood chips, may comprise as much as 50% of the total fuel burned to power passenger flights, ATA spokesman Steve Lott and a Boeing Co. (BA) official told Bloomberg.

“The real winners of this type of regulatory breakthrough will be technology companies involved in the production of aviation biofuels,” said Harry Boyle, an analyst at Bloomberg New Energy Finance in London. “The biotech-biofuels business models of Amyris Inc. (AMRS), Codexis Inc. (CDXS), Gevo Inc. and Solazyme Inc. are all making claims to these types of new markets.”

Other biofuels companies that may benefit from opening up the $139 billion-a-year aviation fuel market are Neste Oil Oyj (NES1V) of Finland, Spain’s Abengoa SA and Honeywell International Inc. (HON)’s UOP unit, which is developing a fuel-making technology.

General Electric Co., the world’s biggest jet engine maker by sales last year, said at a 50% blend level it doesn’t expect to see any impact on engines or operability.

Airbus and Boeing, which together manufacture about 80% of the world’s passenger planes, are planning to set up biofuel production chains across the world. Airbus is working on a supply hub in India where it’s talking with government and airline officials. Its aim is to form joint ventures and partnerships with growers, transporters and refiners. Boeing is negotiating with companies across the supply chain in South America.

Fuel from inedible plants or waste doesn´t put price pressure on crops as can fuel from corn, sugar cane or soy.  Honeywell and Indian Oil Corp., the nation’s largest refiner, are planning to establish a pilot biofuel production plant in India next year, James Rekoske, vice president of renewable energy at Honeywell’s UOP, said. It would be Honeywell’s first pilot facility in Asia and the companies will examine the feasibility of using plants such as jatropha and pongamia to make renewable jet fuel.

The 30 component stocks of the Biofuels Digest Index are:
Archer-Daniels-Midland (ADM)


Algae.Tec (AEB.AX)


Amyris (AMRS)


The Andersons (ANDE)


Aventine Renewable Eenergy (AVRW.OB)


Bluefire Ethanol (BFRE.OB)


BioFuel Energy (BIOF)


British Petroleum (BP)


Biox (BX.TO)


Codexis (CDXS)


CleanTech Biofuels (CLTH.OB)


Cosan (CZZ)


Danisco (DAY.F)


DuPont (DD)


Gevo (GEVO)


Green Plains Renewable Energy (GPRE)


GreenHunter (GRH)


Gushan Environmental Energy (GU)


Lignol Energy (LEC)


Monsanto (MON)


Novozymes (NZMB.BE)


OriginOil (OOIL.OB)


Pacific Ethanol (PEIX)


PetroAlgae (PALG.OB)


Rentech (RTK)


Royal Dutch Shell (RDS-A)


SunOpta (STLK.T)


Syngenta (SYT)


Valero (VLO)


Verenium (VRNM)

The only question now is: will there be enough chips to go around?

Sources: IEA, BP 2030 Energy Outlook, Bloomberg.

Price risks skewed heavily to the upside

On a short-term basis, the U.S. market looks oversold and could bounce later this week, but the thing that has my attention is oil!

OPEC data shows demand for its crude will rise by 2.1 million barrels/day (mmb/d) in the third quarter from the group’s total output in April of 28.8 mmb/d, Naimi said. “Saudi Arabia is committed to supplying the needs of the market regardless of the disagreement,” he said.

The 11 nations with production quotas pumped 26.15 mmb/d in April, according to the IEA. That leaves the group with about 4.5 mmb/d of spare capacity, most of it in Saudi Arabia, to be tapped in an emergency.

The 50-year-old organization met as fighting in Libya shut off most of the output from Africa’s third-largest producer. A rebellion against Libyan leader Muammar Qaddafi has cut shipments from the North African country by almost 90 percent, according to Bloomberg estimates.

The lack of Libyan oil production is concerning. Estimates of current shut in production vary from a low of 500,000 b/d to a high of 1.5 million, from a total production of 1.6 mmb/d. Company withdrawal of expatriate production workers appears to be a major contributing cause of the production decline, not damage to producing fields. Libya is a small producer; however its oil is highly prized in the Mediterranean basin by Italian, French, and other regional buyers, as well as in northwest Europe for use by heavy, sour-based refiners as a blending crude.

To date, OPEC crude production remains around 1.3 mmb/d below where it was before the Libyan crisis broke out. Political and military stalemate there leads me to assume Libyan supply will remain absent from the market for the rest of 2011.

Production from Yemen too is now significantly curtailed by political unrest.

OECD stocks are on a trajectory to descend through the trailing 5 year average.

The good news!!! Iraq's current output is about 2.7 million to 2.8 mmb/d and expected to reach 3 mmb/d by end 2011 and 4 mmb/d by end 2012. Iraq's oil exports in May averaged 2.225 mmb/d.

"Export terminals and pipelines will not be the obstacle," Shahristani, who is responsible for Iraq's energy affairs, told reporters during a visit to southern oilfields and export facilities.
Iraq is rebuilding its oil infrastructure after years of conflict and has signed deals with oil majors to reach a proposed production capacity of 12 mmb/d by 2017. Most analysts see 6-7 mmb/d as more realistic.

I see lots up upside in oil prices, if supply is not brought back on stocks will deplete to worrying levels and that could excessively hamper global growth as oil prices exceed pre-crash levels.

Stock pick of the day: COG

Sounds like the USA needs a nip & tuck!!! (see TV series for context)

“We’ve gotten inconsistency, hesitancy and unevenness” in U.S. economic growth, Atlanta Fed President Dennis Lockhart said on 6/7/2011 in a speech in Charlotte, North Carolina. “I’m troubled by what you might describe as a lack of conviction in this economy.”
“Oh Mr. Chairman and Fed. Prez.: It’s called America’s deficit which has surpassed $14 trillion!!!”

What’s holding back the stock market and the economy is lack of sustainable confidence rather than a lack of money. Summer will likely set the stage for fits of starts, stops, falls and start agains markets for the remainder of 2011. Which is likely for the remainder of our children’s lives at the rate our enlightened leadership is managing the purse strings.

And really it stems from the politics of it all v the business fundamentals. If Bernanke said; the economy needs no further stimulus and we’re getting on with debt reduction. And Obama said, we’re out of Afghanistan and Iraq and focusing on our peace time economy. Imagine taking 25% of the military budget ($663.8 bln) and investing it in America v in American defense. What a concept. I mean if it still has to get spent in a military way, how about a war on urban and infrastructure decay? Get the Army Corps of Engineers to build some high speed rails; or lay some dark fiber; or raise a few utility scale solar pv arrays…or how about the Navy & Coast Guard cleaning up the waterways, or sending some officers in to teach English, math, history or physical education to our kids. There are plenty of ways to spend money wisely.

Those calling for a technical default -- which assumes that in short order the Treasury starts paying its coupon again – must recognize that this action would have long-term adverse consequences on rates.

Let’s remember Peru in 2000, which defaulted despite not having any problems making payments. That trick cost 200 bps in borrowing costs.

There are other impacts as well. A technical default could have a similar impact on foreign willingness to hold Treasuries – see Fannie and Freddie effect on GSE holdings by foreigners (they collapsed).

And of course this would hit growth. JPMorgan estimates that we'd see a minimum 1% GDP hit thanks to higher rates and a presumed selloff in equities.

Not to mention the dooms day scenario – a run on the banking system.

It’s not socialism I’m calling for, it’s survivalism. We’re on the wrong course. We need to be re-building our nation not dumbing, contaminating, and squandering it down. Unless the plan is the economic rapture, how about the end of pissingitawayism and let’s get on with the basics of business => cut debt, invest in people & technologically, and increase reliability. Now what would that America look like?

Meanwhile, the stock pick for the day:  WY

On a final note: Let’s avoid the protest chants on the streets of Spain: “no jobs, no houses, no pension, no fear.”

Just get it right!!!

We’ve got gas!!! [Not the Beano type]

A golden age is upon us. Natural gas is abundant, cheap and near the points of consumption; generally far away from conflict zones.  IEA just put forward a scenario whereby the consumption of natural gas could rise by more than 50% to 5.1 trillion cubic meters in 2035 – that would have it increasing its stake in meeting global energy demand from 21% now to 25% then.
Total recoverable resources could sustain consumption for over 250 years. Plus all major regions have recoverable resources equal to at least 75 years at current consumption.

In a USA context, the gas glut has already begun disappearing with storage tracking at the 5 year average mark. A major hurricane or other interruptions to supply and/or unexpected increases in demand could see natural gas pushing back up to the $6-7 mmbtu level by February-March 2012.

One wrinkle in the reliability of gas, is fracking; at least fracking as it’s been regulated to date. The evidence is in – the chemicals used do contaminate water and have leaked into the water table with damaging effect. The federal government is taking a closer look even with the support of Texas!  So, regulatory delays are likely to tighten supply too.

The debate about GHG mitigation and natural gas cuts both ways. Use more gas and displace coal and oil = good for a cooler planet but if gas displaces nuclear or renewables then it has a warming effect. At current forecast it is more likely a substitution fuel for coal in power and oil in transportation thus net-net we’re ahead on greenhouse gas emissions (GHG).

One comment on displacing nuclear: Given the tragedy of Japan, I think I write for most members of the planet when I say I would rather adapt to more CO2 then depleted Uranium. If nuclear is at such a state that we cannot anticipate what might go wrong then it should be reserved for the laboratory and not powering our garden parties.

Some stocks to bet on: NFX, SWN, DVN, CHK, CLR, LNG and AGL.

Humala on a shining path forward!!!

Peru’s stocks tumbled the most in two years and dollar bonds fell after former army rebel Ollanta Humala claimed victory in the country’s presidential runoff yesterday and sparked concern that he will seek greater state control of the economy.

I think his election represents a great buying opportunity.  Excluding Mr. Chavez, most of the former populist revolutionaries of the Southern Cone have become quite pragmatic in their maturing years.  Humala is no Chavez; he is more in the camp of Lula de Silva of Brazil.

Humala defended policies that have made Peru the fastest growing Latin American economy over the past decade.  Some investors may be concerned he will raise mining royalties and impose greater state control over natural resources.  My guess is that they should be more worried about England’s treatment of taxes in the North Sea!!!

Peru’s benchmark Lima General Index of stocks sank the most since October 2008, retreating 8.7 percent to 19,378.78 at 9:38 a.m. New York time.  Yields on dollar-denominated bonds due 2037 rose 17 basis points, or 0.17 percentage point, to 5.91 percent, according to data compiled by Bloomberg.

The cost to protect Peru’s debt from non-payment with credit-default swaps jumped 20 basis points to 168, the highest since April 27, according to data provider CMA in London. The sol weakened 0.3 percent last week to 2.7631 per U.S. dollar.

Peru is the world’s top silver producer, third in copper and zinc and sixth in gold. It has vast oil and gas reserves.

Good stock bets are (not to mention the currency and bond plays):

Southern Copper Corp. (SCCO), Peru’s biggest producer of the metal, fell 8.6 percent in U.S. trading to $31.73.

Hochschild Mining Plc (HOC), a producer of silver in Peru, fell to its lowest in four months in London trading, declining 8.7 percent to 498.8 pence.

Viva Zapata!!!

June Swoon or not? My bets are on that which feeds us….

No nation is an island and the world continues to motor on even in the wake of European Debt crisis after crisis and environmental wake-up calls in select parts of the globe.

What do we know…feedstocks are all in growing demand. Oil, metals, corn and wheat. Guess what? All have faced big challenges in delivering on growth to meet increasing demand. Think about civil unrest, environmental impacts and a global population that grows at 2%+ year and is urbanizing at 10% pa. All equal: upward pressure and strains on supply lines…

Speculators raised their net-long positions in 18 commodities in the week ended May 31, government data compiled by Bloomberg show. The Standard & Poor’s GSCI Spot Index rose for a fourth straight week as Chinese metal inventories plunged and droughts lingered in the Asian country and Europe, trimming prospects for wheat and cotton crops. The global recovery “is gaining strength,” the Group of Eight leaders said May 27 after a summit in Deauville, France.

One final note: The Asia-Pacific region overtook North America last year as the world’s biggest derivatives market amid increasing demand for futures and options contracts in the region’s fast-growing economies, according to data from the Washington-based Futures Industry Association.

Pure plays, like commodities are trader’s friends. Asia – Pacific and Southern Cone are going to make huge strides this year and next and that means more volatility!!!