Tom Bulford (Penny Sleuth):

Joseph Stalin does not sound like a very nice man to have worked for.

He had this idea that digging up coal from underground in order to burn it as soon as it reached the surface was a bit of a waste of time and effort. Why not simply burn it while still underground and then simply draw up the heat and gases through a pipe?

Convinced that this was a smart idea he set his scientists to work on the problem. Unfortunately for twelve of these scientists, they failed to do so and Stalin had them executed.

But to be fair to Stalin, his idea was right but just a little ahead of its time. Last week the UK Coal Authority granted a license to Clean Coal, a subsidiary of the quoted Anglo-American (ticker: AAL) to put Stalin’s theory into practice.

Under the North Sea, within ten kilometres of the coast, is enough coal to satisfy UK demand for at least ten years. The difficulty is getting it out.

But thanks to a new technology called Underground Coal Gasification this is no longer necessary. Let me show you how it will work.

How to make hard-to-reach coal fuel a power station

A drill will bore its way through the ground at somewhere, on land, close to perhaps Grimsby. Having reached the required depth it will then take a ninety degree turn and head out sideways underneath the coastline until it hits the coal seam.
Next a second bore hole will be drilled into the coal seam. Once that is done the coal will be set alight underground, and will be constantly fanned by oxygen fed down one of the pipes. Up the other pipe will come a methane-rich synthetic gas able to fuel a power station.

This will not be the first time that this has been done. Similar projects are already up and running. In the course of investigating a penny share company last week, I came across another such plan.

This was Strategic Natural Resources (ticker: SNRP), and I managed to catch up with chief executive Jeremy Metcalfe, a man whose enthusiasm and energy defies his seventy years. . .

Click here for the rest of Mr. Bulford’s report at Fleet Street Invest, UK.

Your life will be regulated — directly and surely indirectly — by the Environmental Protection Agency (EPA), mostly through its powers under the Clean Air Act (CAA). And the parts of your life not regulated by EPA will fall under the jurisdiction of your friendly state or provincial environmental authorities. Many of the policy details will be rounded out via litigation in state and federal courts, mostly initiated by the likes of the Sierra Club and other environmental organizations.

You should expect to see STRICT controls on carbon emissions, via taxes, regulation and outright bans on many energy-using systems. And since 40% of North America’s electricity comes from burning coal, you can plan on having less electric power and on paying much higher electric rates. The utility companies will just pay the fees and costs for cap and trade and pass the bill on to you in your monthly statement, for example.

But it goes beyond just the utility companies writing checks to the government. We’re talking about BIG money, from every nook and cranny of the economy. One panelist compared the amount of money in play with cap and trade to completely rewriting the U.S. tax code. “Just tear up the tax code. Abolish it. Pulverize it so it goes away completely,” he said. “Now, rewrite it to raise even MORE money than before, and do it by taxing energy usage.”

United States of Clean Air Act?

So the CAA — which came about in the early 1970s as a way of fighting smog — is now morphing into the new constitution for the U.S. Really, I’m not exaggerating. I know some of you think I overstate my points every now and then. But I’M NOT KIDDING!

We’re seeing a new “American Revolution.” Except the key players are not exactly Ben Franklin and George Washington and James Madison. In the name of fighting climate change, there is a new class of bureaucrats, regulators and judges who will control your life down to what time you plug in your coffeepot. And with “smart metering,” they’ll know if you leave your water heater on for too long. (“Well,” is the reply, “just get a solar heater for your roof.”)

One university professor who spoke at the seminar said that if the U.S. adopts a per capita approach to sustainable worldwide energy usage — a serious proposal that’s in front of several powerful international bodies — we’ll have to reduce carbon-based energy demand in the U.S. by 97%. Basically, if that happens, the environmental true believers will take the U.S. back to an energy state that existed in the 1850s. No typo. The 1850s.

Heck, the energy future of the U.S. might make the scenes in James Kunstler’s 2008 book World Made By Hand look like a day at the beach.

So you can see why I’m saying you should accumulate gold and silver. And while you’re at it, own those geothermal power producers. They’ll be the gold mines of the future.

The “Axis of Overspending,” Inflation and the Rush to Precious Metals

Why am I banging the drum so hard for precious metals? Well, you must know the drill by now. Government spending is out of control. We have a big-spending Congress in Washington that can’t say no to anything (except the token defense cut, or taking away school vouchers from inner-city kids in the District of Columbia). It’s been going on for way too many years, under both previous and current party management.

Everybody who’s anybody in this country, it seems, gets a permanent, pet government program, if not a large bailout. (Huh? You didn’t get your program or bailout?) How long can it last? I think we’re about to find out.

As Bernie Madoff might say, “Bailout, schmailout.” Still, the axis of overspending leads to inflation. It’s the 1970s redux. And inflation will soon rear its head and roar so loud that even the wizards of Washington will have to admit the obvious.

Washington Is Awakening! But Clueless!

Actually, our betters in Washington are waking up to the issue of inflation and the decline of the dollar. Just yesterday, I received an inquiry asking if I want to appear on a nationally syndicated show that originates from Washington, D.C. (well, Alexandria, Va., to be exact). The audience is Washington people — you know the type — and their intellectual and spiritual kin in “blue spots” across the country.

Here’s the exact inquiry:

“We’re doing a story on hoarding behavior and I am looking for people who have taken some (or all) of their savings out of traditional investments and are now storing money as cash or in the form of physical gold or some other precious metal in a safe or secret place. I am having trouble finding anyone like this. Do any of you know of someone who fits this description, who might be willing to talk to me about it? I am looking for someone in Boston; Washington, D.C.; New York; or maybe Chicago. If anyone has any leads, please let me know!”

Oh, man! That’s rich! Verbatim! Honest to God, I have not edited this inquiry by EVEN ONE WORD! These people are clueless!

The producer wants to interview gold bugs for the show. In an anthropological fashion that would do Margaret Mead proud, the subject of the story is “hoarding behavior.” But the poor producer says, “I am having trouble finding anyone like this.” (Like looking for a registered Republican at the Harvard Faculty Club?) And how about that request to find somebody in Boston, Washington, New York or Chicago? If you’re from, say, the silver mining town of Wallace, Idaho, you need not apply.

Here was my reply: “People who’ve taken their savings out to buy gold and store it or hide it probably don’t want to brag about it on NPR.”

“Houston, We Have a Problem”

Remember that line from the movie Apollo 13? “Houston, we have a problem.”

Wow. Do we have a problem in this country, or WHAT? It’s WORSE than Apollo 13. We should be so lucky as to be in a small capsule in the cold of space heading away from Earth toward the moon with almost no oxygen or electrical power. Instead, we’re watching the national currency declining and dying right before our eyes. And the opinion makers of the nation don’t know anybody who owns gold. Amazing!

Meanwhile, Over in Dubai…

Well, the producer could always go find somebody in Dubai. Because from that distant desert kingdom comes word that the Dubai Multi Commodities Centre (DMCC) has finished building a state-of-the-art precious metals vault, with world-class tracking and security systems. Think Fort Knox, but in the desert and without the trees and pretty landscaping we see in the hills of Kentucky.

You want “hoarding behavior”? The new vault will become the home for the exchange-traded fund (ETF) of Dubai Gold Securities. Also, “It’s a natural home for the central banks in the region to store their gold in Dubai, rather than in London, where they have typically held their gold,” said a Dubai-based gold dealer INTL Commodities DMCC’s CEO Jeffrey Rhodes. Yep. “Natural home.” (Margaret Mead, call your office!)

A DMCC official stated that the new vault will be used to store precious metals associated with precious metal-based ETFs that are on the drawing boards and scheduled for launch later in 2009. This can only add to worldwide demand for gold and silver, especially from the traditionally gold-friendly Middle East.

Here’s the Bottom Line…

OK, so here’s the bottom line. When the American people realize that the dollar is in for another round of inflation, they’re going to look for a way out. When people envision the future decline in their purchasing power, we’ll see a rush for the monetary exits. It’ll be the “Gold Panic” of 2009, or 2010 or 2011… Whichever year gets the naming rights.

When the reality sinks in, people will flock in droves to physical precious metals (yeah, try to get some!), as well as mining shares. I’m old enough to remember the last time it happened, in the 1970s and early 1980s. And I’ve studied enough history to know it won’t be pretty.

So beat the gold rush! Hoard now!

Until we meet again,
Byron King

Source: Gold, Climate Change and the Cap and Trade Revolution

In fact, the decline in U.S. oil consumption will be quite painful for pretty much every American. Prices for fuel will rise, and you will wish that was the only problem. Spot shortages will turn into large scale “dry outs.”

You should anticipate that every level of government will do things to discourage using liquid fuel, from charging user fees and “congestion pricing” to higher taxes. Heck, the government might even appeal to your patriotism to drive less. And don’t be surprised to see rationing in one form or another, even with expensive fuel and costly fees and taxes.

But this is not a book review of James Howard Kunstler’s 2005 volume The Long Emergency, or his recently released (and exceedingly well-written) World Made By Hand. The point is that oil use will fall in the years to come, because world oil output is falling. You cannot use what is not there in the first place.

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Setting the Stage for CTL

So this sets the stage to explain why Coal to Liquid (CTL) is about to simply take off in the U.S. The U.S. will adopt CTL, because it has to do so. There are few other large-scale industrial alternatives. Windmills, biofuels, conservation and every other energy-saving and energy-extending idea will help. But the world we live in is built to run on oil, and nothing else will cut it for some things when it comes to running a fast-transforming economy. So stand by for CTL.

According to a 2006 estimate by the National Coal Council, a robust CTL industry could produce about 2.6 million barrels per day of oil-equivalent fuel by 2025. This is about 12.5% of current U.S. daily demand. But it is tricky to draw comparisons over time frames of nearly 20 years. Certainly, a lot of things will change between now and 2025 in the realms of both demand and supply.

And a large-scale CTL program will dramatically increase the demand for coal. Can U.S. mines deliver? There are issues here, to be sure. The U.S. is supposed to have that mythical “250 years of coal reserves, at present rates of consumption.” But that estimate is 35 years old. And much U.S. coal is buried deep, in thin seams, and thus hard to mine. Plus, some 40% of U.S. coal resources are in Alaska — much of it north of the Arctic Circle. So even with coal, the U.S. needs to be wary of believing its own press releases.

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Potential 250% Gain This Year — If You Get in By July 12

The U.S. Department of Energy says it could be the key to unlocking an oil deposit in the Rocky Mountains that’s three times the size of Saudi Arabia’s reserves.

I say it could make you $65,500 inside of a year.

Let me tell you why that’s such a big deal.

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Still, CTL can serve as a liquid fuel supplement for at least several decades. And CTL technology is pretty well developed, based on many decades of operational success by Sasol in South Africa. The Air Force believes that the CTL plants of the future can even be relatively “green,” based on evolving technology for removing pollutants from the coal and sequestering carbon dioxide. It will also be possible to reduce the volumes of coal in the blend by adding some types of plant-derived materials.

Thus, it is not a question of if the U.S. will adopt CTL. It is a question of when. And looking ahead, every month is precious. As I said above, we are running out of time. So it will matter greatly how much will we as a nation fool around with our national obsession of navel-gazing over ancillary issues before we get around to making a decision to bend steel.

One way or another, CTL is coming. And one way or another, we at Penny Sleuth are going to find a way to invest in the companies that will build it out.

Until we meet again…
Byron W. King

P.S.: My colleague, Greg Guenthner, is working on an amazing energy play that trades for just a few dollars. If he pulls the trigger, only his elite Penny Stock Fortunes’ readers will gain access to it. To be among these lucky few, click here…

Source: Stand By for CTL

As the impact of the global credit crunch rumbles on, we’re seeing a very interesting divergence in the performance of the Asian economies. The countries that are still bound to the American eagle are heading for the doldrums. But the ones that have chained themselves to the Chinese dragon are roaring ahead.

You see, despite all the babble about a global economic slowdown, China is still booming. Its economy grew by a white-hot 10.6% in the first quarter of this year. And that’s despite all the efforts of the Beijing government to slow things down…

So, the commodity-rich Asian countries that supply China’s industrial machine, like Malaysia, Indonesia and Thailand, are surviving the global economic downturn well enough. In fact, they’re seeing exports boom…

But not every Asian country is benefiting. The Asian countries that rely on electronics shipments for the bulk of their exports, like Singapore and the Philippines, are being hit by the US slowdown.
The numbers say it all

Just look at the figures. This week, Malaysia announced a 21% jump in exports in April from a year earlier. What are they selling to the rest of the world? Let’s see…palm oil exports are up by 71%, crude oil exports by 53% and exports of natural gas by 26%. Electronic-component exports were up by just 12.5%. The electronics industry used to be the crown jewel of Malaysia’s export industry. And most of those components used to go to the U.S. We’re seeing a massive shift in the centre of economic gravity here.

Same thing in Thailand. The country’s exports jumped 28% from a year earlier. And a good part of that comes down to the soaring prices of rice and other agricultural products.

Indonesia’s monthly exports have just hit a new record of $11.9 billion in March, as well. No prizes for guessing what they’ve been selling…crude palm oil (Indonesia is the world’s biggest producer), natural gas, timber, coal…

Indonesia’s coal story is something that I’ve written about recently. Coal is the new gold. And Indonesia has some of the most exciting coal companies on the planet. We’re watching that situation very carefully…looking for a chance to get in…

And then India has reported a 32% rise in exports… The gist of this story is that if you’ve got what China needs right now, you’re in the money.

And The Dragon isn’t just dragging along a bunch of small Third World economies either. Even developed economies like Japan are getting a boost from China’s rise. The Japanese have sold so much industrial machinery and parts to China that their economy grew by 3.3% in the first three months of this year from the year before.

But here is the bit that really excites me: what China is doing for Asia, it’s now doing for Africa as well. It’s locking the Dark Continent into its economic orbit. And Profit Hunter readers have bought into this boom right on the ground floor.

From basket-case to oil exporter…

It has already invested $30 billion in Africa’s oil and gas industry. And most of that has gone to places that most Western investors would never have touched: Sudan, Chad, Equatorial Guinea, Angola, Nigeria….

Now it plans on investing $5 billion in the West African country of Niger. This is one of the poorest countries on earth. It ranks in the bottom five on the United Nations’ human development index. And the country is battling an insurgency by the magnificently blue-cloaked, be-turbaned, camel-riding Tuareg nomads in the north of the country. But the Chinese don’t seem remotely concerned. They plan to pump the country’s first barrel of oil next year. And to get it out of the country, they are going build a 2000-kilometre oil pipeline and a refinery with a capacity of 20,000 barrels a day.

Here’s another country about to become an economic annexe of the Middle Kingdom…

The new king of the African oil patch

While we’re on the African oil industry, here’s a bit of very interesting news. Angola has now dethroned Nigeria as Africa’s biggest oil producer. Nigeria has held the top spot for decades. But militant attacks in the oil rich Niger Delta and worker strikes have undermined the country’s oil industry. In April, Angola produced 1.87 million barrels of oil per day. Nigeria produced 1.81 million barrels.

We aren’t in Nigeria. But our brilliant African play puts us in the thick of Angola’s booming economy. It owns airlines in the region and is setting-up a massive logistics centre in the country’s capital, Luanda.

Source: China Invests Billions In Africa And We’re Set To Book a Massive Profit

Currently, two-thirds of the world’s coal is used to generate electricity. The rest goes into steel and concrete production.

The US Department of Energy says China and India will account for 70% of the increase in world coal consumption over the next two decades.

And consider China’s plans for the next five years… they’re planning to build the equivalent of ten New York Cities, said a Canadian chief executive and financier at the mining conference I attended yesterday!

This will need unimaginable amounts of coal for steel production, concrete production and energy generation.

China used to be the largest coal producer in the world, but it is now a net importer. As the communist Republic continues to develop, it will have to import more and more coal. There are no realistic alternatives.

And that will continue to boost the coal price. It’s great news for one brilliant investment. More on that in a moment.

Two more UK coal power stations planned

Most governments have accepted that coal will have to play a big part in their future energy strategy.

Why? Because most of them have been useless in sorting their energy strategy out. This is particularly true in the UK.

France puts us to shame. The country gets 79% of its electricity from nuclear power; which is way ahead of anyone else in the nuclear stakes.

We still do not know for sure if any new nuclear power stations are going to be built – and it takes years to bring one into operation.

However, we do have plans to build our first coal power stations in 20 years. And it’s not just one – but two. And they’re being built by the Germans – even they are ahead of us in the nuclear stakes!

In March 2007, RWE Npower submitted proposals to spend more than £1bn to replace its existing coal-fired station at Tilbury in Essex. The plant would be operational by 2013. E.ON also hopes to replace its plant in Kingsnorth, Kent, by 2012.

Coal will bridge the energy gap as the oil price soars

It’s cheaper and less technologically challenging to build a coal-fired power station than a nuclear facility. This means coal will be attractive in developing countries too.

The American government has also been slow in resurrecting nuclear power as an energy option in the US.

This situation has been repeated all over the world, and I have no doubt it ensures coal’s continued bull-run over the next 10 years.

The US Energy Information Administration forecasts world coal consumption will double between 2003 and 2030. Non-OECD countries account for 81% of this increase.

So, coal is by no means the fuel of yesteryear – it will be around for a long time to come and demand is likely to soar.

If you haven’t got exposure to a coal producer in your portfolio, you need to think again

Here at Smart Commodities UK we’ve been invested in this trend since last October and it’s already showing a tidy gain.

But I believe there are much more gains to come.

You see, this company uses royalty streams (which are now rising) to invest in early-stage mining companies with a view to generating more royalty payments.

The board has proved this strategy works. Between 2002 and 2006 the group achieved a compound annual growth rate on its investments of 76% – this was before the recent surge in coal prices and the increased royalty payment news.

And just this morning they reported that from 1st July 2008 a two-tier coal royalty rate would now apply to its assets in Queensland.

The current 7% royalty rate will apply to the value of coal produced by a mine sold below $100 per tonne and a higher 10% rate will apply to the value of coal sold above $100 per tonne.

In April 2008, coking coal prices rose sharply to between US$250 and US$300 per tonne… so it looks likely that all payments from now on will be made at the 10% rate instead of 7%.

It goes some way to explain why analysts at brokerage firm Numis have upped its price target of this share by 12.5%.

The company also pays a dividend. A payment of 4.35p per share was approved in April. This fact makes the company virtually unique on the London Stock Exchange.

You get exposure to early-stage mining opportunities, paid for by rising coal royalty payments AND a dividend stream as well.

I’m encouraging my readers to buy this stock immediately.

Find out how to access these details here.

Regards,

Garry White
Editor Smart Commodities UK

Note: Past performance and forecasts are not a reliable indicator of future results.

Source: Coal Price Guaranteed to Soar

China’s problem is two-fold: a lack of coal and severe coal pollution.

In case you haven’t seen the CNN.com story of May 20th, Chinese power plants are running out of coal, with less than a three-day supply in some areas, according to official government statements. About 32 power plants shut down due to a scarcity of fuel — aggravated by the May 12th earthquake.

The current decline in uranium prices gives these China super-traders a critical inflection point to pick up the slack and clean up the environment.

China is the world’s biggest emitter of sulfur dioxide, a toxic byproduct of burning cheap, dirty coal. The country’s all-powerful State Council reported that pollution cost more than $200 billion in 2005, nearly 10% of the national GDP — the last year Beijing released the numbers of the nation’s environmental damage.

The pollution is also sparking little-known riots.

On April 8, 2006, villagers armed with iron bars attacked factories polluting their water. Pollution riots in Huashui in April 2005 pitted outraged citizens against 10,000 police officers. And in mid-July 2005, some 15,000 protestors amassed in at the gates of an offending factory, throwing stones and overturning police cars, despite the thick clouds of tear gas.

The Chinese people are taking to the streets. They want to stop the pollution that is damaging their livelihoods and health.

A look at one industry will show you the devastating financial impact of China’s addiction to dirty coal.

Nearly 12-million tons of grain are contaminated every year from the airborne mercury contamination of coal. (As though China’s agriculture and food industries don’t have enough problems from the recent recalls.)

China could benefit greatly from plunging uranium prices…as well as investors who take a long-term position in China’s growth.

Uranium futures contracts through the end of this year are trading in the mid $60 range. By comparison, U308 uranium was priced at about $140 per pound as early as January of this year.

The steep decline in uranium could be just what the Chinese need to make their move before manufacturers start moving out entirely to countries such as Vietnam.

This exodus of capital is certainly in the tea leaves…

– China’s power shortage forced Shanghai Volkswagen to stop work for several days at a time.

– Sony’s Chinese manufacturing plant had to cut production due to chronic power shortages.

– Chengdu City suffered the worst power shortage ever, with 345 companies stopping production.

– The China unit of Marubeni Corp, Japan’s fifth-largest trading company, stopped work two to three times a week due to blackouts.

– General Motors and Panasonic shifted production to off-peak hours, losing days of work.

There is a growing sense of urgency to corner the uranium market.

This stealth team of Chinese traders is armed with a $300-billion war chest to grab up every last ounce of U308 uranium. And if anyone can pull this off, it’s the Chinese.

Unlike gold, oil or copper, there’s no regulated trading exchange for U308. You can’t buy an ETF for it. U308 moves in a near-underground economy of secretive auctions where uranium trading is fast and furious.

The absence of a regulated trading exchange gives an enormous advantage to a stealth team of Chinese traders instructed by the government to track down every last pound of U308.

This crackerjack team is headed by a cabinet-level rising star who is chauffeured around Beijing in a big, black Audi. He sports a cigarette holder like FDR and is considered one of China’s top economists.

Under his brilliant supervision, the Chinese uranium traders will draw on a war chest of $300 billion in U.S dollars. That amount is nearly twice the size of the world’s largest mutual fund. It’s about six times bigger than the legendary Magellan Fund. And it’s bigger than the world’s top four mutual funds combined.

Over the next 15 years, China plans on building 30 new nuclear reactors. Without those critical reactors, the country’s environment and economy could be heading straight for the dumpster.

China desperately needs another 23,000 megawatts to maintain its nonstop growth.

And 23,000 megawatts is a massive amount of electricity. It’s how much New York City lost during the great blackout of 2003, when 19 million New Yorkers were plunged into darkness and the city was dead in the water.

That’s why China is committed to shelling out $50 billion on 30 nuclear power plants. The country must make the leap from 8.7 million kilowatts today to 40 million kilowatts by 2020. It’s the most ambitious nuclear power expansion in history.

For investors interested in China, the move to nuclear energy is great news. It means that China will overcome its energy problems — removing another obstacle to long-term growth.

Irwin Greenstein

Source: SWAT Team Looks to Cut China’s Addiction to Dirty Coal

Global consumption is growing almost twice as fast as for oil, it is the cleanest-burning of the fossil fuels, and it is comparatively cheap: it currently trades at about half the cost of crude oil on an energy-equivalent basis.

In an energy-hungry world, it’s therefore not surprising that there’s now a mad scramble to procure long-term supplies and bring them to market.

Let’s take a look at some of the current major developments…

Pipelines. Russia, which has the world’s biggest reserves of natural gas, is building a direct link to Germany beneath the Baltic Sea, and planning others to China and Italy. These are enormous undertakings. The 3,000km Italian link, for example, is expected to cost $15bn.

Elsewhere, the ConocoPhillips-BP pipeline to bring North Slope gas from Alaska to Canada’s oil sands industry and the lower 48 US states will be the largest private-sector construction project in North America. And the pipeline China is building from Turkmenistan in Central Asia to Shanghai will stretch for 9,000 kms.

Liquefaction. An alternative means of moving gas is to liquefy it by freezing, ship the liquids across oceans, then turn it back into gas. The technology is not new, but LNG (Liquified Natural Gas) facilities are hugely expensive. For years this limited its transportation to countries not accessible by pipeline, mainly Japan.

But high energy prices have now made LNG viable on a large scale. And there are other advantages. European nations, for example, nervous about their increasing dependence on Russian gas, are looking to alternative sources such as North Africa, using LNG. China signed a $60bn deal with Qatar last month to buy three million tons of LNG a year over 25 years from 2011.

With its volumes growing 7% a year, LNG is the fastest growing of the fossil-fuel industries. Because of the massive investments required, it is dominated by a handful of very large multinationals.

New Reserves. Oil majors are boosting efforts to find and tap hydrocarbon deposits that are primarily gas, with oil as a side-product.

The newly-discovered Sugar Loaf field under the Atlantic off Brazil, claimed to be one of the world’s biggest, is primarily a natural gas resource. The Shtokman development in the Barents Sea off Russia’s Arctic coast, and several projects off the coast of north-west Australia, focus on production of gas, not oil.

There is also increasing interest in exploiting hard-rock resources that have been neglected in the past because it’s difficult to tap their gas. On the western slopes of the US Rockies, Exxon Mobil is starting to employ an explosive fracturing technique three times more effective than conventional technology to unlock the riches of the Piceance Basin.

Coal-bed Methane. The “fire-damp” found in coal deposits – the curse of miners throughout the ages – is almost pure methane and an excellent substitute for natural gas, which is about three-quarters methane. It may be recovered from worked-out collieries or from coal deposits left unexploited because they are so gassy they are too dangerous to mine, and already accounts for a tenth of natural gas production in the US.

BG Group, the global specialist in the discovery, extraction and supply of natural gas, plans to build the world’s first plant to produce LNG from coal-bed methane piped 400km from fields in the interior of Queensland, Australia.

Liquid fuels. Although currently used as gas to fuel central heating, industrial furnaces and power stations, natural gas can be converted into liquid fuels. In Qatar, which has the world’s third largest gas reserves, they’re building plants to do just that.

Worldwide demand for natural gas has been growing at an average rate of nearly 3% a year, compared to oil’s 1.7%. China’s gas consumption is forecast to triple over the next 12 years, India’s to double. Yet between them they have less than 2% of global reserves, so they will be forced to look to imports from the Mideast, Russia and Australia.

Investing in natural gas: major role in power stations

The strongest demand growth area for natural gas is in electricity generation. Dirk Beeusaert, chief executive of Suez, the world’s biggest operator in the field, says the investment cost per kilowatt of power from gas turbines is “half that of a coal plant, and a third of that from a nuclear plant of the same capacity.”

Gas power stations can be built quickly, are flexible in operation, reduce dependence on other resources such as coal, oil and nuclear – and have particular attractions in these times of ecomania. Not only do they produce less greenhouse gases than other fossil fuel, but they can be used efficiently to generate intermittent power, to fill the gaps when turbines driven by wind and water shut down because of calms or droughts.

A couple of decades ago, gas accounted for little of the world’s electricity generation; now it fuels almost one-fifth.

Although the oil majors are giving increasing attention to finding and producing natural gas, most of the world’s resources are closed to them, or are politically high-risk. Russia seeks to use its gas supplies as a strategic weapon in its dealings with Europe and is squeezing out foreign companies. Iran is a different kind of political minefield. Qatar is happy to partner international oil firms, but is also right in the middle of the potentially explosive Middle East.

One country that is benefiting from all this is Australia, which has reserves almost as large as those of the US, production that is likely to continue expanding for the next quarter-century, and a business-friendly environment. Chevron’s Gorgon project alone, which got its go-ahead from regulators a few months ago, expects to produce more than a trillion cubic metres of gas over its 60-year life.

Not just coal though…coal seam gas. Black rock is the new black. Rock on.

We emailed our full wrap-up of the sector to our beloved Diggers and Drillers fraternity a couple of days ago. But the big-wig of the sector is Santos (ASX:STO).

Santos, after wooing several potential partners, has found a mate to invest in its LNG export terminal at Gladstone. Petronas, Malaysia’s state oil and gas investment vehicle, grabbed 40% of the project for AU$2.6 billion. Santos must have laid the woo on pretty thick.

But woo is an infectious disease in the hard asset sector these days. You have to wade through a viscous slurry of woo to get anywhere. Romance is blossoming…covetous, greedy-eyed romance. Everyone wants someone else’s stuff.

How else could Australia’s largest sugar producer make 38% of its revenues from building products…35% from aluminium…and just 19% from sugar? It’s been doing some whacky diversifying.

Whacky or not, Gabriel has caught the sweet scent of gains in CSR’s (ASX:CSR) chart. As usual, you’ll find him toiling away down at the bottom of the e-letter.

This new Santos story opens up another door for coal-seam gas producers. BG’s bid at the start of this month was like connecting a jumper lead for stocks with coal-gas. Petronas’ foray will shift share prices up a gear again. Two of the world’s largest LNG producers have thrown their back into Australia’s top-notch coal-seam gas reserves. If they play this right, the stuff should be whizzing out of port and up to China within a few years.

How good is that demand source though?

Huge Growth in LNG Demand

Well, latch your peepers onto this offering from ABARE. It shows you what LNG demand is capable of doing in the next few years. LNG is as good as any fossil fuel, but it’s one of the cleaner ones. So it’s getting top billing these days.

Growth just keeps popping up in the energy sector. A thought hit us late yesterday on the topic. We think the oil price is too hot to touch right at this instant. Further down the track, it’ll be a little cheaper.

But when it comes back a little, that doesn’t mean things go back to normal.

The current spike in oil prices tells you something. No-one has full control over the oil price. The purpose of OPEC in the first place was to keep oil between US$22 and US$28. Obviously it didn’t keep it there.

For almost five decades, Indonesia held a unique position as the only Asian member of the OPEC oil-exporters’ cartel. When it joined OPEC in 1962, it was Southeast Asia’s undisputed energy giant. But yesterday marked the end of an era for the country. Indonesia has formally withdrawn from the oil cartel.

You see, the country’s oil production hit a peak in 1976. And In the early 90’s it was still producing about 1.7 million barrels per day. But ageing oil fields and a lack of investment has seen falling production since 1995. The country now produces about 800,000 barrels per day and it’s been a net oil importer since 2005. Its days in OPEC were obviously numbered.

It’s big news in the oil industry, but I think that the country’s withdrawal from OPEC is really a bit of a non-event — at least from an investor’s point of view. Indonesia is still a major energy exporter. The country is the world’s biggest exporter of thermal coal, which is widely used in the power sector. It is the world’s second biggest exporter of liquefied natural gas (LNG) after the Gulf state of Qatar. And it has recently overtaken Malaysia as the world’s biggest producer of palm oil as well.

Global oil demand is expected to increase by 1.03 million barrels per day this year. And about 70 per cent of that additional demand is going to come from Asia. But it’s not just oil. Asia’s growing economies are fuelling demand for just about all forms of energy. And Indonesia is well placed to profit from it.

Coal is gold…

The country is sitting on about 90.5 billion tons of coal. And demand for the stuff is surging. In fact, Indonesian companies are now selling coal to Japanese buyers at double last year’s prices. So, investors have been flooding into the sector. Indonesia’s biggest coal miner, Bumi Resources, has seen its share price soar by about 431 per cent in the last year. Its market cap is now $16.4bn

Now the country’s second and third biggest coal miners are planning on floating on the markets as well. Number two producer, Adaro Energy, is planning a Rp12,000 billion ($1.3bn), public offering. That will make it the biggest IPO in Indonesia’s history. And it’s going to be the world’s 8th biggest IPO this year.

Adaro has already pulled in top international investors. 64% of the company is controlled by two Indonesian strategic investors. But 36 per cent of the shares are owned by major global investors, including Goldman Sachs, Citigroup and the Government of Singapore Investment Corporation.

And demand for the IPO has been huge. In March, the company announced that it planned to raise $500 million. Then, earlier this month, they raised that to about $1 billion…and then $1.3 billion…

The Adarco IPO is scheduled for next month. The country’s second biggest coal miner Indika Inti Energy plans on raising $300 million through selling an 18 per cent stake in an IPO shortly before the Adarco float. Both these IPOs are probably going to do well. Investors and speculators who missed out on Bumi Resources’ rally will probably try to get in early this time… a move I see as being quite sensible.

Bumi Resources is one to watch…

The two new coal IPO’s might take some of the wind out of Bumi’s sails. And if we see that happen, a fantastic buying opportunity will present itself.

Just consider: China is building new coal-fired power plants at a rate of about one per week! And then there is India. Asia’s other giant plans on adding more than 400,000 Megawatts of new capacity by 2030 — and the bulk of that is going to be powered by coal. So, the coal story still has a long way to go. In the months to come there could be moves to be made… and a second chance for anyone who missed out the first time around.

I’ll keep you posted.

Regards

Manraaj Singh
Profit Hunter
Editor

PS If you liked what you read here — you can become one of my regular subscribers and receive all our new Profit Hunter recommendations the moment we make them.

Source: Careful Timing Could Mean Big Profits From The Worlds No.1 Coal Exporter

It now applies to a wide variety of similar processes for converting coal, biomass and other carbon intensive feed-stocks into usable products such as diesel and jet fuel.

These two scientists at the Kaiser Wilhelm Institute invented the process because of a petroleum shortage, increased demand and skyrocketing prices – similar to what the United States faces today. During World War II, Germany used the technology to keep Hitler’s war-machine running.

By 1944, Germany’s annual synthetic fuel production reached more than 124,000 barrels per day from 25 plants. After the war, captured German scientists continued to improve the process in the United States.

But the technology faded after the 1980s. That’s when Congress passed the Energy Security Act, which birthed the Synthetic Fuels Corp (SFC). SFC spent over $88 billion in government loans and incentives, with the goal of creating two million barrels a day of synthetic oil within seven years.

SFC was launched in 1980 and it folded in 1986 after spending billions without providing any fuel. In the grinding recession of the early 1980s, oil prices sunk from more than $39 a barrel to less than $8 a barrel. Synthetic oil became a financial bust.

Now the economics have changed…

With Oil Trading at $130 per barrel, Synthetic Fuel is a “No-Brainer”

The process works like this: Coal is broken into its components by subjecting it to high temperature and pressure, using steam and measured amounts of oxygen. This leads to the production of synthetic gas.

Because the United States has benefited from years of low price petroleum, the leader in synthetic gas grew up in South Africa. The global leader is Sasol (NYSE: SSL). Sasol uses coal and natural gas as a feedstock to produce a variety of synthetic petroleum products. Sasol produces most of South Africa’s diesel fuel using a modified Fischer-Tropsch process.

This process helped South Africa to meet energy needs during its economic isolation under Apartheid. Sasol’s process has received recent investor attention because they produce a low-sulfur diesel fuel, which minimizes the environmental impacts. As a result its stock has soared.

In the United States, a small firm named Rentech, Inc. (AMEX: RTK) provides technology to produce ultra-clean synthetic fuels and chemicals. It licenses its proprietary derivative process from the Fischer-Tropsch method.

It converts synthesis gas derived from coal, petroleum coke, biomass, natural gas, or municipal solid waste into liquid hydrocarbon products. This includes ultra clean diesel fuel, jet fuel, naphtha, specialty chemicals and other fuel products. Rentech also manufactures anhydrous ammonia, UAN, nitric acid, carbon dioxide and granular and liquid urea.

The US Air Force has been a leader in the utilization of these fuels. Most of the fleet is being certified to fly on a blend of synthetic and jet fuels. Recently, a B-1 Bomber became the first plane to break the sound barrier flying with a mixture that included synthetic jet fuel.

In addition, Rentech has a joint development agreement with Peabody Energy Corporation for the co-development of CTL projects that convert coal into ultra-clean transportation fuels using Rentech’s Process.

As with many companies focused on research and development of new technology, Rentech has yet to post a profit and its shares have traded in a small range for over a decade. RTK is still a highly speculative investment in one of the many potential solutions to our rising fuel costs.

So while the media hype is focused on solar, wind and even tidal power to solve our energy needs, the likely successor to petroleum will be refined from a black, sooty fuel that has been used since ancient times – coal.

I am happy to report that the United States has lots of coal, and companies operating in our free enterprise profit-incentive world are perfecting the technology to cleanly burn it in our planes, trains and automobiles.

Happy investing,

Floyd

Source: How These Two German Scientists Are Solving Our Energy Crisis