The Future Of Coal – Who Is Buying It Now?

Bill Clinton locked away Utah’s vast store of clean burning coal (to benefit a supporter with alternative supply?) (while sitting across the state line), yet complains about the environment and pushes “green” everything (which benefits Al Gore, of course).

All Presidents since Nixon promise to make us less dependent on foreign oil, yet the Energy Department has done nothing of the sort.

America has coal, in abundance, although it is not as good for the environment as Nuclear for sure. And nuclear, well, there was that 3 mile island thing a while back which made for good NIMBY (not in my back yard) fodder.

Yet coal will not go away.

What is the future for coal and who is buying it now? Marin Katusa from Casey Research will tell us.

China and India: Still Hungry for Coal

By Marin Katusa, Chief Energy Strategist, Casey ResearchOne can only hope that the “Don’t shoot the messenger” adage is still popular in the international community.

UK-based consultants M&C Energy Group have become the latest to join the chorus of voices asking the international community to increase the pressure on China and India to switch to cleaner energy sources.

As far as energy analyst David Hunter is concerned, it is the Western businesses that are carrying the financial burden of reducing carbon emissions. China and India, on the other hand, are benefitting from much cheaper energy, and their companies don’t have to bear the costs of reversing the effects of global warming.

Mr Hunter, however, should steel himself for disappointing news. Industry experts are expecting anything but a cut in coal demand for the foreseeable future.

By their analysis, global coal demand – already at a record high – will remain strong even as the recession cuts down on oil and gas use. And the numbers are certainly matching up to these expectations.

India’s coal demand is expected to reach 653 million tonnes this fiscal year, with only 572 million tonnes expected to be produced in the country. The China National Coal Association expects demand to grow by 4-6% in 2010 and the coal consumption to expand to roughly 3.4 billion tonnes.

And with power-starved economies to feed and millions of people to lift out of poverty, neither country is going to take kindly to any interference with its energy agenda.

There are two different types of coal – in fact two different types of demand – when it comes to the coal market. Though they can’t be considered to be totally separate, the criticism levied against these two Asian tigers becomes somewhat blunted when we take this angle.

The first is for thermal coal, the cheapest and most popular way for emerging economies to produce electricity. Almost 75% of China’s electricity comes from coal-fired plants, but this picture is rapidly changing.

Irritated by the “world’s biggest energy consumer” sticker, Beijing is investing heavily – US$736 billion – into clean energy investment plans. The aim: increase the non-fossil fuel supply component to 15% of the total primary energy demand by 2020. So really, Mr Hunter’s desire for a less coal-intensive China might just come true. As for India, it never likes to be too far behind its Asian rival.

The second demand is for metallurgical, or coking, coal. This is what China and India really need – good-quality metallurgical coal, something that North America has in plenty. And this demand is not going away anytime soon.

For a strong economy, one needs strong infrastructure. For strong infrastructure, one needs steel. Steel is the backbone of an economy, and it is metallurgical coal that is used to produce the heat in 90% of the world’s steel production process. And for as long as the economy continues to blaze, it is metallurgical coal imports that will be stoking the furnace.

The heyday of the coal market is far from over. We’ve called coal the invisible bull market before; today it’s very much at the forefront of the market, and it isn’t going away. Coal suppliers know as well which side their bread is buttered. While traditional markets in Europe continue to struggle with their debt crises, China and India will be only too happy to race on ahead and pick up the slack.

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No one knows energy better than Marin Katusa, Casey’s chief energy strategist and senior editor of Casey’s Energy Report. One of his previous coal picks jumped by 80%, handing subscribers handsome profits. Who will be the coal winner in 2011? Find out with a risk-free, 3-month trial with 100% money-back guarantee.

Make Money On Uranium Investing Again?

Saskatchewan: A Gold Mine for Uranium

By Marin Katusa, Casey’s Energy Report

Mining is a risky business and accidents happen. But when your mine is the world’s largest uranium deposit, fourth largest copper deposit, and fifth largest gold deposit, an accident can cost a little bit more than the average. Something BHP Billiton found out after the shaft accident at its flagship Olympic Dam mine located 560 kilometers north of Adelaide, South Australia.

In October of last year, a breakdown of one of two haulage systems saw a loaded iron skip plummeting to the bottom of the 800-meter-deep main shaft. It caused enough damage to the inside of the shaft, and to the gears and the wheels that bring the ore to the surface, that it took nine months to repair.

So much does it actually cost when production is halted at a mine that’s clearly won the geological lottery?

BHP Billiton revealed on July 21 that annual copper production was down 11% in 2010, uranium production off by 43%, and gold production was 19% below the normal. The amount of material mined in fiscal 2010 was 5.3 million tonnes, down 9.8 million tonnes from last year.

The mine has, according to the company, returned to full production now. There is however, the small problem of contracts.
One of BHP’s largest clients is China, the country whose energy appetite just can’t get enough. The country that will be buying up to 5,000 metric tonnes of uranium this year.

The Olympic Dam mine produces 7% of the world’s uranium, production that was affected by the shutdown. While production is getting back on track today, the feeling in the BHP boardroom is one of unease.

The reason: the rise in the number of new nuclear power stations coming online in the next few years, along with all the contracts that need to be fulfilled. Expansion plans are in the works already. BHP is looking to massively increase the size of the mine and has handed in a 4,000-page environmental impact statement (EIS) draft to the Australian government.

The sticking point is, they’re going to have to go deeper, and it’s going to get a lot more expensive. The Australian government isn’t going to turn away from the opportunity to tax this goldmine either. And if the problems of additional cost aren’t enough, the rail system in Australia can’t handle moving that much ore at all times, so tack on some more delays.

Unsurprisingly, BHP is out scouting the market for some good deals on uranium. Top on their list is Saskatchewan, Canada.

Why Canada Is 45 Times Better Than the U.S.

The uranium deposits in Saskatchewan aren’t just significantly large; they’re also the highest-quality uranium known on the planet. The ore mined at MacArthur River has an average ore grade of 21% – average ore grades are given as a percentage of uranium oxide in the ore.

Just to compare, the uranium found in the U.S. is usually around 0.4 – 0.5%. That makes the Athabasca Basin uranium 45 times higher-grade.

The uranium deposit at MacArthur River can be visualized as a few school busses parked within a school football field. It might sound small, but in uranium-speak, that deposit’s big! It’s big because the grades are incredible in the Athabasca Basin. And that makes it huge financially.

Canada also ensures that the uranium it sells is used solely for electricity generation at nuclear power plants. The end use is very strictly enforced through an assortment of international non-proliferation treaties and Canadian export restrictions.
In fact, uranium on a per-tonne basis is worth more than gold if you’re in the Athabasca Basin. Given current uranium spot prices, it can fetch a staggering US$13,500 per tonne. That’s unheard of!

BHP Takes a Whole Building in Saskatoon

After meeting with many uranium executives, one can’t help but notice the large BHP building off 3rd Avenue while walking around Saskatoon. It’s not just the potash and diamonds that BHP cares about in Saskatchewan. The quantity of uranium underneath the Athabasca Basin is almost beyond reckoning. It can provide substantial wealth to the right company and the right investor.

If BHP decides to enter the uranium sector in Saskatchewan, which companies are on their short list?

That’s exactly what I was finding out while wandering the prairies.

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If you want to know which juniors are the most likely to be taken over by uranium-hungry BHP, you’ll find out soon in Casey’s Energy Report. After Marin has done his due diligence, he’ll emerge with a few hand-picked small-cap companies that show the greatest potential to provide investors with handsome returns. Take your 3-month risk-free trial now and get in early when Marin gives the starter shot. Learn more here.

Where Will The U.S. Get Its Oil?

The energy-rich, former Soviet republic has some of the largest oil and gas reserves in the Caspian Sea basin, producing 1.43 million barrels per day (bbl/day) in 2008. And as the giant Tengiz and Karachaganak fields are developed further, an additional 1.5 million bbl/day will be coming off the production line.
With the country holding 3% of the world’s proven oil reserves and the majority of its Caspian Sea holdings still unexploited, it’s no wonder oil companies – both major and minor – are flocking to it like moths to a flame.

Is the Future of U.S. Oil Really Secure?

By Marin Katusa, Chief Energy Strategist, Casey Energy Report

Two words that any oil company dreads to hear are “export duty.” Especially if the word “increases” or “introduced” is floating around there too.

So when Kazakhstan introduced an oil export duty to meet shortfalls in the national budget, the mood wasn’t exactly jovial.

On July 13, the Kazakh government brought back the tax that had been abolished during the financial crisis. A US$20 tariff will be levied on every ton of crude oil exported from the Central Asian nation. The hope: collect some US$406 million in additional revenue by the end of the year.

The energy-rich, former Soviet republic has some of the largest oil and gas reserves in the Caspian Sea basin, producing 1.43 million barrels per day (bbl/day) in 2008. And as the giant Tengiz and Karachaganak fields are developed further, an additional 1.5 million bbl/day will be coming off the production line.

With the country holding 3% of the world’s proven oil reserves and the majority of its Caspian Sea holdings still unexploited, it’s no wonder oil companies – both major and minor – are flocking to it like moths to a flame.

Of course, this new tax has everyone from Chevron and ENI, whose long-standing agreements have been unilaterally revised in effect, to the small-scale producers in an uproar. The move has been dubbed as the latest example of resource nationalism in Kazakhstan, analysts say, and the feeling is that the country seems to be taking its cue from Mother Russia.

There’s worry, too, that this is only the beginning of the end. There’s no guarantee to say that the tax will not rise as more and more oil begins to flow out of the country. And the thriving uranium industry might be next to get heavy taxes slapped onto it.

Bringing it back to an American context, the question of energy security rears its head yet again. Oil from Kazakhstan flows through two pipelines: one winds through Russia, the other through China. Not exactly the two countries you’d want controlling the taps of your oil supply.

Today’s realities – be they economic or security-related – mean that the natural shopping ground for U.S. oil are the Canadian oil sands in Alberta. According to the EIA (U.S Energy Information Administration), Canada remained the largest exporter of oil in April, exporting 2.486 million barrels per day to the U.S. The majority of these barrels come from the Canadian oil sands.

While protestors may get up their flags and launch advertising campaigns, technological breakthroughs mean the environmental impact from oil sands is far less than before. Canadian laws also protect the environment, ensuring that all disturbed land is returned to a productive state.

Carbon revenue, too, is reinvested into clean energy research, paving the way to the future.

As we wait on alternative energy sources to take center stage in world energy plays, the truth remains that oil and gas must power our lives. And for the United States, Canadian oil sands mean a secure and most of all, reliable, source of energy.

With Canada looking ready to pick up the slack from the Gulf, it’s worth knowing which companies operating in the Great White North are worth adding to your portfolio. These are the ones that combine the latest technology with good site locations and excellent cash flow. Their inclusion will benefit any portfolio and rake in some promising returns.

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Whether it’s Canadian oil sands, uranium, or viable green energies, Marin Katusa and his team make it their mission to find the best of the best junior energy companies for maximum profit potential. Read more about Marin and the new European “Cold War” that promises investors enormous opportunity.

Gulf Spill Pandoras Box For Obama

Has the Gulf Spill Opened Pandora’s Box for Obama?

By Marin Katusa, Chief Energy Strategist, Casey’s Energy ReportThe White House might be gaping in shock that the U.S. federal court overturned the six-month drilling moratorium, but it really isn’t all that surprising. Amid the finger pointing and political posturing, the Obama administration seems to have missed a vital detail – the U.S. oil industry is in a spot of bother.

It’s not just America’s oil supply and energy security that’s in danger after the BP oil spill and the subsequent drilling ban. The Gulf economy is hanging by a thread, and it won’t take much to send it over the edge.

Thousands upon thousands of rig workers were effectively laid off when the 33 rigs operating in the Gulf stopped drilling. The full economic impact of the ban is still unrealized, with the layoffs just starting, but estimates put the figure for lost wages as high as US$330 million per month.

Given the potential economic losses, BP’s US$100 million compensation fund for rig workers starts to look rather paltry. It doesn’t end there either. There’s a domino effect in play as well – each rig job supports up to four additional jobs for cooks, supply-ship operators, and those servicing the industry.

And should the drilling ban become permanent, the consequences could be dire. Just like the towns that died in the Upper Midwest after the demise of the auto plants and steel mills, the entire Gulf Coast – where deepwater drilling is crucial to the economy – could fade away.
All in all, not the best news for a country whose economy can be best described as fragile at the moment.

There’s also the question of America’s energy security. The Gulf accounts for up to 30% of all the oil produced in the country. Should the Gulf be put off limits, that shortfall has to be made up from somewhere. Obama’s renewable energy might be the future, but it’s not up to the challenge of meeting the needs of the present.

And attractive, viable options are far and few in between. Russia may be a friend now, but its tap-twisting history with gas in Europe does not strike up a positive note. The Middle East is hardly America’s best friend, not to mention its royalty structures, which leave much to be desired. And in Venezuela, Hugo Chavez just recently nationalized 11 oil rigs belonging to a U.S. company.

In the end, only two real options are left in the hands of the U.S. – the oil sands of Canada or rethinking the drilling ban.

A revised drilling ban would still see higher taxes on each barrel produced and tighter regulations for companies coming to the Gulf. Any lease application would come under intense scrutiny and face higher insurance rates. For smaller companies interested in the Gulf, the rising production costs mean that the death knell has been sounded.

Option two is the friendly neighbor to the north, Canada. The country already plays a big role in U.S energy. One in every six barrels of oil consumed daily in the U.S. comes from the oil sands in Alberta, Canada. The oil sands are pretty controversial stuff, however, associated with derelict, broken landscapes and carbon emissions.

But this is an image that’s going to change very soon. The future of oil sands is here: they are cost effective and their face is green. Steam Assisted Gravity Drainage (SAGD) pumps steam into the ground to liquefy the bitumen and stiff crude oil, making it thin enough to be pulled out of the ground. No giant holes or toxic tail-ponds – just two horizontal pipes, one above the other, puffing away efficiently.

That the Gulf spill is a game-changer for the U.S. oil industry is yesterday’s news. For now, it’s about making ends meet. And while we expect the U.S. to shift towards renewable energy, and maybe even rethink its energy use, for now there’s an unmet demand that’s not going anywhere.

As far as an investment portfolio goes, both options bring with them opportunities. If the U.S. federal court allows a somewhat watered-down version of the drilling ban, the long delay means that there’s potential to pick up some great stocks at a cheap price. On the Canadian side of things, there are some well-run companies perfectly combining cash-flow and SAGD technology. The Gulf spill might be Obama’s Waterloo, but for the careful investor, the winds of change could just blow in a fortune.

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Marin Katusa is the editor of Casey’s Energy Report, your single best source for ongoing coverage and profitable recommendations in the energy sector. Learn more here.

Secret To Making Money With Energy Stocks

The Secret to Finding Winning Energy Stocks

By Marin Katusa, Chief Investment Strategist, Casey Research Energy TeamAs the world hesitantly emerges from recession, the one question that seems to be on the lips of investors everywhere is: what’s next? As the tragedy continues to unfold in the Gulf of Mexico, with no fix in sight, market attention has suddenly shifted to the energy sector after years of neglect. Pundits and would-be energy experts are a dime a dozen. Speculation about oversold or underbought oil abounds.

But the real profits in energy won’t be made anywhere near the Gulf and have little to do with going long or short on BP or Transocean.

They’ll come from being the first to arrive on the newest scene, getting there before the crowds do. The current economic climate has opened up doors to some exciting opportunities around the world. Discovering which of these is going to be the next big winner, however, can be quite the challenge.

A question that our subscribers ask us time and again is, “What is your secret to consistently picking winning stocks?” As seasoned resource investors, our answer today is the same one that company founder Doug Casey has been giving for decades. It’s what he calls the “8 Ps” of resource stock evaluation.

The 8 Ps are: People, Projects, Paper, Promotion, Push, Phinancing, Politics and Price. They form the basis of the job interview that any Casey stock recommendation must go through as part of the due diligence we perform.

These criteria let us look beyond a few numbers, deep into the real fundamentals of a company. But even before we turn our attention to individual companies to select the few gems that we include in our newsletter, we concentrate our efforts on finding the niche in the energy market that is about to explode. Then we can sort out who is most likely to exploit that niche.
We’ve traveled the world, and we believe we’ve found the most promising area for oil exploration.

East Africa: Oil and the Elephant

Africa might be the final frontier, the last place left on Earth where elephant deposits – very large oil and gas reserves – remain to be found. This makes Africa a central piece in the world energy matrix, and the area is getting some major attention.
When oil and Africa are mentioned in the same sentence, thoughts automatically jump to oil rigs dotting the landscapes of Nigeria and Libya. But the ship has sailed for West and North Africa – their oil fields are either producing or about to come online. Anyone looking at buying into the energy mammoths operating there will find it just too dear.
The last oil elephants are in fact thousands of miles away, in East Africa. Yet it remains, for the most part, a blank slate. If we graph oil production on the continent, the picture looks like this:

East Africa has been largely ignored since early drills, almost 50 years ago, came up dry. But then Irish oil giant Tullow discovered over 2 million barrels under the waters of Lake Albert, Uganda, in 2009, and the region suddenly shot into the limelight.
Now some of the biggest players in the field are jostling each other to get in on the action. France’s Total SA, China’s CNOOC (China National Offshore Oil Corp), and Ireland’s Tullow are only three of the energy titans wooing governments and smaller companies. Just days ago, on June 2, Afren bought out Canada’s Black Marlin Energy, in a US$100M deal that gives the formerly West Africa-focused British producer a significant foothold in the east.
But East Africa is anything but a cakewalk. Poor governance, limited rule of law, and a severe lack of transportation infrastructure are just some of the problems that companies looking to do business there are facing.
Additionally, unlike West and Northern Africa, which have a complex network of pipelines, East Africa has only two. With the Lake Albert discovery, another pipeline is being built by some of the major companies in the region, but it won’t be operational until 2011.
Violence is also a serious threat. Quite a few militant groups are active in the region, attacking oil rigs and pipelines, kidnapping foreign oil workers. And the operations of pirates in the Gulf of Aden are well documented.
Nor is political stability a given. Mogadishu, in Somalia, still remains a no-go zone. Parts of Ethiopia are plagued by rebel insurgencies, and the country is at war with Eritrea. Even Kenya, a model of governance by African standards, has simmering ethnic and political grievances that could erupt at any time.
In short, the threats to both body and business often impede a firm’s ability to function, let alone continue exploration and production in the region.

If it’s so bad there, then why is East Africa one of our top picks for 2010?

There’s an old Chinese saying, “If you don’t go into the tiger’s den, you won’t get the tiger.” As we’ve proved in the past, a high-risk project is by no means an automatic guarantor of failure. After all, this is only picking the sector… if a company sails through the Eight Ps, the potential reward can outweigh the risk.

As an example: When we identified renewable energy as the sector to watch in 2008, our recommendation was a high-risk play. Reservoir Capital, a hydroelectric company, had acquired some viable projects in Serbia, a country with great geology for hydroelectricity.

But how stable was Serbia itself? They had just lost a war, Kosovo’s declaration of independence caused the coalition government of 2008 to collapse over a weekend, and anti-Western radicals seemed poised to win the elections.

It looked grim. Yet we reasoned that no matter which party won, people still would need jobs. In a country starved for power, a company that was already open for business, with good prospects, was miles ahead of the competition. Not to mention that Reservoir had balanced its position by putting its fingers in a couple of mineral deposit pies as well.

A green light for Politics, albeit shaky, meant that Reservoir had successfully passed through the 8 Ps. And sure enough, our high-risk gamble paid off, garnering over 300% in gains for subscribers, as you can see:

Like Serbia, East Africa is certainly an intimidating prospect, but that doesn’t mean investors should stay away. Better technology, higher world oil prices and decreased risk in some of the countries (compared to 20 years ago) have turned the scene on its head.
Realistically, only five other regions remain where an oil elephant may be found, and they all have their problems. The Gulf of Mexico is going to be hit with tighter regulations. Iraq and Iran are crippled by terrible royalty structures. West Africa and Brazil are restricted to the big boys, since new fields are so costly to bring online.

That leaves East Africa.

For the smaller fry in the oil industry, the area represents their best chance to get in on the ground floor and reap potentially huge rewards in the future. For the government players, East African oil can generate much-needed cash, as well as help meet their nations’ rising energy needs. And for the majors, a shiny new market is opening up.

This corner of the world is elephant country in more ways than one. It is, in our opinion, the place to watch in the near future. But not everyone will hit the energy jackpot, of course. In East Africa, as elsewhere, it’s survival of the fittest, and our job is to determine who’s most likely to come out on top.

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Marin is the senior editor of Casey’s Energy Report, focused on discovering outstanding small-cap opportunities in the energy sector, such as the ones mentioned above. And he’s simply the best at it. It’s no coincidence that of 19 recent stock picks, all 19 were winners… a 100% success rate. Learn in this report how you, too, can profit from his expertise and spot-on instincts.

How Much Electrical Power Does The Internet Require?

What do search engines and wind energy have in common? That’s the question a lot of investors were asking earlier this month, when Google made an almost US$40 million investment into NextEra Energy Resources, a North Dakota wind energy firm. The simple answer: more than you think.
It’s not surprising that the Internet search-engine superstar needs energy. Companies like Google own massive computer frameworks, known as server farms, to store all that digital data floating around in cyberspace. While Google is quite hush-hush about how many computers it owns, estimates put it at about 1,000,000 servers (almost 2% of the world total), and an enormous amount of power is needed to keep them running constantly. And as cyber-information grows – almost 24 hours of video footage is uploaded onto YouTube every minute – more and more computers are required to store and distribute it.

And where does all that power come from?

Driving down the interstate through the Midwest, it’s amazing to see all of the Windmills, in places previously determined to be uneconomical for Wind Energy.

What’s happened?

2 things:

  1. Advancement in Technology
  2. Government subsidies

Let’s hope it can learn to stand on its own (ugly) pedestal soon, without Uncle Sam taxing us to pay for it.

Why Google Should Subscribe to Casey Research

By Marin Katusa, Chief Investment Strategist, Casey Research Energy Division
What do search engines and wind energy have in common? That’s the question a lot of investors were asking earlier this month, when Google made an almost US$40 million investment into NextEra Energy Resources, a North Dakota wind energy firm. The simple answer: more than you think.

It’s not surprising that the Internet search-engine superstar needs energy. Companies like Google own massive computer frameworks, known as server farms, to store all that digital data floating around in cyberspace. While Google is quite hush-hush about how many computers it owns, estimates put it at about 1,000,000 servers (almost 2% of the world total), and an enormous amount of power is needed to keep them running constantly. And as cyber-information grows – almost 24 hours of video footage is uploaded onto YouTube every minute – more and more computers are required to store and distribute it.

But where does their power come from? Most server farms are located near coal-fired generating plants. Good for efficiency, but that adds up to a pretty big carbon footprint. Naturally, this has environmental groups fuming and lobbying the corporations for clean energy alternatives. Given Google’s avowed sensitivity on this issue, investing in wind turbines in North Dakota makes good public relations sense.

However, it is usually the company’s philanthropic arm, Google.org, that handles such good-citizen initiatives. Thus the unprecedented move to make a first-time direct investment into NextEra Energy suggests that Google is expecting something further.

It seems logical to assume that the company’s motivation also involves saving money by slashing its dependence on coal-fired generators. After all, when your electric bills approach that of a small country, it’s hard not to jump on a company that could potentially produce enough power to light up 55,000 homes.

But if this is, in part, an exercise in cost-cutting, Google made a big mistake: it chose the wrong renewable energy.

Wind Farms vs. Geothermal Power

The main problem with wind farms: they don’t work when it’s not windy.

But that’s not all. Wind energy is plagued by high capital costs, a weak power transmission system, and low output, making its success heavily dependent on government subsidies. Load factors for wind energy – that is, the difference between how much power a generator can produce and how much it actually produces, which determines how much money a utility will make – are also quite low. The large physical footprint – the amount of land required to build wind farms – is another downside, as is the threat they pose to birds and the noise pollution they generate.

Add this all up and you’ve got the biggest loser when it comes to going green. In reality, the best renewable energy bet Google could make, especially in the United States, is on geothermal. Leaving everything else aside, geothermal beats wind energy on the most important factor: it is not dependent on weather. That means there is no need for backup power generation facilities, something wind farms must have for the days when the turbines won’t turn. Nor are government subsidies absolutely necessary for geothermal energy; they’re more of an added bonus. And geothermal power plants require the least amount of land: they can hum away contentedly even in the middle of farmland or a park.

Geothermal also wins on the numbers, with the highest load factor of all renewable energies and the biggest profit margin. Take a look at the cost breakdown of renewable generating technologies in the U.S. – it’s clear that geothermal is miles ahead:

Generating Technology* Load Factors Revenues per plant (US$0.10/kWh electricity) Costs of Operations** (US$) Profit From Operations (US$) Capital Costs 2009
(US$ per KWH)
Geothermal 90% $39,420,000.00 $8,416,500 $31,003,500 $1,749.00
Hydroelectricity 45% $19,710,000.00 $696,500 $19,013,500 $2,900.00
Wind – Onshore 25% $10,950,000.00 $1,549,000 $9,401,000 $1,966.00
Wind – Offshore 40% $17,520,000.00 $4,346,000 $13,174,000 $3,937.00
Biomass 90% $39,420,000.00 $30,336,620 $9,083,380 $3,849.00
Photovoltaic 25% $10,950,000.00 $597,000 $10,353,000 $6,171.00
Solar – Thermal 15% $6,570,000.00 $2,902,500 $3,667,500 $5,132.00

* Numbers are on a comparable per-plant basis   ** Costs are exclusive of subsidies.

Once Bitten, Twice Shy

Perhaps the reason Google decided to go with wind energy this time is because it gave geothermal a chance in the past. Two years ago, through Google.org, the company became the biggest investor in enhanced geothermal research, beating even the United States government. Unfortunately, that time around, Google picked the wrong company.

Google invested US$6.25 million into AltaRock Energy in August 2008, to help the company make a success of its promising Geysers project in northern California. AltaRock was using the latest technology – Enhanced Geothermal Systems (EGS) – in an attempt to harness some of the energy locked far beneath the earth’s surface. As Google discovered, though, making a sound investment is not as simple as picking a company just because it has a great project location and the finest in tech. A host of pitfalls faces any geothermal developer – including inexperienced crews, insufficient financial backing, and the lack of a good power purchasing agreement.

But most formidable of all are the challenges of very deep drilling. While EGS represents a breakthrough, it’s still new, and it’s tricky to use. To properly exploit its potential, companies need to learn how to drill that deep, and to do so despite the hot corrosive fluids and unfriendly intervening layers of rock that can ruin a well in short order. And as if that weren’t enough, users have to work extra cautiously. Geothermal activity is generally found around seismic fault lines, and fracturing deep rocks using hydraulic pressure has linked EGS to earthquakes.

As AltaRock Energy (and its investors) found out, it’s going to take more than just fat corporate and government checks and tweaks to conventional techniques for EGS projects to work. The Geysers project came to an abrupt halt just over a year after drilling began. Barely a third of the well’s planned 12,000 ft depth had been reached before drillers encountered a layer of fibrous rock that caused the holes to collapse.

Getting on the (Right) Green Bandwagon

Renewable energy is essentially still in its infancy, with plenty of barriers to surmount. At the same time, there’s no mistaking politicians’ growing desire to climb onto the bandwagon. Which means more and more companies are jumping at the chance to join in. But this is still relatively unexplored territory, and the market has some hard lessons yet to teach. Not every company… or idea… is cut out for this.

It would be wrong to say wind energy doesn’t have a future, because it does – a very distant and windy one. One that won’t be materializing anytime soon, at least not until the capital costs of wind development drop and transmission techniques improve.

Geothermal isn’t easy. The Geysers failure demonstrates that. But it’s proven, it’s cost effective, and it runs 24/7… so for now, it’s our favorite renewable energy.

Our research is focused on finding the best geothermal companies out there and, because Google is our favourite search engine, we’ll be happy to share that research with CEO Eric Schmidt and his band of merry men. So come on Google, feel lucky and click here – we’ll give you a free three-month trial with our Energy newsletter, including our #1 geothermal recommendation.

Not just for Google, you too can get access to Casey’s Energy Report today and start profiting from the green energy movement, as well as from oil, gas, and other energy trends. Start your 3 month risk free trial today.

Will Shale Gas Production Save Europe From Gazprom?

The latest buzzword on investors’ lips is shale, and it’s everywhere. Shale gas production is rapidly growing, and the domino effect of unconventional gas development on the global energy market is staggering.
North America has already seen the stampede of companies staking their territories and is now in the next phase: consolidation. However, buying into the American industry giants now, where even a major strike creates only a blip in share price, is like catching a ship that’s left the harbor.

Shale by the Pail: Europe Shakes Its Fist at Russian Hegemony

By Marin Katusa, Senior Market Strategist, Casey’s Energy Report

The latest buzzword on investors’ lips is shale, and it’s everywhere. Shale gas production is rapidly growing, and the domino effect of unconventional gas development on the global energy market is staggering.

North America has already seen the stampede of companies staking their territories and is now in the next phase: consolidation. However, buying into the American industry giants now, where even a major strike creates only a blip in share price, is like catching a ship that’s left the harbor.

But at Casey Research, we wouldn’t advise you to despair just yet, because the next big opportunity is just over the horizon. Coming up next – the basins of Europe.

The new techniques in drilling and well completion have transformed this formerly unprofitable source into a gold mine. Add that to the success that shale gas has enjoyed in North America, and you see why shale gas is creating a stir and intrigue throughout Europe.

Possibilities for shale gas production in Europe are endless – the American Association for Petroleum Geologists estimate a total resource of 510 trillion cubic feet (enough to power 27 European countries for over 30 years) of unconventional gas for Western Europe alone – and the rewards for investors in the right place could be huge.

In addition, unlike the United States, where major gas companies started snatching up land and smaller companies as shale gas became more popular, Europe’s shale market is still in its infancy. This puts the junior and smaller companies on the same playing field as the biggest players.

If commercial amounts of gas are found on a junior company’s land, it’s not inconceivable that its share price will multiply by ten. At the very least.

Taking on the Bear

But the main attraction of shale gas in Europe, and what gives it government support across the board, is the increasing urge to break the stranglehold of the Russian gas giant Gazprom. Almost all of Europe is heavily dependent on the state-controlled Gazprom for the majority of their gas supply. Gazprom’s tap-twisting of Ukraine’s prices, through which flows almost 80% of Europe’s gas, has made it clear that Russia has a big stick and it is not afraid to use it.

reliance-on-gazprom-as-a-percentage-of-consumption

With the installation of a pro-Moscow president in Kiev, Europe’s interest in a non-Russian source of gas has escalated, and should a U.S.-style shale phenomenon turn up in Europe, the energy landscape could drastically change.

Knowing Your Enemy: The Other Side of the Story

That is not to say that there aren’t any challenges facing the companies. The lack of equipment in Europe – 20 fracturing sets vs. 2,000 in North America – is a major obstacle and at millions of dollars each, companies aren’t exactly falling over fracturing sets.

Then there is the chance that the rush for land will lead to overstaking of territories, with more than one company claiming a piece of land. This will invariably lead to quarrels, even legal battles, which would delay exploration and create a mess for companies and shareholders alike. And after all this, no two shale basins are the same, and techniques that work on one may not translate to the other.

So companies looking for shale gas in Europe in largely unexplored regions face significant risks – the initial production rate, its sustainability, and costs of the well are all unknowns… and that’s precisely what makes it so exciting.

What Would You Do With a 670% Return?

Shale gas is the hot topic in Europe today, and we knew this would happen back in 2007. Our subscribers bought one 25-cent stock, then sold it at $1.80, netting a quick gain of almost 700%.

With the huge potential just waiting to be explored, investors need to have their ears on the ground to know about the “me too” companies, the ones that will hit the payload. For now, the watchwords are “oil shale in new markets.”

Casey’s Energy Report has its finger on the pulse of the world’s most exciting energy plays… and its readers are the first to know which companies have the equipment, the management, the property and the expertise needed to make the big returns in oil shale.

At Casey Research, we know the sector better than others, and we know who is strong and who is weak. Don’t miss out on the incredible opportunities that await investors in oil shale – subscribe to Casey’s Energy Report today with a generous three-month, no-risk, money-back guarantee. Details here.

Is Coal A Good Investment Opportunity?

Imagine the price of gold jumping to $1,500 overnight… what would that do to the price of junior mining companies? That’s what just happened to the price of coal – it jumped 38% in one day!

Coal is dirty, it’s dusty, and it sends environmentalists into a tizzy. It’s also the most rapidly growing fuel source in the world, it’s broadly distributed with almost 70 countries having economically recoverable resources, and the energy found in it still exceeds that in all other fossil fuels combined.

Coal made the headlines again with some very tragic mine disasters, but the bottom line is that whether Obama wants to kill coal or not, lots of United States citizens and businesses depend on electricity generated from coal.

Let’s remember too that Bill Clinton locked up some of the cleanest burning coal in the world and made it untouchable for use.

Casey’s Energy Report is one investment newsletter not afraid to tackle a not-so-politically correct topic.

Coal: The Contrarian’s Investment

By Joe Hung, Editor, Casey’s Energy Report

Imagine the price of gold jumping to $1,500 overnight… what would that do to the price of junior mining companies? That’s what just happened to the price of coal – it jumped 38% in one day!

Coal is dirty, it’s dusty, and it sends environmentalists into a tizzy. It’s also the most rapidly growing fuel source in the world, it’s broadly distributed with almost 70 countries having economically recoverable resources, and the energy found in it still exceeds that in all other fossil fuels combined.

Whether you love it or hate it, coal will be playing the most important role in global energy supply over the next 50 years – and it is the focused investor who stands to profit from this.

As far as energy prices go, coal has historically been lower and less volatile than oil and gas. For developing nations, this makes coal a first pick as an energy source, and combined with considerable deposits, it is simply the cheapest and most convenient thing around. This isn’t to say it’s not important for the rest of the world: in the United States, almost 50% of all electricity generated and 90% of the steel production is fired by coal.

electricity generation in the united states

The King’s Coal – Better Than Gold?

Where it gets really interesting is when we look at the demand for thermal coal (coal used to generate electricity) from the emerging Asian markets. With looser environmental concerns, the emissions cap threat that is dogging producers in the United States and, to a lesser extent, Canada, is not quite as real here.

India is seeing rising demand even as coal resources shrink, while China consumes almost half of the world’s production of coal each year. With a rapidly expanding industrial sector that needs constant fueling, and cleaner alternatives still too expensive, China and India are out shopping… and undeveloped coal resources from Mozambique to Canada are the hot items. Which makes the companies holding on to these assets prime targets for takeovers and joint ventures.

Adding the sparkle to this rather lucrative picture is that the European and South American companies that were dependent on Asian coal exports are now looking towards North America for exports.

coal consumption in china by sector

Then there is metallurgical coal. Known more widely as coking coal, it is essential in refining iron ore and the production of steel, and carries none of the environmental stigma that comes with thermal coal. Nor is it as abundant as thermal coal – only a relatively narrow range of coal rank and compositions make good coking coals – and thus demands a much higher price. Any industrialized nation has a high demand for steel, and with housing booms and rapid infrastructure development, Japan, China, India, and Korea (to name a few countries) are desperate seeking to fuel their growing appetite.

Dirty Your Hands for a Clean Profit

With the demand for thermal and coking coals becoming red-hot in the strong Asian markets, the team at Casey’s Energy Report knows coal is the invisible bull market.

In 2009, China’s total coal imports tripled, reaching 125 million tonnes, and last month it signed yet another multi-billion coal supply contract. India’s growing negative coal balance saw a record-breaking 80 million tonnes of coal imported last year – and that number is set to rise for 2010. The global energy market is set, and the profits are there for the taking.

The Casey Research Energy Team has been watching this sector for over two years now, and our subscribers have benefited from a 38% spike in the price of coal in a single day. We know which junior companies combine excellent cash flow with knowledgeable management teams to use an investor’s money best to advance projects. As a subscriber to Casey’s Energy Report, you will receive expert advice on how to play a truly undervalued energy sector… and win. Click here for more.

Energy Independence – Does Obama Equal Hope?

Is President Obama’s goal for the United States Energy Independence or just more political pork for people like Al Gore and job losses for the coal mines he wants to shut down?

Obama feels government intervention in the form of tax credits and tax penalties is a “market based” approach. Any economics 101 student knows otherwise.

Charles Brant has some evidence indicating that energy independence, if it ever comes for the United States, will not be brought on by team Obama.

Will Obama Destroy Any Hope of U.S. Energy Independence?

By Charles S. Brant, Energy Correspondent, Casey Research
The U.S. consumes nearly three times the amount of oil that it produces domestically on a daily basis. How can this statistic get any worse, you might ask?

Imagine in 2010 the Obama administration persuades Congress to pass a budget that results in a reduction of domestic oil production by 10% – 20%, making the supply/demand imbalance even more lopsided. Foreign oil companies will gain a distinct advantage over American domestic operators as an unintended consequence of these proposals.

Sound farfetched?It’s closer to reality than you may think… If it comes to pass, it will likely be the biggest structural change in the U.S. domestic oil and gas industry in decades and have far-reaching implications for investors and for the entire country.


In early 2009, the Obama administration proposed to eliminate significant tax incentives for the oil and gas industry. These tax benefits were put in place decades ago to incentivize oil and gas producers to develop domestic sources of energy, while recognizing that oil and gas exploration entailed special risks. Two of the proposed repeals with the most potential impact relate to what the industry refers to as “percentage depletion” as well as “intangible drilling costs” (IDC).

Tax incentives explained

The first proposal involves eliminating the deduction for percentage depletion. Currently, the tax code allows small oil and gas producers to choose between two different tax deductions,  percentage depletion or cost depletion (Big Oil’s ability to use percentage depletion was severely limited years ago).

Percentage depletion allows a tax deduction of 15% of the annual gross revenue of a well, continuing as long as the well produces and even after 100% of the costs have been recovered. On the other hand, cost depletion is calculated as the amount of oil or gas produced annually as a percentage of the total reserves of the reservoir. This deduction ceases when 100% of costs have been recovered (after which the producer may switch to percentage depletion).

From a practical standpoint, this means many small stakeholders, including investors and lessors who are not directly involved in the operations of the wells, will lose their ability to deduct depletion altogether, putting them at a significant disadvantage to their larger competitors.

And cost depletion is pretty much out of the question for most small stakeholders, as it’s extremely difficult for them to calculate. Small stakeholders in wells often aren’t entitled to the proprietary reservoir data developed by the operator of the well, which is necessary to calculate cost depletion. While the operators do disclose reservoir data in their annual reports, they rarely contain enough detail for a small stakeholder to locate information relating to a small field or well in which the stakeholder has an interest. Oil and gas stakeholders – such as individual royalty owners, royalty trust investors, and landowners, who all benefit from leasing land to oil and gas explorers – will immediately see the value of their investment decrease while simultaneously paying more in taxes every year.

The other proposal relates to drilling costs. Under current rules, oil and gas producers can elect to deduct certain intangible costs related to the drilling and workover of wells, including labor, drilling fluids, and drilling rig time. By electing to deduct instead of capitalizing and amortizing expenses, explorers recoup their costs faster. If the Obama administration does away with intangible drilling costs, oil and gas producers will no longer be incentivized to reinvest in new drilling projects, and new exploration will decline.

Small oil and gas producers will also rethink their decisions to pursue riskier prospects if drilling incentives are reduced. The only projects that will be worthwhile to undertake will be the “sure win deals.” And if they do decide to drill, they won’t recoup their costs as quickly, which means they’ll be slower to start new projects. Without the tax incentives, marginal producing wells, which might otherwise be reworked and continue to produce for years, will be more likely to be plugged and abandoned.

So what if marginal wells are no longer subsidized? Taxpayers shouldn’t be supporting bad assets and small oil and gas companies that operate them.

That’s a fair point. But it’s significant to note that 85% of the total oil wells in the U.S. are marginal producers, and these wells account for approximately 10% of total oil production from the lower 48 states. For natural gas, marginal wells produce nearly 9% of the total. And it’s not just small companies operating these wells. These subsidies are deeply embedded in the economics of the U.S. independent oil and gas industry. Cutting the tax incentives will drastically change the industry. The chairman of the Independent Petroleum Association of America thinks these proposals will cost independent oil and gas producers over $30 billion.

Back in May 2009, when it came time to include the president’s proposals limiting oil and gas tax incentives in the FY2010 budget, cooler heads prevailed in Congress and the proposals were not enacted. However, you can bet that similar policies affecting the industry will be enacted sooner rather than later.

Profiting from the mayhem

All independent, non-integrated U.S. explorers and producers will be affected if these proposals become a reality. At first, profits of oil and gas producers across the board will decline precipitously, impacting companies’ bottom lines and hammering investor returns. Producers that primarily operate marginal wells will be forced to plug and abandon newly uneconomical wells as a result of the policy changes. Without cash flow to support high fixed costs and precarious balances sheets, these companies will quickly become distressed.

Next, oil services companies will suffer as their small and medium-sized customer bases shrivel up. Regardless of size, all exploration and production companies with significant exposure to U.S. oil and gas assets will get hurt.

It’s also almost guaranteed the market will overreact and punish any U.S. company that has anything to do with oil and gas, whether or not it’s fundamentally justified. However, once the initial panic subsides, expect to find some screaming bargains among the surviving companies.

Oil and gas companies with conservative balance sheets, diversified assets outside of the U.S., spare cash, and opportunistic management will have a heyday picking up quality assets at fire sale prices. The trick is to identify the companies that will survive the turmoil and be able to capitalize on their competitors’ misfortune. Initially these strong companies will suffer stock declines along with every other oil and gas company. But they will recover quickly, and as they acquire new assets at attractive prices, their growth and profitability will be better than before. The window of opportunity to get into these stocks at bargain prices will be brief, as the market will quickly correct and the value will disappear.

Big Oil identified the United States as a hostile political environment years ago and has moved most of its production overseas, so they’re less likely to be negatively affected by these changes. However, bargain prices will be too tempting for these giants to stay on the sidelines. They’ll wade into the fray in a big way, picking up great assets even though it means they’ll be subjected to the stifling regulatory environment that comes with doing business in America.

Energy prices across the board will explode upwards and stay high until the production void left by oil and gas can be replaced by renewable energies, nuclear, or coal. The coming energy crisis will present you with plenty of opportunities to profit if your portfolio is correctly positioned.

Picking the best of the best oil and gas explorers is the forte of Marin Katusa and his team at Casey’s Energy Report. Thanks to due diligence, a secret mathematical formula, and a vast network of industry insiders, every single one of Marin’s most recent 19 stock picks was a winner… and number 20 is in the making. Click here to learn more.

Make Money Investing In Canadian Oil Sands

The biggest economic shift of our time is under way.

Cheap and easy oil is gone for good. And given our addiction to low-cost oil, the results are about to put the squeeze on your pocket book.

Increasing prices will have a huge effect on every aspect of your life, from the price of your food, to how much you’ll pay at the gas pump, to the cost of heating and cooling your home.

Nearly everything in our lives revolves around oil.

One of the reasons the Canadian economy and the Canadian dollar are doing so well is that it is a commodity based country. One of those commodities is energy, and oil sands in particular.

Cheap oil is gone for good and with new technology, the oil sands of Alberta, Canada are becoming not only economic, but a rather hot topic.

That’s why I am happy to share this info from Marin Katusa of Casey’s Energy Report.

The Other Oil Play You Simply Can’t Ignore

By Marin Katusa, Senior Energy Strategist, Casey’s Energy Report

The biggest economic shift of our time is under way.

Cheap and easy oil is gone for good. And given our addiction to low-cost oil, the results are about to put the squeeze on your pocket book.

Increasing prices will have a huge effect on every aspect of your life, from the price of your food, to how much you’ll pay at the gas pump, to the cost of heating and cooling your home.

Nearly everything in our lives revolves around oil.

While demand for oil continues to grow, we are now coming to the realization that like all other resources, oil is finite and output is now in terminal decline.

This has the oil industry stuck on a treadmill, running faster just to stand still.

The Globe and Mail reports, “conventional oil supply (the type of low-cost fuel you can afford to burn)  has not grown since 2005, and may never grow again.”

The U.S. Department of Energy has concluded that 2009 will be the last year that oil production will keep up with consumption. And if the government is making this admission, it’s safe to say the situation is far more urgent.

On top of this, as the standard of living for people in developing and emerging countries  increases, so does their consumption of oil. A recent article in Reuters said that over 1.3 million vehicles were sold in China during the month of September alone, up 77.8% from the same time last year.

Trading bicycles for brand new oil-burning cars is a trend that is quickly gaining momentum.

And so, the question becomes: if demand is already outstripping supply, where will we find the oil needed to satisfy the billions of new consumers just coming online… protect our own lifestyle… and avoid a dangerous global tug-of-war over this dwindling precious resource?
As dire as this situation sounds, the truth is, we’re not running out of oil. Far from it in fact. What we are running out of is the supply of cheap, conventional oil we’ve grown accustomed to. And for investors, this has opened a whole new window of opportunity.

The solution for tomorrow’s growing demand will be solved by the industry’s other oil play — namely Canada’s massive oil-sand deposits.

The promising outlook for the Canadian oil sands is two-fold:

  1. the easy oil is not so easy anymore
  2. the cost of oil sands production has decreased because of the improvements in technology

And as for why I like Canada (and particularly Alberta) over other sources of oil sands, the answer is simple. Canada has the best upside for oil sands in the world, with ready-available infrastructure and a stable political system. Venezuela and Russia lack important criteria, infrastructure and political stability.

This chart from Statistics Canada tells an interesting tale. In 2008, investment in Alberta’s oil sands reached a record high of $19.2 billion, a 14% increase over 2007, even after oil prices fell below $34 per barrel. Now that prices are close to $80, development and research will only increase in this proven and reliable resource.

oil and gas investment in albertaAnother noteworthy plus for Canada is a change in the accounting principles, providing the majors with a more favorable financial uptick from the oil sands reserves. Within the next few years, this should offer a tremendous upside for the majors, providing excellent growth potential.

If you’re interested in learning more about the future of oil, and also which stocks I believe will have the best potential to capitalize on the coming increase in oil prices, now is the ideal time to sign up for my advisory service, Casey’s Energy Report. This publication is full of must have information for investors who want to make informed decisions.

Due to extraordinary response, we are extending our special year-end offer… for one week only.

Until January 31st you can get a 1-year subscription of Casey’s Energy Report for only $595 – that’s $400 off the regular retail price. Plus, as a special gift, you’ll receive 12 issues of Casey’s Extraordinary Technology – a $995 value – FREE of charge.

In the next year or two, the price of oil will be dramatically higher. That’s why there’s never been a better time to get on board with my favorite stocks and stake an early positioned in the explosively profitable oil sector. For more details, click here.