Fascinating Political and Energy Read by Oilprice.com

Republished for your information (with the kind permission of James Stafford of Oilprice.com) is the always fascinating Oilprice.com newsletter — complete with an informative article about the recent scientific, political and economic progress of algae-sourced biofuel in the United States.

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John Brian Shannon

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OIL PRICE.com

Dear OilPrice Reader,

Energy Intelligence Report                   Newsletter #130  /  4th August 2012

Like Oilprice.com Intelligence Report: Algae Growing on Investors as Technology Advances on Facebook

Greetings from London.It’s been an interesting couple of weeks in the energy world with yo-yoing oil prices, increasing geopolitical tensions, India’s power cut and a host of other topics keeping our editorial team on their toes.We have put together an interesting investment report for you below that takes a look at the advances made in the algae biofuels sector and why recent technical advances and strategic partnerships have made this an area investors should start paying attention to.But before we get to that here is what’s been happening in the energy world:This week was a busy one for US energy policy, and renewable energy tax credits were the focus of legislative battles and Obama-Romney campaign rhetoric. Republicans in the Senate dealt Romney a blow when the Senate Finance Committee passed a one-year extension of the wind energy tax credit. The deciding factor was when Republican Senator Charles E. Grassley of Iowa—where wind energy creates thousands of jobs—threatened to side with the Democrats if Team Romney insisted on removing the $3.3 million tax break.Also included in the tax break package is a proposal that would boost development in the biofuels sector and include algae among the lists of biomass for biofuels production for the first time. On Wednesday, the Senate Finance Committee submitted a proposal to extend the $1/gallon biodiesel tax credit and to include algae, extending the tax credit for another year after its expiration on 31 December 2013 and retroactively to 31 December 2011.The tax package passed the committee on Thursday in a 19-5 vote. When the Senate returns in September, this will be a top legislative priority.Solyndra was also a major feature of this week’s DC energy news, with the release of a House GOP report on the government’s backing of the failed solar firm. The report details what it calls a “cautionary tale” of political pressure and misguided policy that cost taxpayers half a billion dollars. The report, the result of an 18-month investigation, failed to find concrete evidence to support GOP allegations that Obama administration officials funded Solyndra in return for campaign donations.Elsewhere in the world, the geopolitical energy dynamic that is culminating in a fast-moving showdown between the Iraqi central government and the Kurdistan Regional Government (KRG) in northern Iraq deserves particular attention. The mainstream media is just now catching up to this development, which Oilprice.com has covered extensively over the past couple of months. Notably, since ExxonMobil provoked the ire of Baghdad in October by cutting a deal with the KRG and bypassing the Iraqi central government, the past couple of months have seen this trend increase greatly in momentum, with Chevron, Total and Gazprom Neft following in ExxonMobil’s footsteps.This is the number one geopolitical game to monitor at present. Baghdad is attempting to regain the advantage by banning oil companies working with the KRG from involvement in Iraqi national oil ministry deals. So far, this threat has not proved a sufficient deterrent. This is a dangerous geopolitical game on the part of the oil majors and particularly the US and Turkey, which are supporting this maneuvering, the implications of which will have long-term consequences.That’s it for the news this week.I wanted to take the opportunity to mention our forum again which is growing very quickly with more industry professionals, investors, traders and energy news enthusiasts joining on a daily basis. Please do take a moment to stop by and join in the conversation. Click here to visit the forum.I hope you enjoy this week’s report below and have a great weekend.James Stafford
Editor, Oilprice.com
Twitter: http://twitter.com/oilandenergy
Discuss: http://oilprice.com/discussion

Algae Growing on Investors as Technology Advances

It’s been a long and challenging road, but algae biofuels are finally at the point where investors should take notice as technology advances and variety of strategic partnerships—from oil and gas to power utilities, agricultural processes and chemical plants–are replacing subsidies to eventually make the industry commercially viable on its own merits.

Algae produces some carbon dioxide when burned, but it takes the same carbon dioxide in to grow. So when algae farms grow massive quantities to be turned into biofuels, the end result is that they actually suck greenhouse gas out of the air. It also has other advantages over biofuels from corn or soybeans, in that it does not require soil or fresh water to grow. It also has the potential to produce more energy per hectare than any land crop.

Currently, high cost of capital and operations limit bio-based materials and chemicals to a few facilities located where corn and cane are plentiful and cheap. Algae can change that.

All that’s been missing is the necessary technology to harness mass production.

A recent study put out by the respected energy research firm SBI predicts a compound annual growth rate of 43.1% and a $1.6 billion market in 2015 for algae biofuels. That is double digit growth for the emerging industry, which is receiving a sizable development boost as strategic partnerships are gradually replacing the millions in loans from the US Department of Energy since 2009.

SBI’s “Algae Biofuels Technologies: Global Market and Product Trends 2010-2015” specifically points out that the production of algae for biofuels is the “most viable and attractive” of biofuels because of its high yield per acre and minimum environmental impact.

“Strategic partnerships from ExxonMobil, Chevron, BP, Dow Chemical, Desmet Ballestra and many others will drive the investment needed to successfully commercialise algae biofuels. Private investment and venture capital will also provide funding through 2015,” according to SBI.

One particular area of promising investment is the technology being developed to harness algae’s potential.

One example is the US Department of Energy’s Idaho National Labs (INL) purchase order of two test-scale units for dewatering algae and removing contaminants from frack water from Origin Oil, Inc. The significance of this is that it boosts algae technological development as Origin Oil focuses both on cleantech processes for oil and gas and for harvesting algae.

INL is optimistic that the new equipment would significantly reduce the algal dewatering barrier, which in turn would allow for the dewatering of larger quantities of algae for use in the production of feedstocks blended from algae biomass. A key problem contributing to costs is the quick evaporation of pond water, which is expensive to continually replenish.

This is a strategic partnership between OriginOil and the INL, via a Cooperative Research and Development Agreement (CRADA). Specifically, OriginOil’s Algae Appliance Model 4 can continuously concentrate up to four liters of algae production per minute. OriginOil also has a joint venture in Ennesys, in Paris, where it is testing algae in urban energy generation also using the Algae Appliance Model 4.

Another boost to the industry is the 2 August Senate Finance Committee mark-up of the Family and Business Tax Cut Certainty Act of 2012, which contained a proposal to extend the $1/gallon biodiesel tax credit and make algae eligible for the credit. The proposal extends the tax credit for another year after it expires on 31 December 2013 and is effective retroactively to 31 December 2011. In addition, the algae tax credit will apply to producers who sell their fuel to refineries for further processing, rather than only to producers selling for end use as a fuel. This is a significant point and a significant victory for the biofuels industry.

There are plenty of naysayers, particularly when it comes to the current cost of using algae in biofuels production. According to Lux Research, right now algae is a “cost-intensive loser”. Lux analysts claim that algae cultivation yields a 48% loss because of the high capital costs for growing algae at an industrial scale. They put the price at about $202,000 per hectare.

The costs are high for the time being, but we view investment from a development perspective and we see forward movement in this emerging industry and are particularly upbeat about the shift away from energy department loans to strategic partnerships that will work to tap the vast potential of algae for biofuels production and render it commercially viable. Getting in now on the technology will translate into an advantage.

Check out the 6th Annual Algae Biomass Summit in Denver, Colorado from 24-27 September for more insight into technological advances and how innovators are working to unlock the full potential of algae as a feedstock for fuel, food and other co-products.

By. Oilprice.com analysts

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