Tag Archives: development
Biofuels Could Lead To Billions in New Capital Investments
Research firm finds new capital investments in biofuels could tally nearly $70 billion over next ten years Published: Jul 23, 2013 Though biofuels appear to be expanding more slowly than originally projected, they will soon grab a stronger foothold in global infrastructure, and may translate into $69 billion worth of new capital investments, says energy research firm Navigant. According to their latest research, the firm says even in the wake of slowing overall biofuels growth and a renewed interested in fossil fuel sources, the next wave in advanced biofuels is nearing commercialization and is expected to advance significantly. Projected revenue from biofuels production, Navigant says, could reach $7.6 billion by 2023. “Conventional ethanol, derived from corn starch, coarse grains, and sugarcane, is expected to remain the largest segment of biofuels over the next 10 years despite facing increased scrutiny as a viable long-term alternative to fossil-based liquid fuels,” says Mackinnon Lawrence, principal research analyst with Navigant Research. Research firm finds new capital investments in biofuels could tally nearly $70 billion over next ten years “The fastest growing segment in the industry, though, will be advanced biofuels such as advanced ethanol, biobutanol, and green diesel, which are moving beyond the pilot and demonstration scale at a handful of projects across the globe,” Lawrence adds. But supply and demand policies will play a critical role in the development of the biofuels market, Navigant points out. Specifically, the firm says targeted production is expected to surpass both obligatory and voluntary blending policies by 2019, assuming actual production will keep pace with current supply targets. “This imbalance is expected to have a significant impact on ethanol and biodiesel blending policies at the country level,” the research says. But Navigant also projects that policy makers could capitalize on greater supply and expand existing blending mandates to encourage greater integration of biofuels into the domestic fuel mix. Though 2019 is more than five years off, some analysts project the “blend wall” – or the point at which more biofuels are made than can be legally blended into fossil fuels – will arrive as soon as next year in the United States. In a February commentary, University of Illinois economists Scott Irwin and Darrel Good explained that in the U.S., policies such as the Renewable Fuels Standard will mandate that a certain amount of biofuels is produced, but the consumption has to increase to necessitate more investment and expansion in the industry. “It seems unlikely that E85 consumption could increase from around 100 million gallons today to a total of 5 billion gallons in 2015. This far exceeds the current E85 fueling infrastructure (around 600 million gallons per year),” the economists wrote, noting that “we are also skeptical that E15 consumption could increase anywhere near the needed 5 billion gallons by 2015 due to a variety of limitations.” Despite the uncertainty surrounding biofuels policy and the potential of the industry to grow, however, Good and Irwin note that EPA has the authority to publish an advanced ethanol mandate – similar to what Navigant’s research expects – thereby expanding existing biofuels policy and continuing with the RFS for the next several years. Continue reading
Sky’s The Limit – Aviation Biofuels About To Take Off?
By John Daly | Sun, 11 August 2013 Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist. The Free Oilprice.com Energy Intelligence Report gives you this and much more. Click here to find out more. For the past decade, commercial production of jet biofuel has become of major interest to international airlines. Renewable Jet A-1 biofuel has two alluring aspects. First, it is a “drop in” fuel – blended 50-50 with conventional Jet A-1 kerosene derived from hydrocarbons, it requires no special engine modifications. Secondly, as the world prepares to institute carbon emissions penalties, biofuel Jet A-1 can reduce commercial airliners’ carbon emissions by 80-85 percent. The eye of the needle for this sunny renewable biofuel future has been twofold. First, the cost – no one has yet been able to produce renewable Jet A-1 at a cost comparable to hydrocarbon Jet A-1. The second problem derives from the first, in that no one has yet been able to produce renewable Jet A-1 in commercial quantities at a competitive rate. But this might all be about to change. AltAir, a major player in the burgeoning biofuels market, has unveiled ambitious plans to provide United Airlines with at 15 million gallons over the next three years of renewable jet fuel from a retooled Los Angeles-based refinery . Needless to say, the development is being closely watched, as the AltAir project will be the first U.S. refinery capable of producing both diesel and drop-in replacements for petroleum-based jet fuels. United has collaborated with AltAir Fuels for the past five years and has agreed not only to the initial purchase, but an option to purchase more. And United scores a march on its competition, as on 5 August Air Transport World magazine named United Airlines the Eco-Aviation “Airline of the Year” Gold Winner by, the top award granted by ATW in its annual Eco-Aviation Awards. United Airlines chairman, president and chief executive officer Jeff Smisek gushed, “This is a great honor for United and I’m proud of the work that my co-workers do every day to be responsible stewards for the environment. Our initiatives are paying off as we reduce United’s environmental footprint and work together toward a sustainable future for our company and our industry. United managing director for global environmental affairs and sustainability Jimmy Samartzis added, “This is a great day for United and the aviation biofuels industry. This agreement underscores United’s efforts to be a leader in alternative fuels as well as our efforts to lead commercial aviation as an environmentally responsible company. We’re excited about what this strategic partnership with AltAir means for United, the industry, the environment, and for our customers.” PR fluff aside, United has solidly put its capital behind its efforts to retool its aircrafts’ fuel consumption. United currently has more than 290 fuel-efficient aircraft on order and was the first U.S. carrier to purchase Boeing’s fuel efficient 787 Dreamliner, which cuts fuel consumption by and estimated 20 percent improvement. Deepening its commitment, United recently increased its order for Boeing 787 Dreamliners to 65 aircraft. Not limiting itself to U.S. domestic aircraft, United has also ordered 35 Airbus A350-1000s, which have reduced fuel consumption rates similar to Boeing 787 Dreamliners. Accordingly, United believes that it will meet its 2013 goal to reduce fuel usage by 85 million gallons and associated carbon emissions by 828,750 metric tons. The attention will now switch to AltAir – can it deliver? Rather than build a new refinery, the company intends to retrofit part of an existing petroleum refinery into an advanced biofuel refinery near Los Angeles. With AltAir’s retrofits, the Los Angeles refinery is set to become the first commercial-scale producer of renewable jet fuel in the world. AltAir CEO Tom Todaro has no doubts about the viability of the project, telling journalists, “United Airlines has been a strategic partner for several years as we work to establish our biofuel facility . We cannot overestimate how important this milestone is for the commercialization of sustainable aviation biofuels, and we at AltAir are proud that United is our first customer.” And AltAir is dreaming big, expecting to expand the refinery’s capacity eventually to produce 30 million gallons of advanced biofuels and chemicals after retrofits are complete. Feedstock for the facility? Non-edible natural oils and agricultural wastes. Can AltAir find sufficient natural oils and agricultural wastes in LA? Can they deliver the promised volumes of fuel? Watch this space. By. John C.K. Daly of Oilprice.com Continue reading
Put Politics Aside, Invest In This South American Agriculture Stock
By GARRETT BALDWIN , Economist, Money Morning July 16, 2013 Three weeks ago we mentioned that Morgan Stanley announced that it will close the agriculture segment of its commodities business. The move was just another sign of hedge funds and banks electing to shift away from soft commodities, and place greater emphasis on the oil and gas markets. Over the last two years, a number of banks have struggled in the agricultural sector. As they continue to show impatience for the long-term, many on Wall Street have picked up the ball and gone home. Still, from our research and conversations with investors like Jim Rogers, the agricultural sector provides one of the best investment opportunities over the long term. With demand outpacing supply and global food stocks hovering near record lows, the fundamentals are clear. It’s is why Rogers told Money Morning this year “the price of agriculture has to go up a lot, or we’re not going to have any food at any price.” But there’s another important investor out there who is long South American agriculture. And he’s using an entirely different strategy than the big banks in New York. The investor is George Soros, Jim Rogers’ former co-founder of the Quantum Fund. Even though many Money Morning readers might not agree with Soros’ politics, there’s one thing you can’t deny: Like Rogers, he too is a legendary investor. And sometimes you have to put politics aside and find the right investment. And sure enough, he’s long one stock that is ripe given the need for more food development in South America. More than One Way to Invest Wall Street banks are pulling out of the agricultural sector for two reasons: One, the short-term focus on profitability clouds their ability to see the long-term value of agricultural holdings. Second, soft commodities are a very difficult to master. There are many different ways to invest in agriculture, but most are subject to short-term volatility given the global supply and demand picture, and the factors impacting prices such as planting cycles, weather variations, energy and shipping costs, and political uncertainty. While animal technology continues to be our favorite way to invest in the sector, the Soros strategy has centered on a valuable investment vehicle that remains popular with hedge funds around the world: farmland. Farmland continues to rise in price as investors attempt to cash in on the growing need for food in a world that will have nine billion mouths to feed in 2050. And it’s a solid hedge against rising prices. Over the past 70 years, farmland real estate appreciation has easily outpaced the annual inflation rate. But farmland isn’t just spiking in price here in the United States. It’s also becoming a very hot commodity down in South America and portions of Africa. And one stock provides an opportunity to get in on the development and ownership of farmland south of the equator. Land Opportunities Abound in South America Adecoagro SA (NYSE:AGRO) is a Luxembourg-based company with approximately 725,000 acres in Brazil, Argentina and Uruguay. Soros Fund Management controls more than a $200 million stake in the company. The company is engaged in the purchase, development, operations and sales of farmland in these three nations. In addition, Adecoagro produces corn, soybeans, wheat, rice, and sugarcane (to provide to Brazil’s booming ethanol sector). The company also engages in the highly competitive meat and dairy sectors. Given that arable land is one of the safest long-term investments out there, AGRO provides a much sought-after way to invest in three of the world’s most important agricultural nations. Investors simply need to be willing to park capital into farmland over the long-term and let the global fundamentals catch up over time. Of course, there are risks to investing in a company like Adecoagro, given its exposure to foreign markets. The stock has been deemed undervalued by multiple analysts given the location of most of its holdings. The principle location of its land is in Argentina, a country rife with economic uncertainty, political turbulence, and rampant inflation. As we’ve discussed several times here at Money Morning, Argentina is one of the worst economies in the world when it comes to economic freedom and property rights. The reality, however, is that Argentina really has nowhere to go but up, as the general business population, and particularly the agricultural sector, has grown tired of progressive politics and unfavorable business environments. But concerns have also centered on the company’s holdings in Brazil, where foreign property ownership is currently a topic of national outrage, and its ethanol development is subject to heavy volatility. Perhaps the biggest threat that few tend to consider is the quality of the farmland in South America. Not all farmland is like rural Indiana. In fact, certain areas of Brazil require as much as six times the amount of water as a Midwestern farm would need in order to grow crops. Adecoagro can counter the latter threat by avoiding land holdings in the lower-quality regions in the southern portion of Brazil where erosion levels are high in the soil and water retention is very low. Currently, Adecoagro uses nearly 70% of its land for agricultural operations, while the balance is currently under development or being held given its long-term appreciation opportunity. For investors looking to get into the global farmland boom, Adecroagro is a stock sitting below $10 that provides plenty of upside, particularly given the confidence shown by hedge funds like Soros Fund Management. Continue reading
