A Warning for Poland's Shale Gas Developers
I am leaving for Krakow, Poland, early this morning.
During this trip, I will present what we have learned thus far in North American shale gas development before a meeting organized by the Polish government and chaired by President Bronisław Komorowski.
What will take place in that room, however, is more than a simple exchange of data.
The Shale Gas Revolution Has Hit Eastern Europe
It began only a few years ago, in places like Texas, Arkansas, British Columbia, Alberta, and Pennsylvania… but the shale gas revolution is now sweeping the world.
To date, 142 basins and more than 680 shale plays have been discovered worldwide. In them are sitting a mind-boggling 6.6 quadrillion cubic feet of natural gas. Even if only 10% of that can be lifted, we are still looking at huge new reserves.
Europe has its fair share of these basins, with five major ones located in Poland alone. And that is the reason for the meetings this week.
The government in Warsaw is about to open up these shale plays to major investment.
Before they do so, however, the authorities must set regulations for drilling, determine what environmental impact will take place, weigh the potential economic benefits and problems, and discuss how this newfound energy wealth is going to change lives.
Turns out that's pretty much my job in Krakow; I will be advising on the policy challenges in each of these areas.
Still, they are not likely to expect my first comment…
The Start of an Energy Storage Breakthrough
Despite soft U.S. economic figures, market gyrations, and the debt ping-pong match going on between Europe and Washington, the American entrepreneurial spirit remains alive and well.
And I have proof.
A tiny upstart company based in Odessa, FL, just made a major move toward revolutionizing energy storage.
In the process, the cost of renewable energies – particularly solar and wind power – could come down dramatically, making them viable competitors in the energy marketplace.
The problem with renewable energy has always been the inability to store large amounts of what is generated – a shortcoming common to any production of electricity.
It's especially true for solar power, which is, of course, only available when the sun is out.
That's why the battery market has become the Holy Grail for the entire energy sector.
Analysts and investors focus on any small improvement in retaining power.
But there hasn't been anything like this before.
And it just might change the way we do, well, just about everything.
The Stuff of Science Fiction
Dais Analytic Corp. (OTC: DLYT) last week finally secured a patent for what it calls a "Nanoparticle Ultracapacitor." (As an indication of how new this area is, the company filed the patent more than five years ago!)
The device uses the company's proprietary nano-structured materials to create an energy storage mechanism projected to have great advantages – both in terms of performance and cost – over existing storage technologies.
The research universe in which this is taking place has been called the most important to emerge in generations.
This is no longer the stuff of science fiction. For well over a decade now, laboratories around the globe have been pushing the envelope in nanotechnology research.
Nanotechnology encompasses a broad range of research with potential applications in areas as diverse as human stem cell therapy, lighter alloys, smaller components of everything… in addition to more powerful lithium and other batteries.
Now here's where it starts to sound like something from Star Trek…
The Latest Development With Private Briefing's Mystery Energy Stock
In last Friday's Private Briefing, former hedge-fund manager Jack Barnes told subscribers about a U.S.-based energy company he believed could be a "high-risk/high-return" profit play.
Just a few days later, the head of a major overseas energy firm announced plans to partner up with the American company and the stock jumped more than 6%.
That's just the beginning, Barnes said.
A Cyclical Shift in Energy Prices Creates Opportunity for San Juan Basin Royalty Trust (NYSE: SJT)
If you're looking for higher yields than what the U.S. Treasury market, or for that matter your local bank's CD rates, are paying, San Juan Basin Royalty Trust (NYSE: SJT) is an interesting alternative source of cash flow.
Currently the company is yielding about 6.3% on an annualized basis. This yield is generated from the overriding royalties the trust owns on current natural gas production.
Additionally, the company is poised to profit from a seasonal shift in energy prices.
You see, San Juan Trust has the rights to 75% of the revenue generated by an oil-and-gas property owned by Burlington Resources Oil & Gas Company LP, a subsidiary of ConocoPhillips (NYSE: COP). It also has royalty interests in 119,000 net producing acres located in northwestern New Mexico's San Juan Basin.
The cash flow from these properties is returned to investors once the trust's costs and capital budgets are deducted.
This makes the company compelling to me as I review its mix of assets and yield, as well as the seasonality of natural gas at this point in the year. I love to buy yield that can appreciate in price and quantity, with a bull market in the out-of-favor underlying asset.
In simple terms, if natural gas goes up in value, so should the dividend rate paid per share of the trust. So investors will enjoy a double gain if the stock rises: One in share price, another in cash flow. This offers you a great way to play natural gas without using margin or futures.
Merger Mania Returns to Natural Gas
Today we're going out into the Moroccan desert to evaluate shale gas fields here. It's early morning, and I am now awaiting my "ride."
They tell me his name is Saad, which means "happiness" in Arabic. Seems a strange name for what I'm still hoping is a Jeep.
Nonetheless, I have a few moments before he shows up to reflect on my government meetings in the capital city of Rabat.
This is an impressive city, with large areas of greenery and beautiful gardens. It also boasts one of the largest palace grounds I have ever seen.
Our meetings dealt with setting the legislative and regulatory agenda for shale gas development in the country. Morocco has been exploiting shale oil for more than a decade, but the gas is new. And it's creating some problems for the existing Oil Law.
If all goes according to schedule, the first evaluation wells will be spud over the next few months. That means there is little time left, before drilling starts, to establish the production, environmental, and royalty/profit ground rules.
One thing, however, is already apparent – both here and elsewhere internationally: Having a known volume of gas in the ground is one thing; being able to provide the working structure necessary to exploit it is quite another.
Without Infrastructure, Field Development Will Languish
Yesterday I traveled some 1,250 kilometers round trip, between Agadir in the south and the capital city of Rabat (north of Casablanca).
It's a 16-hour train ride, all told. But the trip would have been much more difficult only a year ago. That's because the new 250-kilometer extension of the motorway between Agadir and Marrakech is barely one year old.
Looming Loss of Federal Incentives Darkens Future of Solar Power Stocks
The reduction or elimination of several federal energy subsidy programs later this year could further dim prospects for solar power stocks – bad news for a sector already in a months-long slump.
The goal of the programs, which include loan guarantees and grants, was to support the early stage growth of renewable energy companies until they became viable enough to attract conventional investors.
But several of the federal programs created as part of the 2009 stimulus package have expiration dates that assumed the economic woes of the recession would have eased by now.
Instead you have a solar power industry worried about what happens after the programs begin to expire – the first as soon as Sept. 30.
"Is the solar industry going to die if we lose these programs? No, but we're going to stall," Roger Efird, managing director of Suntech America, a subsidiary of Suntech Power Holdings Co. Ltd. (NYSE ADR: STP) told USA Today.
Helped by such programs, the solar industry grew 67% last year, but could see that growth flatten as cash-strapped governments both in the United States and Europe begin to cut back.
Click here to continue reading…
A Natural Gas Company Floating in Profits
Australia, like America, is awash in natural gas. But Australia's gas isn't conveniently located under terra firma, near existing pipelines. We have that luxury and advantage.
Most of the gas Down Under is in giant underwater deposits, located more than 100 miles from Australia's shores. Developing some of its largest fields, far from any landmass, has been a problem without a solution… until now.
This is an interesting opportunity for investors looking to capitalize on innovation in natural gas production outside of the United States.
The Death of Nuclear Power: The Five Global Energy Moves to Make Now
Nuclear power was gaining a lot of momentum prior to the terrible disaster at Japan's Fukushima powerplant in March.
But since then, atomic energy has come under increased scrutiny and once again drawn the ire of environmentalists who were just warming up to its carbon-free emissions.
The German government's decision to close all of its existing nuclear reactors by 2022 shows that this shift in sentiment is gaining traction. And it increases the likelihood that the nuclear-powerplant building boom that had seemed at hand will be set back.
Without a doubt, this new reality will lead to global energy shortages and much-higher energy costs.
But for us as investors, the real issue is this: Which sectors will step up to alleviate the shortfall resulting from the inevitable disappearance of nuclear power?
LNG Imports: We Predicted How Japan Would Ease its Energy Crisis
Just days after Money Morning columnist Peter Krauth predicted a global uptick in liquefied natural gas (LNG) demand because of the nuclear-powerplant disaster in Japan, experts predicted the Asian heavyweight would boost LNG imports by 50% to help ease the massive energy shortage the country now faces because of the tragedy.
Krauth is Money Morning's resident natural resources expert, and he also runs the "Global Resource Alert" advisory service. Late last month, in the special report "A Trillion Reasons to Bet Big on LNG," Krauth told Money Morning subscribers to take a close look at liquefied natural gas, predicting that Japan would seize upon LNG as a ready and plentiful partial solution to its increasingly serious energy-shortfall quagmire.
Japan relies on fuel imports for most of its energy needs. After the March 11 earthquake and subsequent powerplant accident ruined 20% of its nuclear power output, Japan has been forced to seek out other sources of electricity.
Coal Use in China Shines Light on Growth
International coal prices hit $124 per ton last week, the highest level in five months, as strong demand from reconstruction projects in Japan and reduced supply from flood-ravaged Australia have made coal supply tight.
The floods in Queensland, Australia cut the country's output of coal by 15%; other big coal producers such as Indonesia, South Africa and Colombia are experiencing similar production cuts due to floods of their own.
At the end of March, coal prices were 33% higher than a year ago, and earlier this month mining giant Xstrata PLC (PINK: XSRAF) inked a one-year deal with a Japanese utility at $130 per ton, effectively setting a floor under coal prices in the near-term. That's up from $98 per ton the company made in a similar deal a year ago.
Perhaps no country is more affected by this development than China.