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Weekly Energy Update: Why Carbon Capture is a Winning Gamble

The ‘war on coal’ and the $8 billion loan-guarantee appeasement; why we think carbon capture is a winning gamble; coup in Egypt—again; and the latest ‘inside’ offerings for this week’s premium newsletter …

It’s been a VERY busy couple of weeks in Washington DC, most of it either directly or indirectly stemming from Obama’s climate strategy, which is still being tinkered with as the reactions pour in (comments welcome through September).

Last week, the big talk was about Keystone XL—which no one’s quite figured out yet—but this week it’s all about coal, and Obama’s proposed $8 billion federal loan-guarantee program to help companies reduce their carbon dioxide emissions (largely through a reduction in the use of coal by power plants). 

Oil and gas companies will love this plan because it will add to slumping natural gas demand (amid over supply) at the expense of coal.

"These investments will play a critical role in accelerating the introduction of low-carbon fossil fuel technologies into the marketplace and reduce greenhouse gas pollution. Fossil fuels currently provide more than 80 percent of our energy, and adopting technologies to use them cleanly and more efficiently is critical to our all-of-the-above approach," according to Obama.

The coal industry is panicking, and pointing out that the proposal will cost a lot of jobs and make manufacturing more expensive.

Eligible for this $8 billion in aid are proposals that 1) reduce oil and gas drilling emissions; 2) energy-efficiency schemes like capturing waste heat from industrial facilities; 3) carbon capture; clean coal projects (like coal gasification). But these project backers also need to come up with credit subsidy fees to protect the government against default.

Related article: Nuclear Energy Innovation is Vital for Slowing Climate Change

So while the $8 billion loan-guarantee is most likely intended to soften the blow of the emission reductions strategy, detractors are harping on the fact that these loans would be for those producing technologies that could capture and store carbon dioxide or avoid producing it altogether. These detractors say carbon capture is not economically feasible, and seem to think it’s not going to be in the foreseeable future. We disagree. So does the state of Texas.

Texas is THE leader in CO2 for enhanced oil recovery (EOR). The state gets up to 20% of its daily oil production from carbon-assisted EOR. In May, the biggest carbon capture project in the US went on line in Port Arthur, Texas, capturing carbon dioxide from industrial operations and using that carbon for EOR and securely storing it underground. It is unprecedented and the technology is breakthrough. The $431 million project was boosted by a $284 million investment by the US Department of Energy. This is the carbon capture litmus test, and the stakes are high.

There is also a carbon capture facility in Geismar, Louisiana, that can handle about 20 million cubic feet per day. It’s certainly not on the scale of the Port Arthur project, but it’s also been successful. And again, this provides another flow of CO2 for EOR.  Further afield, we have a new carbon capture facility coming on line in 2015 in Mississippi.

Where there is carbon capture and a constant flow of CO2 for EOR, the companies at the receiving end of this pipeline will see production increase, and this will in turn render carbon capture not only economically feasible, but a winning gamble all the way around (especially for those companies on the receiving end of these CO2 pipelines).

Abroad this week, it’s all about Egypt again, where the military on 3 July made good on a 48-hour ultimatum for the Muslim Brotherhood-led government of President Morsi to heed demonstrators calls for him to step down or be at the wrong end of a military coup. The ultimatum was issued on 1 July, and on 3 July, the military took control and ousted a defiant Morsi, exactly 48 hours after the ultimatum was issued.

Everyone seems to be predicting a horrific security scenario for Egypt now, but the truth is, Egypt’s military is thoroughly entrenched in the Egyptian public and controls a significant portion of the economy—so there’s backbone here and staying power, to some extent. And let’s face it, the situation has been in a downward spiral—politically and socio-economically—since Morsi was elected, and this was a sinking ship. The military was simply waiting for the best opportunity to retake control. We will be following this closely both on our website, and via our premium intelligence notes in the coming days and weeks.

This week we have two special reports for you that are taken from Inside Investor with Dan Dicker and Inside Markets with Jim Hyerczyk. Dan looks at the fundamentals and big picture analysis, whilst jim takes a look at the technicals. Both reports can be found in full below the weekly roundup..

Subscribers of premium that acted on Dan’s two stock picks in last weeks letter have seen good returns this last week. Click here to see how you can learn to trade like a pro from Dan Dicker - one of Wall Street’s most successful energy traders.

In Oilprice Premium we have a number of reports you do not want to miss, but before I let you know what they are I wanted to mention that when you start your 30 day free trial you not only get 4 weeks of free analysis, you also get full access to our complete archives where you can access hundreds of valuable and still timely research reports on energy investments, new technology, geopolitics and more. There is absolutely no risk in trying Oilprice premium and we are confident you will find the information interesting, useful and profitable. Click here to start your 30 day free trial.

Our Executive Report takes a detailed look at the incredible opportunities for investors and energy companies in Mexico and the opportunities for investors should Pemex be privatized. It also looks at areas that could be huge profit centers for Pemex in the future and what needs to happen to move things forward.

Related article: On its Own Obama’s Climate Plan will Not Save the World

The Inside Opportunities report takes a look at subsea surveillance and how the defense industry and oil and gas are merging for some top dollar plays. We look at how acoustic spy technology can save oil companies 10’s of billions of dollars and the unique opportunities in subsea leak detection technology.

Inside Intelligence looks at 10 developing geopolitical situations. (This is an essential read for people who have multiple international investments.)

Inside Markets – Our resident rocket scientist Jim Hyerczyk provides his market forecast for the coming week. This is for the technical traders amongst you.

You can read all of these reports for free when you start your free trial to Oilprice Premium. Click here for more info

Best regards,

James Stafford,
Editor, Oilprice.com




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