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April 13, 2010

The Best Peak Oil Investments, Part VI: Barriers to Substitution

Tom Konrad CFA

There are two types of solution to the liquid fuels scarcity caused by stagnating (and eventually falling) oil supplies combined with growing demand in emerging economies.  The most obvious is to find a substitute to replace oil.  These substitute have barriers to their use as a replacment petroleum based fuel.  Understanding those barriers also leads us to the investment opportunities that arise from these substitutes. 

As I wrote the first five parts of this series, looking into potential substitutes for gasoline and diesel, it was clear that many potential substitutes would need to overcome barriers to its adoption.  This article and the next will look at these barriers, and what they say about the potential for investments in substitutes for liquid fuels from petroleum.  Part VII will look at factors which constrain the supply of these substitutes.  Part VIII will combine the resulting understanding of these barriers and constraints to highlight the investment opportunities arising from them.

Barrier: Infrastructure

One great advantage gasoline and diesel have over most of the proposed alternatives is an extensive infrastructure.  In addition to an extensive pipeline network, we also have a large number of competing fueling stations.  If a new fuel requires new fueling stations, like natural gas and hydrogen, or charging points and (potentially) battery swapping stations (electricity) it may not be enough to make sure that enough filling stations exist for would-be drivers to make long trips.  If there is only one national network of filling stations, drivers will likely become concerned that the lack of competition will mean that they overpay for fuel.

Among the possible substitutes, the synthetic fuels discussed in part IV, as well as biogasoline are the best placed in that they can use existing infrastructure. 

In terms of having a nationwide transportation network, the best placed substitutes are natural gas and electricity.  In terms of point of sale delivery, electricity has an advantage in that it's safe and relatively cheap to place charging infrastructure in parking lots, and most homes already have the capability of charging an electric vehicle, although it takes a long time from the 120V outlets in most garages.  Most homes do not have natural gas in the garage, and even when they do, a compressor is necessary. 

Conventional biodiesel and ethanol can be dispensed from the same pumps used for fossil fuels, but both present some difficulties in transport and storage.  Biodiesel cannot be allowed to get too cold, because it begins to congeal, so in colder climates, storage tanks as well as transport tankers must be insulated and even heated.  Ethanol cannot be shipped through pipelines that are also used for gasoline, because it absorbs too much water.  Hence ethanol and biodiesel are mostly shipped in tanker trucks and rail cars.  But both can be blended with conventional fuels, meaning that little new dispensing infrastructure is needed.  The importance of a competitive fueling infrastructure can be seen in in this November 2009 statement from the Trucking industry to the US Senate [pdf] about the conversion of trucking from diesel to natural gas.  They say,

It is not sufficient to have a single LNG vendor with stations built at strategic locations along key freight corridors. Absent a competitive refueling infrastructure, trucking companies could face unreasonably high prices at individual retail LNG stations that have no competition in a particular geographic area. While competition exists in the natural gas industry, the high barriers to entry for retail LNG refueling stations may slow the development of a competitive refueling infrastructure. A competitive LNG refueling model would require the presence of multiple entities selling LNG in the same geographic area.

This objection applies to any potential alternative vehicle which locks the user into one fuel, and includes Electric Vehicles (EVs) such as the Nissan Leaf and Hydrogen Fuel Cell Vehicles, but not to flex fuel vehicles (E85 ethanol) or biodiesel (which can be used in any diesel engine.)  It also does not apply to Plug-in Hybrid Electric vehicles, such as the Chevy Volt, because while charging points and battery swapping stations may be limited, the existing fueling infrastructure provides supply competition.

The fuel with the weakest infrastructure is hydrogen.  Like natural gas, it needs specialized filling stations, but hydrogen lacks a national pipeline network.

Incomplete infrastructure can be either a barrier or an opportunity.  If a potential fuel is compelling for other reasons, firms well placed to provide the necessary infrastructure should be able to profit handsomely.  If, on the other hand, a fuel lacks an existing infrastructure and also faces significant other barriers, it will be unlikely to become a significant transportation fuel, and infrastructure investors are likely to lose their shirts along with everyone else interested in the fuel.

Barriers: Energy Density

When talking about energy density, it's important to consider not only the fuel, but the tank.  Both volume and weight are important.  Few fuels are as energy-dense as gasoline and diesel, both of which can be stored in simple, unpressurized fuel tanks.  In contrast, the fuel tank for electric vehicles is the battery, and batteries are not only large and heavy for the amount of energy they store, they are also extremely expensive and degrade over time.  Although the cost of driving an electric vehicle are very low compared to gas or diesel, the large up-front investment in batteries makes the total cost of owning an eelctric vehicle higher except for drivers who use the vehicle for frequent, short trips with time to recharge in between. 

The big winners for energy density are synthetic fuels, as well as conventional biofuels such as ethanol and biodiesel.  Although ethanol has been criticized because it only contains about 2/3 of the energy of the same volume of gasoline, it's close enough that people using ethanol don't have to completely change their behavior in order to use it in a conventional vehicle.  In contrast, electric vehicle manufacturers find that the range of their vehicles is constrained not only by the cost of batteries, but also by their size and weight.  Weight is particularly important, because as a vehicle gets heavier, more of the energy is used to move the vehicle rather than the occupants, which in turn requires even more batteries.

In between energy-dense biofuels and bulky batteries lie gaseous fuels: natural gas and hydrogen, which have good energy per gram, but require heavy pressurized tanks to pack them into a space small enough to fit in a vehicle.  Hydrogen requires a pressurized tank that takes up a lot of space, even if it is not very heavy.  Natural gas can either be used as Compressed natural gas (CNG) or Liquid Natural Gas (LNG.)  CNG is similar to hydrogen, although it is a little more energy dense.  LNG has the same energy density as diesel, but requires considerable energy to compress into that form, and is not available from a home fueling station.  Hence, natural gas vehicles present a tradeoff between energy density and fueling infrastructure.

Conclusion

Considering just the barriers of energy density and infrastructure, it is clear why the conventional biofuels ethanol and biodiesel gained an early lead over alternatives such as electricity and hydrogen.  The big questions about biofuels arise from constraints in their total supply, and the harm that many forms of biofuel agriculture do to the environment.  Synthetic fuels made from natural gas and coal (GTL and CTL) can also have excellent energy density and can take advantage of existing infrastructure and vehicle fleets, but so far have not been adopted in a large way becasue they have had to compete with cheap oil.  As oil prices rise, we will probably also see the rise of synthetic fuels, but, like biofuels, their long term prospects will be limited by total supply and possibly by concern about the environmental harm they do. 

Such supply constraints and environmental concerns will be the subject of Part VII.  Previous articles have been:
  1. Biofuels
  2. Hydrogen and Vehicle Eletrification
  3. Natural Gas Vehicles
  4. Synthetic fuels: GTL and CTL
  5. Algae

DISCLOSURE: None.

DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.

April 03, 2010

The Best Peak Oil Investments, Part IV: Gas-, Biomass-, and Coal-to-Liquids

Tom Konrad CFA

There are many proposed solutions to the liquid fuels scarcity caused be stagnating (and eventually falling) oil supplies combined with growing demand in emerging economies.  Some will be good investments, others won't.  Here is where I'm putting my money, and why.  This fourth part takes a look at the possibility of converting coal,  natural gas or Biomass into gasoline or diesel we can use in unmodified vehicles.

In the first three parts of this series, I looked at various substitutes for oil based transportation fuels:
This part looks at the potential of technologies to convert coal, natural gas, and other biomass into liquid fuels that can be used directly in place of gasoline and diesel. 

The Other Fossil Fuels

Like oil, coal and natural gas are fossil fuels and so their use will eventually be constrained by limited supply. However, both are more abundant and have not been as heavily exploited as oil, and so many people hope that we will be able to use them in place of oil when oil supply can no longer keep up with demand.  If this hope for a cornucopia of synthetic liquid fuels is to be realized, several question will first have to be answered:
  1. Are the technologies economically viable?
  2. Will the process be environmentally benign enough to be politically acceptable?
  3. Can we produce coal and natural gas fast enough to meet both current existing needs and supply an increasing amount of synthetic liquid fuels?
Economics

The underlying factors for the economics of synthetic liquid fuels are 1) the cost of the feedstock, 2) the efficiency of the process, 3) the capital cost of the plant, and 4) the price of oil.  I found an in depth survey of gas-to-liquids technology from BP Statistical Review of World Energy, but it is eight years old.  At the time, the authors were predicting that gas to liquids (GTL) technology would be economic at oil prices of around $20-$25/bbl.  Coal to Liquids (CTL) technology also seems to cost between $25/bbl and $60/bbl.  It's not surprising that the economics are better with natural gas, because gas is more uniform than coal and is easier to handle.  At current prices of around $80/bbl for oil, these technologies seem to be comfortably economic, at least as long as the price of the feedstock stays low.

Most of the commercial applications of these technologies to date focus on stranded feedstocks, especially stranded natural gas which cannot easily be shipped to markets.  The largest gas to liquid plants are being built in Qatar, a country with enormous gas reserves that dwarf its export infrastructure.  Biomass resources by their nature are almost always "stranded" because they have very high transport costs.  Colorado based Rentech (RTK) is developing a number of biomass based projects in addition to projects that use a mix of stranded fossil and biomass resources.  The problem with stranded resources is often limited quantities.  Synthetic fuel technologies are most economic at very large scales, but free and nearly free feedstock are usually only available in much smaller volumes... otherwise it might make sense to build the infrastructure to transport the feedstock directly to markets.  A couple companies attempting to tackle the scale problem for natural gas are Compact GTL and Velocys, which are competing to produce small gas to liquids plants to be used in Brazil's Tupi oil field.

In terms of efficiency, the dominant Fischer-Tropsch (FT) based process converts about 60% of the energy in the feedstock into useful outputs.  The low efficiency of the process means that these technologies are most likely to be used only for feedstocks that cannot be easily transported or used locally.  Stranded natural gas is a good candidate.  Such natural gas is a byproduct of oil extraction, and is typically flared (burned without doing useful work) when there is no gas pipeline available to bring it to a market.  GTL can allow such stranded gas to be transported out with the oil.  Coal from mines without rail links or with heavy moisture content are also a good match for CTL technology, but only if the environmental harm of the extremely high carbon emissions are ignored. 

Environmental Impact

The biggest worry about these technologies, especially coal to liquids, are the enormous carbon emissions arising from the low efficiency of the process.  This is not a concern for stranded natural gas that might otherwise be flared. The carbon from burning stranded gas will be released into the atmosphere in any case, and if some of that gas can be used, we have a net economic gain without any net emissions.  Remote and low-grade coal resources would likely be left in the ground if not used for CTL.  Diesel made from coal will have about 2 times the associated carbon emissions of diesel made from oil, because of the higher carbon content of coal and the low conversion efficiency.  If CTL enables more coal resources to be exploited, it will result in more carbon emissions, while GTL used on stranded antural gas will not.

Where will the Gas and Coal Come From?

It would be difficult to ramp up natural gas production to a point where a significant portion of the trucking fleet could be converted to run on natural gas.  Since converting natural gas first to diesel and then using it to fuel trucks would require even more natural gas because of low GTL efficiencies, I think GTL will be mostly used on stranded gas resources. 

The same is true for coal, but with different implications.  Many coal resources are remote, and coal's bulk means that it is difficult to access such resources without a huge investment in rail lines.  The United States has large coal resources in Montana and Alaska that are remote from rail transport.  Although the "200 years of coal" doctrine is questionable, the main questions lie around declining quality and accessibility of coal reserves, not the amount of coal actually in the ground.  Peak oil is likely to continue to raise investor interest in Coal to Liquids. But prospective investors in such projects should be cautious.  Greenhouse gas regulations such as California's Low Carbon Fuel Standard could destroy the economics of CTL investments at the stroke of a pen.

Investments

In addition to most of the oil majors, the main companies developing these technologies are South Africa's Sasol (SSL), Oklahoma based Syntroleum (SYNM), and Colorado based Rentech (RTK) mentioned above.  Sasol is a diversified oil and chemicals firm with long experience running Coal-to-liquids plants.  Syntroleum and Rentech are development stage companies with efforts focused on biomass to liquids and stranded natural gas.  Rentech puts considerable effort into managing the carbon footprint of its fuels by finding ways to sequester the carbon it produces.  In terms of investment attractiveness, I would not consider Sasol as an investment because of its CTL focus.  I like Rentech's environmental efforts, but the company is several years at least from profitability, so it is worth watching but I would not consider buying the stock yet.  Syntroleum has a stronger balance sheet and cash flow, is near profitability, so this is the stock I would pick if I had to choose one of the three.

Conclusion

I think the best investment opportunities in this sector will probably go to those investors who choose to wait.  I think the greatest potential is in Gas to Liquids technology that can be scaled down small enough to be portable, like that being developed by the private companies Compact GTL and Velocys mentioned above.

The potential for Coal to Liquids technology is large, but companies focused on this technology are at great risk from any sort of carbon regulation.  Gas to Liquids technology will have a robust niche based on stranded natural gas, and the companies developing technologies which can operate at high efficiency on a small scale seem the most promising.  Biomass to Liquids technology also show promise, in particular because of its feedstock flexibility.  Where the feedstock is uniform and controllable, biofuels and biomass to electricity technologies will probably have the upper hand, but Biomass to Liquids technology seems to have good potential where the feedstock is available in quantity, but irregular in quality.  Municipal solid waste seems like one such potential source feedstock.

Of the publicly traded companies in the sector, Rentech seems like the most interesting one to watch because of their focus on biomass and waste feedstocks.  Nevertheless, the company is too far from profitability to make a compelling investment.

DISCLOSURE: None.

DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.

September 02, 2007

War With Iran? Buy Alternative Energy Stocks.

September is starting out as the month of speculation about a massive three day air strike on Iran

Is Bush ready to attack Iran while our troops are still trying to stabilize both Afghanistan and Iraq?  In February, administration officials were denying it.   The preparations now going on could simply be the stick part of a negotiating strategy; the bad cop to Russia's good cop.  But Bush's chances of successful cooperation with Putin could be better.

What if?

If Bush does launch a massive three day air strike on Iran, what will that mean for alternative energy stocks?  I think it would have to be favorable.  We can certainly expect the oil price to rise sharply, which tends to be good for alternative energy.  Because a war with Iran would almost certainly disrupt world oil supplies, not only from Iran but from neighboring states such as Saudi Arabia.

Of Alternative Energy stocks, the ones likely to see the greatest appreciation from a war induced oil price spike are the ones most aligned with energy security, with a lesser advantage seen by the rest.  If the region remains in turmoil for a long time (and the wars in Iraq and Afghanistan certainly point to that as a possibility) then the rest of alternative energy will probably follow.

Here is my list of the alternative energy stocks I think would benefit most from short and long term increases in the price of oil:

Batteries/Hybrids: 

Short term: Hybrid car makers such as Toyota (NYSE: TM) and Honda (NYSE: HMC) will benefit as people spooked by high gas prices buy hybrids.

Longer Term: All carmakers will be introducing efficient cars, so component makers with an advantage in efficiency such as Magna International (NYSE: MGA), as well as battery and capacitor manufacturers will benefit.  A war with Iran might cause car makers to stop waiting for better Lithium Ion batteries and just go with the tried and true NiMH batteries in a big way.

Biofuels

Short term: Ethanol from corn is lousy on the environment, but almost all the energy that goes into it is domestic.  So most corn ethanol producers will benefit.  I have mixed feelings about biofuels, but ADM is my favorite, because they have a dominant position, and produce their own feedstock. Biodiesel producers will also get a boost, for the same reason, but try to find ones which don't rely too much on the commodity oil markets.

Longer Term: Look to cellulosic ethanol companies, such as BlueFire Ethanol Inc. (OTCPK: BFRE), and ethanol from sugar companies such as Brazil's Cosan (NYSE: CZZ.)  

Coal-to-Liquids

Short term: Coal to Liquids (CTL) firms are likely to get a big short term boost because coal is domestic.

Long term: CTL may have trouble due to constraints in the domestic supply of coal.

In general technologies that can be used for transportation fuels will see big benefits, with lesser benefits being felt by electricity generation technologies.  I've declined to list hydrogen here, because I think it's not a very good transportation fuel due to its low density, the additional energy costs of compression, as well as the high cost of fuel cells.

DISCLOSURE: Tom Konrad and/or his clients have positions in MGA, ADM.

DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.

 

January 16, 2007

The Future of Alternative Fuels: Coal-to-Liquids

Last week I wrote a post about the future of ethanol. In it, I promised a sister piece on the future of coal-to-liquids (CTL). This comes a bit later than initially promised…I apologize to those who had been holding their breaths.

I already wrote a post discussing the future of CTL not very long ago. I’m thus not going to repeat myself here, but rather supplement that post with some new info.

CTL In The News

As stated at the outset of the ethanol article, what drove me to write a series of posts on alternative fuels is that big news items on both ethanol and CTL abounded (relatively speaking) during the first week of January.

Firstly, a very insightful piece on China’s CTL industry appeared in Technology Review in early January (I would recommend this if you have about 10 minutes to spare, it’s very interesting).

This was followed, a short while later, by news that 2 US Senators were trying to revive a piece of legislation aimed at boosting production capacity and providing investment tax credits for CTL in the US. The 2 Senators are also apparently keen on forming a “Senate Coal-to-Liquid Fuel Caucus?. This could be the first step to some helpful pork being funneled to that industry, which, admittedly, hasn't been shown much political love since shortly after the oil shock of the late 1970s.

Finally, a few days ago, news came out that a DKRW unit involved in one of the first large-scale CTL projects in the US, Medicine Bow, had found a buyer for 100% of its synthetic fuel output, due to start flowing in late 2010. This project will have an initial capacity of 10,000 bpd, with a potential of up to 35,000 bpd after expansion.

(BTW, If you want to browse a good database of CTL news, I would recommend the Green Car Congress’)

CTL Growth

There are currently no great short-term plays on CTL in the US, for the plain and simple reason that there is no CTL production to speak of in America today. The first significant CTL production is not scheduled to occur until around 2011. The EIA estimates that CTL production should reach 5.7 billion gallons by 2030. Compare that, for instance, to the ethanol industry, with 4 billion gallons of output in 2005 and a projected 14.6 billion gallons in 2030.

Investing in CTL

Potentially, CTL has all the hallmarks of a great transition fuel: coal abounds, the technology to produce CTL has been around for a few decades, it can be made into a very clean-burning alternative to gasoline, and if oil does not dip below the upper 40s/lower 50s for an extended period of time, CTL can compete.

However, as discussed above, there may not be a good way to play this in the US for a few more years. That is why you should take a good hard look at China, because CTL is already happening there, and it will be big time in the foreseeable future. The great thing is, you can invest in a US-listed company with great exposure to the Chinese CTL market: Sasol [NYSE:SSL]. Sasol is currently involved in one of China’s most ambitious CTL projects.


Sure, the company’s share price has been correcting along with the price of oil over the past few weeks, and it could continue to do so in the short run. But there are certainly other things to consider. The Gold Stock Bull made the case for Sasol based on its exposure to CTL technology just before Christmas. Need anything more recent? Some 20,000 Motley Fool CAPS participants were very bullish on Sasol today.

Although Rentech [NYSE:RTK] and Syntroleum [NASDAQ:SYNM] are 2 interesting companies to keep an eye on, Sasol may be on the verge of doing great things for its investors.

I don't think CTL is a panacea, especially not in the long run. However, it will occupy a growing niche in the transportation fuel mix of several large energy consumers like the US, China and India, at least until the feedstock (i.e. coal) starts to run low. The good thing about CTL from a retail investor standpoint is that there hasn't yet been too much unfounded excitement around it, which is a problem that often plagues alt energy stocks. This could, however, change soon. The value investor might thus be able to scoop up a some good prospects, but my sense is that the window is closing.

DISCLOSURE: I don't have a position in any of the stocks discussed above.

DISCLAIMER: I am not a registered investment advisor. The information and trades that I provide here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.


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December 19, 2006

The Future Should Be Bright for Coal-to-Liquids

You are at a cocktail party somewhere, and, after joining a random group of revelers, you utter the following words: “If I say alternative fuel, what’s the very first thing that comes to mind…don’t even think about it, just answer!? If this fiesta was taking place last night, 9 folks out of 10 would have answered “ethanol?. The remaining 10% would have probably made-up a mix-bag of “biodiesel?, “hydrogen?, and, in extremely rare cases, “synthetic fuels?, also known as synfuels. Ten years from now, I bet you anything that far more than 10% of the general public will be thinking synfuel when they hear the words "alternative fuel".

Synfuels are liquid fuels made from coal, natural gas or biomass. They can be used to power the same kind of applications that currently utilize gasoline or diesel, most notably cars. Today I want to focus on one particular sub-type of synfuel - namely coal-based synfuel or coal-to-liquids (CTL). An article on CTL hit the mainstream newswire on Monday, casting some light on this little-known-yet-promising fuel source.

Investing in CTL: 4 Things You Should Know

The aim of this post is not to go over the whole process behind making CTL, thus me providing some links above for those who are curious about the science behind CTL. What I want to do here is to give you nuggets of useful information that will provide a good starting point should you decide to look at this seriously as an investment option. Here are 4 main things you should know:

A) There’s lots of coal around. The Energy Information Agency (EIA) estimates that, at the 2002 production rate, there’s about 200 years worth of coal left in the global ground; 26% is in the US, 23% in the Former Soviet Union and 12% in China. Like oil, recoverable reserves will likely increase as new extraction processes are brought on stream. However, like oil, production rates are going to increase massively as demand from booming economies like China and India picks up.

B) I’ve come across a couple of different estimates of crude oil price floors required to make CTL operations in the US profitable. Estimates typically range from $40/barrel to $45/barrel. You thus have to be an energy bull to want to invest in CTL in the US. Apparently, the Chinese are running operations that are economical at $25/barrel.

On a related note, I recently came across an interesting article in the September 2006 edition of Chadbourne & Parke’s Project Finance Newswire (PDF, see article on p. 24) discussing, among other things, the energy price risk associated with investing in CTL from a project finance standpoint.

C) CTL fuel burns much cleaner than conventional fuels, as a lot of the dirty stuff is removed during the production process. This means that, under certain favorable regulatory scenarios, CTL could hold some form of a ‘clean’ premium over gasoline at the pump (e.g. lower taxes). However, producing synfuel from coal generates large amounts of carbon dioxide, and carbon dioxide could become regulated at the federal level before most proposed US CTL operations are fully up-and-running. This could add certain costs at the front end of the production process that would nullify back end benefits.

D) Politicians and the military like CTL. I won’t discuss the military as I don' know too much about it, other than the fact they have been running some tests and seem to like the idea of not having to rely on hostile countries to power their fighter jets.

Politicians like CTL for the same reasons they like ethanol: (a) there’s a rural job-creation angle in an industry otherwise seen as on the wane, (b) it’s an easy sell to voters concerned about the security implications of sourcing a large part of America’s energy from unfriendly nations, and (c) soft environmentalists, under the right conditions (e.g. carbon capture at CTL plants), will embrace CTL because of its overall cleaner profile. If you want specifics on the existing and proposed government incentives for CTL, go to the EIA’s most recent Coal News and Markets page and scroll down to the section called “Coal Technology? towards the end. Under the sub-heading “Coal-to-Liquids Project Financing?, there is a short discussion on this topic (sorry for not being able to provide a direct link to the section, the page doesn’t allow for it).

3 CTL Stocks

The article on CTL discussed initially lists 3 companies who are banking on a bright future for coal-based synfuel: Headwaters [NYSE:HW], Syntroleum Corp [NASDAQ:SYNM], and Rentech [AMEX:RTK].


Of the 3 companies, Headwaters is the only 1 with positive earnings, although I suspect it’s not from its CTL operations. The stock has had a terrible year, and it is currently trading down about 40% from its 52-week high of $40.19. Earnings year-on-year are down nearly 38%. Nevertheless, analysts covering the stock seem confident that 2007 EPS will be markedly higher than 2006 EPS.

Syntroleum Corp hasn’t exactly had a great year either, and analysts don’t expect the firm to become profitable for a few more years. Syntroleum is the company with the most important exposure to the military.

Rentech is the company I am most familiar with, as I seriously investigated it as a potential investment last summer. In the end, I decided not to buy at and I’m happy I made that choice. Rentech has a very interesting project pipeline, and is probably the closest thing to a CTL pureplay there is. I might look it again in the near future.

After deciding not to purchase Rentech, synfuels fell off my radar screen, and with good reason. There hasn't been an exciting synfuel story yet, and investor attention (but not mine!) has been squarely on ethanol. I must say that reading that article has rekindled my interest, and CTL is definitely something that I'm going to start paying more attention to.

To conclude, if you want a good, safe way to get some exposure to CTL, have a quick look at the South African company Sasol [NYSE:SSL]. When South Africa was under a trade embargo because of its apartheid regime, Sasol perfected CTL technology to keep South African cars running, and the company is now busy developing that side of their business in places like China.

March 31, 2005

Milestone for Gas-to-Liquids Fuel Plant

Syntroleum Corp (SYNM) commemorated the successful production of more than 140,000 gallons of ultra-clean fuels at its gas-to-liquid (GTL) fuels plant at Port of Catoosa, Oklahoma. The plant also manufactured 60,000 gallons of additional products, such as syncrude. Gathered to mark the occasion were representatives from Syntroleum, the U.S. Department of Energy (DOE), Marathon Oil Company and Integrated Concepts and Research Corporation (ICRC). [ more ]


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