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The recent revelations of a International Energy Administration whistleblower that the IEA may have distorted key oil projections under intense U.S. pressure is, if true (and whistleblowers rarely come forward to advance their careers), a slow-burning thermonuclear explosion on future global oil production. The Bush administration’s actions in pressuring the IEA to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves have the potential to throw governments’ long-term planning into chaos.

Whatever the reality, rising long term global demands seem certain to outstrip production in the next decade, especially given the high and rising costs of developing new super-fields such as Kazakhstan’s offshore Kashagan and Brazil’s southern Atlantic Jupiter and Carioca fields, which will require billions in investments before their first barrels of oil are produced.

In such a scenario, additives and substitutes such as biofuels will play an ever-increasing role by stretching beleaguered production quotas. As market forces and rising prices drive this technology to the forefront, one of the richest potential production areas has been totally overlooked by investors up to now – Central Asia. Formerly the USSR’s cotton “plantation,” the region is poised to become a major player in the production of biofuels if sufficient foreign investment can be procured. Unlike Brazil, where biofuel is manufactured largely from sugarcane, or the United States, where it is primarily distilled from corn, Central Asia's ace resource is an indigenous plant, Camelina sativa.

Of the former Soviet Caucasian and Central Asian republics, those clustered around the shores of the Caspian, Azerbaijan and Kazakhstan have seen their economies boom because of record-high energy prices, while Turkmenistan is waiting in the wings as a rising producer of natural gas.

Farther to the east, in Uzbekistan, Kyrgyzstan and Tajikistan, geographical isolation and relatively scant hydrocarbon resources relative to their Western Caspian neighbors have largely inhibited their ability to cash in on rising global energy demands up to now. Mountainous Kyrgyzstan and Tajikistan remain largely dependent for their electrical needs on their Soviet-era hydroelectric infrastructure, but their heightened need to generate winter electricity has led to autumnal and winter water discharges, in turn severely impacting the agriculture of their western downstream neighbors Uzbekistan, Kazakhstan and Turkmenistan.

What these three downstream countries do have however is a Soviet-era legacy of agricultural production, which in Uzbekistan’s and Turkmenistan case was largely directed towards cotton production, while Kazakhstan, beginning in the 1950s with Khrushchev’s “Virgin Lands” programs, has become a major producer of wheat. Based on my discussions with Central Asian government officials, given the thirsty demands of cotton monoculture, foreign proposals to diversify agrarian production towards biofuel would have great appeal in Astana, Ashgabat and Tashkent and to a lesser extent Astana for those hardy investors willing to bet on the future, especially as a plant indigenous to the region has already proven itself in trials.

Known in the West as false flax, wild flax, linseed dodder, German sesame and Siberian oilseed, camelina is attracting increased scientific interest for its oleaginous qualities, with several European and American companies already investigating how to produce it in commercial quantities for biofuel. In January Japan Airlines undertook a historic test flight using camelina-based bio-jet fuel, becoming the first Asian carrier to experiment with flying on fuel derived from sustainable feedstocks during a one-hour demonstration flight from Tokyo's Haneda Airport. The test was the culmination of a 12-month evaluation of camelina's operational performance capability and potential commercial viability.

As an alternative energy source, camelina has much to recommend it. It has a high oil content low in saturated fat. In contrast to Central Asia's thirsty "king cotton," camelina is drought-resistant and immune to spring freezing, requires less fertilizer and herbicides, and can be used as a rotation crop with wheat, which would make it of particular interest in Kazakhstan, now Central Asia’s major wheat exporter. Another bonus of camelina is its tolerance of poorer, less fertile conditions. An acre sown with camelina can produce up to 100 gallons of oil and when planted in rotation with wheat, camelina can increase wheat production by 15 percent. A ton (1000 kg) of camelina will contain 350 kg of oil, of which pressing can extract 250 kg. Nothing in camelina production is wasted as after processing, the plant’s debris can be used for livestock silage. Camelina silage has a particularly attractive concentration of omega-3 fatty acids that make it a particularly fine livestock feed candidate that is just now gaining recognition in the U.S. and Canada. Camelina is fast growing, produces its own natural herbicide (allelopathy) and competes well against weeds when an even crop is established. According to Britain’s Bangor University’s Centre for Alternative Land Use, “Camelina could be an ideal low-input crop suitable for bio-diesel production, due to its lower requirements for nitrogen fertilizer than oilseed rape.”

Camelina, a branch of the mustard family, is indigenous to both Europe and Central Asia and hardly a new crop on the scene: archaeological evidence indicates it has been cultivated in Europe for at least three millennia to produce both vegetable oil and animal fodder.

Field trials of production in Montana, currently the center of U.S. camelina research, showed a wide range of results of 330-1,700 lbs of seed per acre, with oil content varying between 29 and 40%. Optimal seeding rates have been determined to be in the 6-8 lb per acre range, as the seeds’ small size of 400,000 seeds per lb can create problems in germination to achieve an optimal plant density of around 9 plants per sq. ft.

Camelina's potential could allow Uzbekistan to begin breaking out of its most dolorous legacy, the imposition of a cotton monoculture that has warped the country's attempts at agrarian reform since achieving independence in 1991. Beginning in the late 19th century, the Russian government determined that Central Asia would become its cotton plantation to feed Moscow's growing textile industry. The process was accelerated under the Soviets. While Azerbaijan, Kazakhstan, Tajikistan and Turkmenistan were also ordered by Moscow to sow cotton, Uzbekistan in particular was singled out to produce "white gold."

By the end of the 1930s the Soviet Union had become self-sufficient in cotton; five decades later it had become a major exporter of cotton, producing more than one-fifth of the world's production, concentrated in Uzbekistan, which produced 70 percent of the Soviet Union's output.

Try as it might to diversify, in the absence of alternatives Tashkent remains wedded to cotton, producing about 3.6 million tons annually, which brings in more than $1 billion while constituting approximately 60 percent of the country's hard currency income.

Beginning in the mid-1960s the Soviet government's directives for Central Asian cotton production largely bankrupted the region's scarcest resource, water. Cotton uses about 3.5 acre feet of water per acre of plants, leading Soviet planners to divert ever-increasing volumes of water from the region's two primary rivers, the Amu Darya and Syr Darya, into inefficient irrigation canals, resulting in the dramatic shrinkage of the rivers' final destination, the Aral Sea. The Aral, once the world's fourth-largest inland sea with an area of 26,000 square miles, has shrunk to one-quarter its original size in one of the 20th century's worst ecological disasters.

And now, the dollars and cents. Dr. Bill Schillinger at Washington State University recently described camelina’s business model to Capital Press as: “At 1,400 pounds per acre at 16 cents a pound, camelina would bring in $224 per acre; 28-bushel white wheat at $8.23 per bushel would garner $230.”

Central Asia has the land, the farms, the irrigation infrastructure and a modest wage scale in comparison to America or Europe – all that’s missing is the foreign investment. U.S. investors have the cash and access to the expertise of America’s land grant universities. What is certain is that biofuel’s market share will grow over time; less certain is who will reap the benefits of establishing it as a viable concern in Central Asia.

If the recent past is anything to go by it is unlikely to be American and European investors, fixated as they are on Caspian oil and gas.

But while the Japanese flight experiments indicate Asian interest, American investors have the academic expertise, if they are willing to follow the Silk Road into developing a new market. Certainly anything that lessens water usage and pesticides, diversifies crop production and improves the lot of their agrarian population will receive most careful consideration from Central Asia’s governments, and farming and vegetable oil processing plants are not only much cheaper than pipelines, they can be built more quickly.

And jatropha’s biofuel potential? Another story for another time.

This article was submitted by OilPrice.com who focus on Fossil Fuels, Alternative Energy, Metals, Oil Prices and Geopolitics. To find out more visit their website at: http://www.oilprice.com

Most foreign investors have been focused on Central Asia’s vast hydrocarbon resources and the extractive industries of energy and Minerals. But water is an issue of rising concern throughout the region as after years of soviet mismanagement geopolitical tensions are running high.

These regional problems present outside companies willing to think outside the box with an incredible opportunity and a guaranteed red carpet welcome.

Full article at: http://www.oilprice.com/article-central-asias-most-precious-resource-water-not-oil.html

Are you sold on gold? The precious metal outperformed every major equity index in the world in 2008. The question is, can gold—and other precious metals—keep on flying? Or would buying today be buying high and selling low?

Precious metals have always been intriguing to investors because they tend to hold their value. In times of geopolitical crisis or currency devaluation, for example, the value of paper money might fluctuate, but a hard asset will always be worth something. As a result, historically, precious metals have been considered  a “safe haven” in times of economic and financial instability.

That brings us to why gold is on a tear today. It declined in 2008 and early 2009 as panicked investors rushed into cash in an attempt to weather the financial crisis. But sometime in the middle on 2009, when investors began to move their money from the sidelines, gold started to rally. It returned 32.59% through the third quarter of 2009, vs. 19.26% for stocks.

The question is, where can we expect gold to go from here? In order to predict whether gold prices will skyrocket or come crashing down, it’s important to understand the principal factors that affect the price of any commodity: supply and demand.

The supply side of the equation is not particularly relevant in regard to gold because gold supplies remain fairly constant. That’s because production has not significantly increased due to a lack of new mining sites. Should supplies increase, however, investors may want to be cautious.

The demand side of the equation, then, is the one gold investors must look at. And as we noted above, demand for gold tends to increase when investors have a lack of confidence in the U.S. economy and financial markets.

That’s certainly the case today. In fact, we see two factors, that could lead gold to outperform in the near future: inflation and currency devaluation. In response to the financial crisis of 2008 and 2009, the Federal Reserve injected massive amounts of liquidity into the money markets. Ultimately, that increase in the money supply could devalue the U.S. dollar and lead to inflation. In fact, the U.S. dollar is already shockingly low. On October 14, 2009, it fell to a 14-month low against the euro, hitting $1.4947, the weakest since August 2008, according to Bloomberg. And while inflation is not yet a problem, economists are on the lookout for it.

These conditions led Standard & Poor’s (S&P) to raise its gold price assumption for 2010 from $750 per ounce to $800 per ounce. “Investors seeking a hedge against inflation risks and uncertainty in the financial markets continue to support gold prices,” the S&P analysts write. “The metal's properties as a safe haven, and to a lesser extent the demand for jewelry, also support its longer-term price prospects.”

S&P’s estimate, however, may be on the low side. As of November 2009, gold was trading at more than $1,000 per ounce. And since gold exceeded $1,000 per ounce level, the price has been extremely resilient, with no meaningful pullback seen. There have been periods of profit-taking, but increased demand quickly appears on any weakness in price.

In sum, then, good old-fashioned gold fever is back—and investors who are looking for a promising trend may want to consider investing in it and other precious metals.

But don’t consider gold an investment only for troubled times. One of the greatest advantages of precious metals exists regardless of economic and market conditions. Precious metals tend to perform differently from other assets. As a result, investing in precious metals may be a good diversification strategy for a portfolio comprised mainly of stocks, bonds and real estate—in all environments.

This article was written by OilPrice.com - who offer free information and analysis on Energy and Commodities. The site has sections devoted to Fossil Fuels, Alternative Energy, Metals, Oil prices and Geopolitics. To find out more visit their website at: http://www.oilprice.com