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Propelling Your Investment to the Next Level with Algae Biofuel

|Includes: The Boeing Company (BA), CEA, PTR, ZNH
Last week, I spoke briefly about my venture to the Shanghai World Expo. Today, I will be circulating back to the Expo to expand upon the algae-based fuel.

While I toured the China Pavilion, the clean-tech focus could not be ignored. The Algae-fuel system at the China Pavilion takes concentrated algae, extracts the oil, and creates biodiesel. Take a look at the filtration below.

A Biomass Opportunity You

Not only did I see the advanced technology first-hand, but I also saw the commitment by the Chinese government.

Boeing Co. (NYSE: BA) and PetroChina Co. (NYSE: PTR) have signed an agreement to collaborate on establishing an agreement to bring biofuel to the aviation arena. Air China (OTC: AIRYY), which we use for the majority of our internal flights in China, is also a part of the project. Air China's goal is to conduct the biofuel flight test by May 2011. The biofuel project will not only utilize algae to create the biofuel, but will also use jatropha.

Jatropha is a wild green shrub found in warmer climates, like Southern China, and grows well in a wide range of terrains. The shrubs will be supplied by PetroChina (NYSE: PTR) which, as you know, is China's largest oil and gas producer.

Boeing (NYSE: BA) has invested around $500,000 each year into an R&D facility with the Chinese Academy of Sciences; the focus being commercial applications for biofuel.

“If we can do that (commercialize biofuels for aviation), that will give our customers an alternative fuel supply, and hopefully we could smooth out some of the spikes in jet-fuel prices and allow airline operators to be more financially stable,” Joy Bryant, Boeing vice president, said earlier.

Propelling Your Investment to the Next Level with Algae Biofuel

Traditional jet fuel has been cited as being 40% of total expenditures for Air China (OTC: AIRYY), China Eastern Airlines (NYSE: CEA) and China Southern Airlines (NYSE: ZNH) with jet fuel prices at $816.40 per ton.

In June 2010, EADS flew a four seated plane on 100% algae-based fuel. The fuel usage was 5% to 10% more efficient with 40% less nitrogen oxides than conventional jet fuel.

Propelling Your Investment to the Next Level with Algae Biofuel

There are a number of companies out there right now who are focused on producing algae bio-fuel for alternative uses. Here are just a few of the companies, besides the firms previously mentioned, in the race to produce algae-based biofuels for commercial use.

  • PetroSun (OTC: PSUD) is a publicly-held company that has an algae-to-biofuel production plant in Rio Honda, TX. The algae ponds extend 1,100 acres. PetroSun's goal is to produce 4.4 million gallons/year of algae oil and 110 million pounds/year of biomass.

  • OriginOil Inc. (OTC: OOIL) is another publicly-held company that has developed a system using electromagnetic fields to extract the oil from living algae without killing the cell. This could be a major step for the industry if the cost-structure is reasonable.

  • Solazyme is a five-year old firm that utilizes synthetic biology and genetic engineering to tweak algal strains to provide higher biofuel yields. Although they are not publicly-traded, Solazyme is one of the few who are backed by a major oil company, Chevron. Even the Navy made a certain purchase of 1,500 gallons of algae-based fuel; moving the Navy even closer to their goal of operating half the fleet on renewable fuel by 2020.

The Wrap Up

Algae-based biofuel has some maturing to do before investors will feel comfortable enough to enter into a solid position. The government is definitely favoring the industry which can only help the firms. Not only would these algae-based biofuel producers profit, but the aviation industry would be able to control expenditures for sustainable profits. We might not have to actually pay for that second checked bag!!

On a more serious note, we have been keeping an eye on newly emerging ETFs for a play on GREEN ARG-TECH. This would be a smart play while still diversifying yourself until the sector matures with some front-runners. Keep your eyes on the prize.

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Disclosure: No positions

Disclosure: No positions