Investing in Combustible Ice

Written By Christian DeHaemer

Posted October 7, 2009

President’s Note:  It’s my pleasure to introduce to you the latest addition to the Wealth Daily team, Christian DeHaemer. If you’re a veteran reader of investment newsletters, you’ve undoubtedly come across his analysis… and possibly some of his many profitable market calls. Chris was responsible for handing his followers +672% on Oracle… +735% on Sun… a +450% gain in Heritage Oil… and an average gain of +252% on four gold mining stocks, just to name a few. Chris has been a financial analyst for nearly 14 years and I have no doubt he will continue his profitable calls for Wealth Daily readers.

Brian

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Some say the world will end in fire;
Some say in ice.

The existence of methane clathrate, or "combustible ice," might give Robert Frost’s poem scientific credibility. . .

Burn, Baby, Burn

methane clathrate

Though methane clathrate may seem like something out of an episode of the X-files, the truth is flaming ice is real, abundant, and believed to have played a part in the massive climate shifts throughout earth’s long history. What’s more, there’s enough of it to power the world for 1,000 years. . .

Combustible ice is a simple combination of methane and ice crystals. It is usually formed under sediments in the deepest parts of the ocean, where methane escaping from the earth’s core runs into high pressure and low temperature and becomes trapped in the crystal structure of water ice.

Double the Known Reserves

What might be surprising than its earthly existence is the sheer abundance of methane calthrate. Some geologists estimate that there is twice as much of this compound than all known oil, natural gas and coal reserves on earth…

According to Forbes:

Timothy Collett, a research geologist at the U.S. Geological Survey, has estimated that there could be as much as 317 quadrillion cubic feet of methane gas stored in hydrates in the U.S.

To put this in perspective, the U.S. Department of Energy estimates that the country has 187 trillion cubic ft of natural gas reserves. Needless to say, the potential value of gas hydrates as a less-polluting and more secure supply of energy is immense.

The Methane Time Bomb

There is a downside to all of this stored energy. The problem arises when temperature shifts or pressure changes and massive amounts of methane are released. The sudden release of these giant gas bubbles have been known to sink ships.

But more alarming than that, methane is 20 times worse than CO2 as a global warming agent. The sudden release of natural gas in extraction processes from methane clathrate deposits has been pointed to by climate scientists as a major cause of past and possible future climate changes.

According to the Independent:

Methane is about 20 times more powerful as a greenhouse gas than carbon dioxide and many scientists fear that its release could accelerate global warming in a giant positive feedback where more atmospheric methane causes higher temperatures, leading to further permafrost melting and the release of yet more methane.

The amount of methane stored beneath the Arctic is calculated to be greater than the total amount of carbon locked up in global coal reserves so there is intense interest in the stability of these deposits as the region warms at a faster rate than other places on earth.

China Rolls the Dice

So, I was a bit concerned when I read that not only has China recently discovered land-based methane clathrate… but that they have plans to exploit it.

According to the People’s Daily:

China will likely make a breakthrough in developing gas hydrates, which have been recently discovered on the Qinghai-Tibet Plateau. Zhang Hongtao, chief engineer of China’s Ministry of Land and Resources, said that the discovery of gas hydrates is comparable to the discovery of the Daqing Oilfield 50 years ago.

With a combined permafrost area of 2.15 million sq km, China enjoys advantages in gas hydrates deposits.

Scientists estimate that the hydrates can provide the equivalent of 35 billion tons of crude oil in energy, enough for consumption for 90 years in China, whereas the deposits in Qinghai Province alone make up one quarter.

Extraction

There are two ways to get the methane out – heat the ice with hot water or remove the pressure. When you do either of these things, the lion’s share of gas escapes into the atmosphere. That’s not to say someone won’t figure out a way to do it. In fact, the Japanese are working on a project that is set to go online in 2016..,

But so far there is only one field that has commercially produced gas from methane clathrates, the Messoyakha Gas Field, which supplies Norilsk, Russia, with energy.

So where does that bring us and our budding relationship with burning ice?

Natural Gas is the Only Choice

I’ve been investing in oil and energy stocks for the better part of two decades. There is no doubt we are near or past peak oil. Nor is there any doubt that the only fiscally feasible solution for powering the globe is hydrocarbon based.

The new extracting methods for natural gas have added 58% to the known reserves in the United States. Combustible ice would give the world 1,000 years of clean burning energy. It could potentially fill the gap oil will leave in a few decades’ time. Oil won’t last.

There are plenty of ways to profits from these macro-changes in energy.

In the past two quarters alone I’ve made gains of…

DGO – up 94%

ANV – up 120%

RIC – up 72%

EGI – up 206%

NSU – up 132%

HOIL.L – up 136%

TLW.L – up 62%

And that’s just the short list. Over the next few months, I look forward to bringing you actionable information on how you can profit from humanity’s constant quest for power.

Sincerely,

Christian DeHaemer

Writer, Stock Picker and Chief Dishwasher

Wealth Daily

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