Losing More of Our Energy Security to China

Having trouble viewing this issue? Click here. Refer a Friend to Energy and Capital.

Losing More of Our Energy Security to China By Keith Kohl | Friday, July 22nd, 2011 Energy security. At one point or another, we've all heard this term... We have much less of it now than ever before. Even scarier is the fact that going forward, our energy security will be increasingly unstable. On Tuesday, I wrote about China's thirst for Canadian energy — particularly the oil resources being developed in the massive oil sands deposits. On Wednesday, China's largest offshore oil producer, CNOOC Ltd, announced it has agreed to buy Opti Canada Inc. for $34 million and $2 billion in debt. Advertisement Saudi Arabia 2.0 Just a few hours north of the U.S.-Canadian border lies the world's last oil reserve... And it may also be the biggest. Holding enough oil to power North America for the next 50 years, the owner of this resource could become the biggest oil company in history. Click here for the details. Think about that for a minute... Adding another $2 billion to the buying price means China has pumped more than $10 billion into the Canadian energy industry over the last several years. This announcement is significant because it marks the first time China has actually bought a Canadian oil sands company outright. Past deals have involved interest in other company's assets, or joint ventures with Canadian energy companies... but this was a takeover, pure and simple. And while we didn't mind much when Sinopec spent billions of dollars for a stake in Syncrude's mining operations, the Opti Canada deal hit closer to home for us; it was a SAGD play. We've mentioned before that Canada has been wary of this exact predicament. Officials have said time and again that they would block any move to completely take over their oil and gas industry. Is this Canada's chance to show their resolve? Unfortunately, that's not likely the case. Unlike last year's deal between BHP and Potash Corp — which was blocked by the government — Opti Canada isn't exactly a monster in the oil sands... not with only a $32 million market cap. So why should we be worried about China stealing our energy security? Have we been blind to the real problem here? The Peak Oil Problem that Started it All We've known for more than forty years that our go-to source of fuel — cheap, easy-to-get crude oil — is heading down the backside of the Peak Oil curve. Just so we're on the same page, we waved goodbye to producing 9.6 million barrels per day in 1970. No matter how bullish we are on domestic drilling, it's going to take more than a 2.8% year-over-year (from 2009 to 2010) increase to get us back on track. We also know Peak Oil isn't a problem reserved for the United States. Hopefully the send-off and thank you cards were enough, because the oil crunch is looming just ahead... Even the International Energy Agency (IEA) is getting cold feet. Is there another explanation for why they would continue to threaten more SPR releases? The results of the first release are still in question, yet the IEA feels continues to say the door is open for similar moves in the future. It's like poking a lion with a stick; if we thought the OPEC was angry at the first release, imagine how they'll react to another threat. This time, the OPEC's decision to cut output won't be so divided... Back at home, our future energy security is paying the price. And believe me, we're going to want Canada on our side going forward. Advertisement China's Master Plan Stumbles They worked for 20 years to build the world's most wide-reaching — and potentially dangerous — monopoly... China's goal: To seize control of the world's consumer and military high-tech industries. What they didn't count on was a discovery made in the Arctic Circle earlier this year — a strike so gigantic, it sent China's master plan reeling. Find out who made this discovery and what's next for the resource valued at over $273 billion.  The Last Frontier's Failure We know we pick on Alaskan oil production often. But to be fair, it's an easy target. Remember, Alaska is supposed to be our second-largest oil producing state... The state's production has plummeted 66% during the last twenty-three years. When discussing Alaskan oil, it's all about the North Slope. That's where the state produces 97% of its oil. The USGS cut its estimate for Alaska's undiscovered, conventional oil reserves by more than 90%; the 10 billion barrels previously thought to be there have dwindled to a mere 896 million barrels. So Long, and Thanks for All the Oil We're not the only ones who see Alaska's hopes falling alongside production... Even though Big Oil is demonized more often than not in the media, you have to give them a little credit. Big Oil isn't stupid. These companies are jumping ship right now rather than be bogged down in Alaska's Peak Oil woes. While BP continues to clean up its latest “oops, sorry about that” spill — this time in Alaska's North Slope (hey, at least it was only 4,200 gallons this time, right?) — others have simply packed up and bid adieu to the Last Frontier. Chevron has been looking to sell its oil and gas assets in the Cook Inlet, where the company produces about 4,000 barrels of oil and 85 million cubic feet of natural gas on a daily basis. This includes their stake in two pipeline companies. If nothing else, Big Oil's exodus from the area is an example of where Big Oil is pinning our future energy security. In 2010, Chevron dished out a cool $3.2 billion to buy Atlas Energy, taking its first steps in the shale gas boom. They're well aware that all the drilling in the world wouldn't save Alaska from the land of lost production and field decline... It's only a matter of time before those Alaskan oil refineries are inputting more crude from Canada than from their own state — unless, of course, that oil already belongs to China. Until next time, Keith Kohl Editor, Energy and Capital P.S. Getting tomorrow's oil at today's price is easily the most profitable way investors can cash in on the upcoming energy crisis. And Big Oil has proven that they're willing to pay top dollar for new oil and gas reserves. That's why we make it a point to get there first... My colleague Christian DeHaemer trekked halfway across the world for precisely these kinds of opportunities. His latest investment report tells you exactly what he found. Related Articles Peak Oil Investments Peak Oil: Tighter Supply Ahead Off-the-Radar Oil Canada's First Oil War Erupts From the Archives... Report Says Yes, and It'll Happen This Year 2011-07-21 - Ian Cooper Group Discount Company Offers Deals on Solar 2011-07-20 - Brianna Panzica Maryland's First Wind Farm Celebrates Opening 2011-07-20 - Brianna Panzica And It's Being Used to Charge Cars 2011-07-20 - Nick Hodge Keeping the Bids Going 2011-07-19 - Brianna Panzica Economic Releases for the week of Monday, July 25th, 2011: Jul 26 - Case Stiller 20 City Index Jul 27 - MBA Mortgage Purchase Index Jul 29 - Chicago PMI Jul 26 - Consumer Confidence Jul 28 - Pending Home Sales Jul 26 - New Home Sales Jul 27 - Durable Orders Jul 27 - Fed's Beige Book Jul 29 - Michigan Sentiment Brought to you by Wealth Daily

You can manage your subscription and get our privacy policy here. Energy and Capital, Copyright © 2011, Angel Publishing LLC, P.O. Box 84905, Phoenix, AZ 85071. All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Energy and Capital does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment. The publisher, editors and consultants of Angel Publishing may actively trade in the investments discussed in this newsletter. They may have substantial positions in the securities recommended and may increase or decrease such positions without notice. Neither the publisher nor the editors are registered investment advisors. Subscribers should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question. Unauthorized reproduction of this newsletter or its contents by Xerography, facsimile, or any other means is illegal and punishable by law. Please note: It is not our intention to send email to anyone who doesn't want it. If you're not sure why you're getting this e-letter, or no longer wish to receive it, get more info here, including our privacy policy and information on how to manage your subscription.