All of us have heard about the La Brea tar pits in Los Angeles. But most Americans aren't as familiar with the Canadian oil sands. Don't feel bad if you haven't, because these oil sands haven't gotten a lot of attention in the mainstream media.
If you invest in oil or energy stocks, this gooey-sounding part of Canada is something you should learn more about. In fact, I can't emphasize enough how huge of a gold mine they are and how investing in them could make you a ton of money.
Time magazine called it the "greatest buried energy treasure that could satisfy the world's demand for petroleum for the next century."
Northern Alberta Is Sitting on the
Biggest Petroleum Deposit in the World!
There are 685 million barrels of proven oil reserves in the Middle East. Meanwhile, there are 300 billion barrels of proven reserves up north ...and it is estimated that another TRILLION barrels are just waiting for recovery technology to improve to make it economically viable to extract them.
That's eight times the oil in all of Saudi Arabia!
This isn't the type of gushing oil that made Jed Clampett rich, mind you. It's in the form of tar sands, which resemble gooey coffee grounds.
For centuries, Native Americans used the material to seal their canoes. But the technology to extract the valuable oil has now made tar sands not only economically important but wildly profitable.
Oil sands are a combination of clay, sand, water, and bitumen, an extremely heavy form of crude oil. So instead of being pumped from the ground, the bituminous sands are dug out of the ground. Next, they're run through a separation process that uses steam and solvents to extract the oil. The process currently recovers roughly 75% of the bitumen at an average cost of $10 a barrel.
Better yet, the petroleum industry is spending billions on research to find new technology to make it even cheaper. I expect the $10-a-barrel cost to rapidly fall closer to the $3 average that OPEC spends to pump a barrel of oil.
There's no doubt that this is already becoming a huge business. More than one million barrels of oil are produced from Canadian tar sands each day, making up 40% of Canada's total oil production.
And Canada is now the largest single supplier of oil and refined products to the United States.
The crude extracted from oil sand is sold to offsite refineries to produce gasoline, aviation, and diesel fuel.
So you see, these tar sands could free the rest us from our dependence on Middle East oil. And the vast amount of oil within is bound to turn into a mountain of profits.
What Do These Alberta Oil Sands
Have to Do with Asia?
A lot. Chinese companies are stampeding into Alberta and spending billions to get their paws on oil sands deposits. In just the last 18 months, Chinese companies have spent $15 BILLION.
Sinopec of China spent $4.65 billion to buy ConocoPhillips' 9% stake in Syncrude Canada Ltd., the world's biggest oil sands producer. A few months ago, CNOOC spent $2.1 billion to buy the OPTI Canada, whose main asset was a 35% interest in a Long Lake oil sands project in Alberta.
$15 BILLION is a ton of money. But research firm IHS CERA believes that foreign companies, including China, will spend an additional $100 billion on Canadian oil sands projects over the next decade.
China isn't the only country from across the Pacific snapping up oil sands deposits. Australian and even a Thai company have invested money into Canadian oil sands projects and portfolios.
One of the big reasons oil sands are so attractive to Asians: The oil sands in Canada are not state-controlled. And they're not government-owned so there are very few regulatory hurdles to prevent outside companies from taking control.
Now meet ...
The Warren Buffett of China
He has been called chiu yan (Superman) and the Warren Buffett of China. He earned that title as one of the most successful Chinese businessman in the history of China and according to Forbes magazine, the ninth richest man in the world and the richest man in Asia.
Some people prefer to invest in restaurants or apartments ... I prefer to invest in energy, as it is a daily necessity. — Li Ka-shing
He controls a vast telecommunications empire ...a massive construction company ...even the Panama Canal ...yet very few Americans have heard of him.
His fortune is centered on conglomerates, Cheung Kong and Hutchison Whampoa, and through them is the world's largest operator of container terminals, a major supplier of electricity to Hong Kong, a giant cell phone provider, a thriving retailing business, and a powerful real estate development company that has built one out of every 12 residences in Hong Kong.
And he also has a $10 billion stake in Husky Energy, which owns vast amounts of proven Canadian oil sands deposits.
The man I'm talking about is Li Ka-shing, whose fortune totals more than $26 billion and is a true rags-to-riches story.
Li Ka-shing was born in the Chinese city of Chui Chow and was the humble son of a teacher. His father died when Li was only 15 years old, and he took on the responsibility of supporting his family.
Li dropped out of school and went to work for a Hong Kong plastics company where he worked 16 hours a day. His hard work paid off because he started his own plastics company, Cheung Kong Industries, in 1950.
He then scrapped together enough financing in 1979 to buy a controlling interest in conglomerate Hutchison Whampoa. Next, he leveraged that to build a business empire that includes: Banking, construction, real estate, plastics, cellular phones, satellite television, cement production, pharmacies, supermarkets, hotels, transportation, airports, electric power, steel production, ports, shipping, and even the Panama Canal!
One of Li's most savvy purchases was fairly unknown at the time and considered a horrible investment because of the low price of oil in 1991. Oh, how times have changed! Li's purchase of Calgary-based Husky Energy has turned out to be a brilliant move and one of the jewels in his portfolio.
A lot of investors have made a heap of money by buying the same stocks that Warren Buffett buys for Berkshire Hathaway. That same monkey-see-monkey-do advice can work just as well — if not better — by following the Asian Warren Buffett, Li Ka-shing.
Husky Energy is a fully integrated energy company with three business segments: Upstream, midstream and refined products.
Upstream is the exploration and development division that goes out and finds the oil and natural gas. The majority of Husky's proven reserves are in western Canada, offshore Eastern Canada, offshore Indonesia, and major offshore wells in the South China Sea. There's that China connection again.
Midstream is where the heavy crude oil and natural gas products that come out of the ground are transformed into synthetic crude oil and transported to refineries for final treatment.
Refined products include refining of crude oil and marketing of refined petroleum products, including gasoline, diesel, and even ethanol blended fuels and asphalt.
Husky Energy is listed on the Toronto Stock Exchange (HSE.TO) but is also available on the U.S. over-the-counter (HUSKF.PK) market.
Now, please don't consider that a rush-out-and-invest-tomorrow recommendation list. As always, you need to do your own homework and figure out if any of the companies I discussed today are appropriate for your personal situation.
Plus, timing is everything in the investment business, so I suggest you wait for them to go on sale or wait for my buy signal in Asia Stock Alert before investing any of your hard-earned money.
The opportunity and potential profits, however, are HUGE and very worth your attention.
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09-23-2011 11:55 AM