Oily- Looks like the press is getting wise to what we've known all along. Here's a recap that many of us on the board collborated on earlier this year. I wrote it up, but its a compilation of thoughts from many on the board. I sent it to numerous news agencies with the disclosure that I was an ERHE shareholder. I post because of the Post article mentioned Diego Garcia as did our recap months ago.
• China needs oil now so they operate with a sense of urgency.
• Nigeria and other GoG countries are growing more and more impatient with super majors like Chevron, and are now awarding exploration rights to smaller, more aggressive companies.
• This plays right into the hands of the Chinese.
• China uses its trade surplus money to secure favor with the countries they are targeting like Nigeria.
• They build things these poor countries desperately need like roads, hospitals and schools.
• In exchange the countries award them exploration contracts.
• Major oil companies like Chevron haven't quite caught on to the new playing field yet. They don’t appear to see the need to win contracts in this way.
• China has takes a "hands off" approach in dealing with rogue governments.
• They don't care how brutal the government treats their citizens as long as they can get to that country's resources.
• The U.S. insists that the rogue government honor certain human rights before they will allow their companies to go in and invest in that country.
• The rules of the exploration game are changing. Natural resources such as oil are going to the highest bidder.
• This isn't just a U.S. vs China game. It's actually a U.S. vs China vs Europe vs India vs Korea vs Indonesia game. We're just seeing the tip of the iceberg in W. Africa.
• Consider the Joint Development Zone in the Gulf of Guinea with Nigeria and a little island country of Sao Tome.
• This area is interesting for a lot of reasons; Nigeria is becoming a real oil power, the security of deep water drilling has some advantages; potentially a W. African Diego Garcia for the U.S..
• However, U.S. citizens should be concerned with how our large oil companies are handling things over there.
• The Gulf of Guinea is supposed to be the next Saudi Arabia in terms of light, sweet crude. Estimates in the Joint Development Zone alone (a portion of the Gulf) place potential reserves as high as 14 billion barrels.
• In the next decade, 25% of the U.S.’s strategic oil reserves will come from this area.
• US Supermajors and mid-level oil companies like Pioneer, Devon and Noble Energy risk losing the U.S. oil race with China.
• For example, in February Pioneer walked away from a small, US independent leaving the door wide open for Sinopec to come in as operator of block 2 in the Nigerian Joint Development Zone.
• You might say, big deal, happens all the time, but Blocks 2 and 4 are rumored to hold vast amounts of oil that could be quickly shipped to the U.S. for refining.
• It now looks like that oil will get sent East instead of West for refining.
• West African oil is primarily the light sweet crude (and lots of it) that our refineries need for making gasoline.
• Yet American majors, by playing hardball with small countries, are willing to risk losing some of the last sweet crude oil reserves on the planet to our largest oil competitors, the Chinese.
• Furthermore, what is to stop Sinopec and CNOOC from targeting low P/E companies like Anadarko for acquisition?
• Heaven forbid China were to come off of the peg; in effect weaponizing their currency!
• Were that to happen, we could find ourselves begging for $3 a gallon!!
• Face it, China has a lot of cash and they’re looking to buy small companies with huge rights in the JDZ.
• By cooperating with third world countries, they basically establish oil satellites similar to the way the Soviets operated in earlier decades.
• Americans may not realize it now, but we are engaged in a Cold War with China over oil, particularly in West Africa.
• Majors like Exxon and Chevron are really banks that build reserves through acquisition.
• As a proxy for the United States in this “oil race” how will they compete with the Chinese and their virtually unlimited financial resource?
• Big Oil is clearly becoming “The Ugly American”. In order to be competitive, U.S. companies must work more collaboratively with emerging countries like Nigeria and others or risk continued loss of lucrative oil rights to China.
• Places like the Gulf of Guinea and Nigeria present huge opportunities for us in terms of oil reserves.
• Such places are also the front lines in the fight against radical Islam, world poverty, and AIDS.
• With the right approach we can win all of these battles AND make a lot of money for U.S. shareholders in the process.
• Like the old saying goes, if you can’t beat’em join ‘em. US supermajors would be well-served to adopt more of an Eastern approach to emerging markets like the Gulf of Guinea than the 20th century model they’re currently using.
• If they don’t, China will be building roads and schools in places like W. Africa.
• And they’ll be doing it with our $10 a gallon!
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