The Chinese are Stealing Our Oil
China Beats USA... Again
As I write this, West Texas Crude is selling for $96 a barrel. Brent Sea Crude is selling for $104.
This isn't really news, as the price of oil hasn't changed much in five years...
What has changed is who is now producing oil — and where it's going.
Earlier this week, it was announced that China is now the largest importer of oil. That's right. China has beat out the United States for the first time in 40 years.
According to the EIA, China's incoming shipments hit 6.12 million barrels per day in December, compared to crude imports in the U.S., which fell to 5.98 million barrels per day — the lowest since February 1992.
The reason for this is that U.S. production of oil and natural gas is surging, due to the use of fracking technology to extract oil and gas in such places as North Dakota and Texas.
Last year U.S. oil production was up more than 800,000 barrels a day, the largest annual increase in 150 years... so much that the International Energy Agency projected the U.S. will overtake Saudi Arabia as the world's largest oil producer by 2017, and will become a net exporter by 2030.
A Good, Hard Frack
What you may not know is that fracking technology doesn't work everywhere.
In fact, other countries have been hard-pressed to develop profitable wells.
Businessweek recently wrote:
With all the buzz over fracking — and the 86% drop in U.S. natural gas prices the boom has helped cause — you’d think the rest of the world would crash the party. Yet shale development in China, home to the world’s biggest unconventional gas resources, has been slower than predicted.
Early enthusiasm faded in Poland after studies pegged drilling costs at three times higher than in the U.S. In 2011, Britain’s Cuadrilla Resources stopped fracking after some minor quakes were linked to its drilling in northwest England. The practice has been banned elsewhere.
The simple truth is that the rest of the world isn't blessed with the geography that is prevalent in North America.
So while Shell claims it will see fracking in China within two years, we have our doubts...
As it is, China must import its oil from the Middle East, and at the same time cut oil imports from Iran due to sanctions.
In the latest month, and despite a slowdown in their GDP growth, China imported 5.6 million barrels a day — up 3.7% from April of last year. It is expected to accelerate from here.
New Zealand Fracking
One place where China will look to get oil is from New Zealand.
Hydraulic fracturing is effective and efficient in New Zealand, and the Kiwis have lots of oil. There is so much oil in New Zealand that it just bubbles up to the surface — like in the start of that old TV show, The Beverly Hillbillies.
These geographical wonders are called oil seeps, or seepages, and there are over 300 on the New Plymouth foreshore, Kōtuku on the West Coast, and Waitangi, north of Gisborne.
At New Plymouth, you can watch the bubbles of gas rise out of the ocean and form an oily sheen. The oil is so prevalent that the first well dug in the region struck gas at seven meters — and oil at 20!
In 1969, New Zealand discovered the Māui gas and oil field off the Taranaki coast. This supplied the country with all the gas it needed, as well as some oil. But by the mid-2000s, it was nearly depleted.
This led to a great deal of exploration and, coupled with fracking technology, it has created some tremendous opportunities for investing in New Zealand oil and gas explorers...
You see, on the West Coast of the North Island sits the Taranaki Basin. It covers an 100,000 square kilometer area. Most of the basin, including the Māui field, is offshore. Although much smaller, the majority of producing fields are onshore, largely because it is cheaper to explore and drill there.
More than 350 onshore and offshore wells have been drilled in Taranaki since the mid-1950s, when modern exploration started. Of these, only 120 were exploration drill holes. That's not very many.
The rest of New Zealand is underexplored. Most sedimentary basins have potential, and many untested structural traps could be larger than the giant Māui field...
A substantial find is most likely to occur within the next year.
Reports coming in are saying New Zealand’s East Coast Basin shale could hold between 12 and 20 billion barrels of oil.
That's a shale formation 2x to 3x the size of the Bakken.
And like I said, it’s nearly untouched...
Those who got in on the Bakken early were rewarded with easy tenbaggers. Companies like Northern Oil and Gas (NYSE: NOG) went from $2 to $32.
The same thing could happen in New Zealand.
I've found one $0.40 company that has some highly desirable prospects (over 214,011 net acres), which include multiple oil seeps on the North Island in the Taranaki Basin.
Until next week,
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