That’s why, in my investment letter, Outstanding Investments, I’ve constructed a kind of end-to-end offshore energy mutual fund – from prospect to pipeline. Each company has a broad skill set. None is just a one-trick pony. Some of the companies overlap in skill sets, and even compete with each other.

A few of my favorite names include Norway’s offshore powerhouse StatoilHydro (STO: NYSE), as well as subsea equipment provider FMC Technologies (FTI: NYSE). Then there’s platform and pipeline builder McDermott Intl. (MDR: NYSE), as well as offshore services provider Superior Energy Services (SPN: NYSE).

Going forward, I’m be looking to recommend other deepwater plays…at the right price, of course. I’m looking for companies that can grab hold of key parts of the growing offshore business, and produce great profits in the coming years. I think you’re going to be astonished at what unfolds.

I recently attended the annual convention of the American Association of Petroleum Geologists (AAPG). (Some guys go to classic car shows; I go to geologist conventions). I’ve been a member of AAPG for 30 years, and it’s always fascinating to spend some time there. The meeting rooms and poster sessions feature reports from the front lines of the search for petroleum, natural gas and other energy resources.

One theme emerged loud and clear from this year’s conference: Deepwater. Most of the major oil discoveries that remain to be found in the world will be offshore, in deep water.

The always-ebullient Brazilian geochemist, Marcio Mello — CEO of Brazil’s HRT Petroleum Co. — wowed the crowd with a discussion of the oil potential of the South Atlantic. “Six of the last ten giant oil discoveries in the world were offshore Brazil,” he pointed out. And then Marcio moved the discussion to the other side of the South Atlantic and gave an eye-popping description of the oil potential of the offshore regions of Namibia.

“The Namibian offshore is analogous to that of Brazil,” Marcio stated, with slides and hard data to back it up. Then he showed his proprietary research into natural offshore oil seeps off Namibia, and the geochemistry that demonstrates immense hydrocarbon potential. “But Namibia,” said Marcio, “is way underexplored. So you can put down a little money for the concessions and get very rich.”

The point for investors is how much of future world energy development will involve subsea systems.

For additional perspective, let’s examine the current structure of the American energy supply. Right now, most of the U.S. energy mix comes from burning coal, natural gas and oil. In fact, according to the U.S. Department of Energy, the U.S. gets 87% of its total energy mix from burning fossil fuels. Another 7% of U.S. energy supply comes from nuclear power. The total is 94%.

That leaves about 6% of the U.S. energy mix to come from so-called “renewable” and alternative sources. And 3% of that 6% is renewable hydropower from unique sources like the Hoover, Grand Coulee and other dams. And we’re not building any more big dams.

Thus, only about 3% of U.S. total energy comes from things that grow, blow or shine. Of that 3%, about half (1.5%) is from “biofuels,” and that’s if you count a company like Weyerhaeuser (WY: NYSE) burning sawdust to run the sawmills.

Finally, there’s a very minor part of the total U.S. energy mix — about 1.5% — that comes from windmills, solar and geothermal. For as much visibility as these things get in the media and pop culture, their energy output is tiny — slightly above statistical noise in the overall national mix.

So just follow the numbers. The “alternative” energy sources are a miniscule component of the current energy mix. That’s after a few good years of significant investment, with lots of political support and plenty of tax breaks.

It will take many years (many decades!) for these energy sources to expand and meet the energy needs of the U.S. And that’s despite whatever the politicians and policymakers wish for in their dreams.

That’s why the U.S. must continue exploring for oil and gas. I cringe when I look at the falling rig counts in the U.S. and around the world. Every well that’s NOT drilled is one less source of hydrocarbon in the years to come, as depletion causes output from current wells to decline…which brings us back to the South Atlantic, one of the world’s greatest petroleum provinces.

Some experts think that the hydrocarbon resources in the pre-salt formations off the Brazilian coast may rival those of Saudi Arabia in magnitude. We’ll see about that. But it’s beyond dispute that Brazil and its energy resources are a complete game-changer for that nation, and the rest of the energy-consuming world. It goes back to basic geology and the history of plate tectonics.

When South America started to pull away from Africa about 140 million years ago, an isolated seaway formed — a proto-Atlantic Ocean — that filled again and again with sequences of limestone, thin shales and, finally, massive salt beds. The processes of petroleum geology worked as advertised in the region. And these processes left utterly eye-popping volumes of petroleum locked in high-quality reservoirs covering vast areas.

The big downside (and it’s big and down, to be sure!) is that all that oil is under a mile or two of South Atlantic seawater, covered by three or four miles of rock and salt beds — it depends where you’re located on the continental shelf and slope.

But that’s why it takes companies with phenomenal technical and managerial skills, plus deep pockets, to play in this great game. The bottom line is that with the right companies working at it, there’s enough oil down there to produce a very big payday, not just for Brazil, but for many of the companies that contribute to the effort.

I’ll discuss at length the new developments offshore Brazil during my talk in Vancouver at the upcoming Investor Symposium, July 21-24. The title of my talk will be Is God Brazilian? So that ought to give you a clue about what I think lies under all that water column and rock down there.

Source: Deep, Wet and Brazilian

Or how about this one:

“When the government actually did something about getting our nuclear strategy on track, it got it so utterly wrong that Greenpeace took it to court on a technicality!”

Angry Garry’s been warning about Britain’s dreadful energy strategy for a long time now. As he explains today, he’s worried our energy needs will ultimately be dictated by Moscow.

And something happened last night that has Garry even more worried.

Find out why Garry believes we’re now on the road to an energy nightmare!
Will the lorries force Brown into U-turn?

Why does the Government tax fuel? Is it to raise revenue? Or is it an environmental measure? Either way, it seems the latest little hike in fuel duty — the 2p increase — won’t be going ahead. And quite right too.

British hauliers are feeling the squeeze. Yesterday, many of them converged on London, parked on the A40, and delivered a petition to Downing Street. They want the Government to scrap the 2p increase.

Gordon Brown first proposed this latest 2p hike — due to come into effect this autumn — over a year ago, while still Chancellor. Since then, the price of crude oil has gone through the roof.

This, in turn, has sent prices at the pump soaring. According to petrolprices.com, the average cost of a litre of unleaded petrol is 115p. For diesel it’s 128p.

If the Government’s plan was to price cars off the road to help the environment, it can stop worrying. By going up so much, the oil price has already done more than this extra tax would have done had oil prices stayed the same.

Even in the car-crazy US, the high oil price has finally fed through to a reduction in car usage, as Bill Bonner notes below in today’s Daily Reckoning.

If the purpose of the 2p hike was to raise revenue (as I suspect it was), then things are a bit trickier. Only a bit, mind.

Yes, the Treasury will have budgeted for the extra revenue. But then again, higher fuel prices will have affected consumer behaviour. If Britons drive less, that in itself will impact the Treasury’s fuel duty income.

Not only that, but the higher oil price has boosted the state’s North Sea revenues. And besides, it wouldn’t be the first time this year the Treasury has had to do the sums again.

I’ve had a pop at the Government here before (If I’m honest with myself, that last sentence felt like a bit of a ‘mini-pop’). I’m sure I will again.

But if the Government changes its mind on this one, let’s not just blithely label it a U-turn, in the manner of some newspapers this morning.

Pressing ahead with the 2p increase would be the wrong policy, at the wrong time and hitting the wrong people. As one protester pointed out yesterday, we still need lorries to take goods from place to place.

If domestic hauliers go bust, foreign firms will do the job instead — and the Treasury will receive even less revenue. Not to mention the fact that allowing the industry to wither would be another step on the road to the so-called “backrub economy” — a society in which everyone derives their employment from the service sector.

Much has changed since the 2p hike was first proposed. At the time, crude oil was around $60 a barrel. Now it’s more than double that. In all likelihood, then, the Government will change its policy. And they’ll be right.

It’s just common sense, really.

Brasil! Brasil!

Ever since my days playing capoeira, I’ve liked to spell ‘Brasil’ with an ‘s’. It makes me feel cultural.

“It’s Brazil with a ‘z’,” says my down-to-earth colleague Manraaj Singh. “Now stop it.”

Brazil, you’ll be aware, is one of the hottest economies in the world right now. Manraaj tells me growth this year is expected to be close to 5%. Strong in oil, sugar, and with a buoyant service sector, Brazil is the place to be for many investors.

Leading the Fleet Street charge is our man Manraaj, who today shows us why the stock market there is rapidly outgrowing São Paulo…
Fleet Street Research presents: 3 firms hoping to escape the UK consumer gloom

I don’t know what it’s like where you are, but outside my office window the weather’s pretty grim. I don’t think it’s raining… but it may do soon.

A bit like the economy then (I know! Seamless!)

Tenuous links aside, the UK economy is in wobbly health. The canniest UK firms have protected themselves, and now make a significant amount of their money well away from these shores.

I’ve asked our research department to take a look at some such companies. There’s still work to be done (our boys are thorough, and wouldn’t dream of issuing a recommendation without doing the necessary prodding and poking).

But my colleague Theo has agreed to give you a sneak preview of some of the companies he’s been looking at.

Remember, these are NOT recommendations (happy Theo?). This is just to give you an idea of the kind of opportunities we’re looking at right now.

Until tomorrow

Ben Traynor

Source: How Blair’s Blunders Sold Us to the Russians

As I said on Friday, Congress just passed a US$57 billion alternative energy plan – that promises to do little but make the headlines.

Meanwhile, in another chamber of Congress, executives of big-oil firms were called on the carpet to account for recent sky-rocketing crude oil prices.

Congress wants to know why crude oil is soaring past US$135 a barrel – double the price of last year! Hmm… more demand than supply maybe?

Of course Congress just doesn’t get it! As the CEO of ConocoPhillips correctly points out, “The fundamental laws of supply and demand are at work.” We are getting squeezed by oil exporting nations that are “managing demand for their own interest,” and severely restricted access to energy reserves both at home and abroad.

Today, the International Energy Agency said that a major supply crunch is looming unless the world’s oil majors can ratchet up production by 12.5 million barrels a day within the next seven years. Uh… don’t count on it.

Decades of underinvestment in new energy exploration and development, and a seismic shift in who controls access to new energy deposits means sustainable high prices for years to come. Fossil fuels are a dead-end for American big-oil firms – it’s time to embrace an alternative energy future!

MIKE BURNICK, Senior Editor & Global Markets Analyst

Source: Congress Doesn’t Understand $135 Oil