What Are These Oil Sands?

Back in Pleistocene time, the glaciers covered much of northern Alberta.  In places, there was a mile of ice.  During some of the warmer periods, there was a lot of melting.  On occasion, and in some places, there were giant, glacial-dammed lakes.

Every now and again, these glacial dams would break, sending massive volumes of water downstream, wiping away pretty much everything along the way.  Well, it turns out that in this scoured-out area that included much of the rock covering some lower Cretaceous deposits of oil.  Or rather, it was “oil” that had long ago lost the volatile components.  The stuff is properly called bitumen.

Thus we have an area in northern Alberta that’s about the size of New York State.  That area holds near 1.4 trillion barrels of bitumen resource.  To be sure, not all of it is recoverable.  In terms of recoverable “reserves,” there are only (ahem…) about 175 billion barrels, or over eight times the total of U.S. oil reserves.

Of those 175 billion barrels, about 20% are near enough to the surface to strip mine.  That’s within about 250 feet or so.  Any deeper, and the cost-benefit calculation dictates that you have to recover it via a well-and-pumping process.  Still, that makes for about 35 billion barrels of bitumen that could be extracted by mining.  (About 1.5 times total U.S. oil reserves.)  The actual, mineable area is about the size of Rhode Island.

The Heart of Oil Sands Country

All of which gets me back to why I was in Fort McMurray.  This is the heart of oil sands country.

Near 200 years ago, early explorers noticed gooey oil seeping out of the banks along the Athabaska River.  On warm days, with direct sunshine, the stuff actually flows.  Mostly, it has the consistency of peanut butter.  Unless it’s cold up here – which happens a lot – and it’s hard as a rock.

Needless to say, people talked about these “oil sands” for a lot of years.  Then in the 1960s, some people within Canadian industry and the Alberta government began to do something about it.  They decided to develop them.  It’s a long, long story.

Here’s the Short Version

The short version of the story is that large-scale oil sands development began in the 1970s.  It took gigantic levels of capital investment, like tens of billions of dollars.  That’s not pocket change.  So a group of lease-owners got together and pooled their capital to form Syncrude Canada, a joint venture.  First mining started in 1978.

Thing is, the way Syncrude operates it’s not really “mining.”  It’s landscape architecture.  Under Alberta law, Syncrude could not turn over its first shovel of rock without a master plan for remediation and restoration at the end of the cycle.

So for much of the 1970s, Syncrude performed baseline environmental studies and data-gathering.  Then they started digging in 1978.  At first, the pit looked like a moonscape of open pit mining.

The process is fairly straightforward.  Big shovels (really big) scoop large volumes (really large) of oil-laden sand (API number 8, the “bitumen”) into gigantic loaders (and I mean gigantic.)  The loaders haul the rock to a crusher.  The crushed rock goes to a washing bin, kind of like your washing machine at home except it’s the size of a high-rise office building.

The Syncrude operation washes the bitumen off the sand using naphtha.  Then they separate the bitumen, recover the naphtha for reuse, take the clean sand (and it’s clean), and replace it in a previously-mined pit.

The process uses a lot of water, but not as much as the horror-stories you might hear about “draining the rivers” of northern Canada.  Each barrel of water is recycled about 18 times.

The process uses a large amount of natural gas, but not as much as you may have heard (like, “all the natural gas of northern Canada.”)  Pretty much everything about the operation is built with co-generation in mind, so they continuously recover the heat at each stage.  That natural gas goes a long way, from what I saw.

If it takes, say, five years to dig a pit, then it may take five or more years to fill it back up with sand during the restoration process.  Syncrude’s goal is to handle the rock as little as possible.

Eventually, Syncrude returns the land to original grade, although they have some artistic license with the contours.  They cover the land with the original topsoil, that’s been in cold storage (northern Alberta… it’s cold up here for 10 months of the year).  Then they replant trees, and that’s saying something because the growing season is under two months.  It takes 80 years for your basic spruce tree to reach maturity.

There’s even a new water table, despite the disturbance of the land.

Where Things Now Stand

So at this stage, after 30 years or so of mining (with about 80 years to go, at current rates of extraction), Syncrude has come to a point of delivering 350,000 barrels of synthetic crude oil per day.  They take the 8-API bitumen and upgrade it to oil that’s competitive with West Texas Light.  Then they deliver it to the JV members, for whatever use the owners want to make of it.

Along the way, the Syncrude process removes the sulfur, so it’s sulfur-free (refiners like that).  In fact, there’s a mass of sulfur up at Syncrude that’s about the size of the Step-Pyramid at Suqqhara, Egypt.  And along the way, Syncrude sells the sulfur to the chemical industry.

I visited a former Syncrude mine, about 3.5 miles square and formerly about 200 feet deep.  Now it’s restored to grade, with trees growing and a herd of 300 wood bison grazing.  For the cynics out there, I’d say that it’s not some environmental Potemkin Village because you can’t fake a replanted forest of 25-year old trees.  You can’t fake a 300-bison herd.  Not on a former mine site 3.5 miles square.

Bottom line is that this is an immense operation.  Syncrude employs 5,000 people, plus 2,000 contractors.  Paychecks are north of $100,000 per year.  Every oil sands job supports 3 local jobs, 6 provincial and 9 others across North America (especially at Caterpillar, where they build those giant, 400-ton loaders).

In the coming weeks I’m going to delve deep into North American oil sands operations and any companies that may be set to profit. Oil sands are nothing new, but now may be the perfect time to scoop up shares of a small player or two…

Regards,
Byron W. King

Source: The Oil Sands in Alberta, Canada

It’s official: Our government ran a record $180.7 billion over budget in July, the Treasury Department said today. That’s just a bit over Wall Street expectations and just under the Congressional Budget Office estimate we reported Monday. Thus the government tab so far this fiscal year is a record $1.27 trillion, not the record $1.3 trillion the CBO guessed earlier this week. Phew… what a relief.

A few more scary details:

• The budget deficit is still on track to exceed $1.8 trillion by October, the end of the fiscal year. That would be four times last year’s record budget
• July spending rose to over $332.2 billion, an all-time high
• Government revenues fell 5.6% from last June, to $151 billion
• Those revenues have been lower than the same month the year before for 15 straight months.

And we doubt Uncle Sam will get much help from tax revenues anytime soon… even “cash for clunkers” couldn’t save American retail sales in July. The Commerce Department’s July retail sales number shocked the Street this morning, down 0.1%, despite expectations of a 0.8% rise.

The government’s cleverly acronymed Car Allowance Rebate System (CARS) program did help — without auto sales, the retail gauge would have fallen 0.6%. But the lowly consumer has made his point: Even with free money deals from Uncle Sam, retail is not ready to “get back on track,” as the Obama administration likes to say. In fact, even if the Street’s wish came true, we’d still be a long way from the old status quo.

In a similar vein, Wal-Mart’s latest sales numbers missed expectations this morning. While still profitable, the world’s biggest retailer saw same-store sales fall 1.2% in the second quarter — well below the Street’s forecast of a 1% rise.

Interestingly, Wal-Mart enjoyed 13 straight months of better same-store sales from April 2008-April 2009. Then they suddenly stopped reporting monthly sales and switched to quarterly. Now, in their first quarterly report, sales are down. Hmm… must be a coincidence.
We don’t blame Joe Consumer for resisting retail, even “everyday low prices.” After all, another 558,000 Americans filed for unemployment for the first time last week. Initial claims rose by 4,000, says the Labor Department today. 6.2 million people are now receiving unemployment benefits.
U.S. foreclosures rose to another record high in June,says RealtyTrac today. One in 355 households, or about 360,000 homes, were in some form of foreclosure during the month. As we mentioned yesterday, roughly one quarter of all mortgages are worth more than the present value of the homes they cover.

That’s not good for the average home price, down 15% last quarter to $174,100 (existing single-family home).

Well, at least troubled homeowners can count on the Fed to keeping pinning down refi rates… Uh-oh:
Mark your calendars… the Fed has promised to stop manipulating the bond market by October.

That’s the meat of the news from yesterday’s Federal Open Market Committee meeting. They will “gradually slow” the pace of its official Treasury purchases, but the $300 billion program will now run through October instead of ending in September, as the Fed had previously scheduled.

(Of course, as our friend Chuck Butler often points out, that’s just the official word. The Fed has other ways to skin this cat. For example, they’re rumored to be striking deals with primary dealers for post-auction purchases. Instead of making official bond purchases at the auction, the Fed will have a primary dealer buy the bonds and then sell them to the Fed… same debt monetization, but without that pesky “transparency” and media attention.)

Outside of the Treasury bond announcement, the FOMC statement was about what you’d expect: Interest rates were left at 0% and will remain “exceptionally low” for an “extended period.” While “economic activity is leveling out,” it will “likely remain weak for some time.” And, of course, “inflation will remain subdued for some time.”
“The Fed doesn’t exist to help you,” says our currency man Bill Jenkins.

“Central banks do not exist for the good of economies. They do not exist for the good of citizens. Their sole purpose is to keep the game going, and to profit from it as long as possible. After that, they clear out, leaving the taxpayers to pay off their debts. Their protection and enhancement of economies and citizens is just a means to an end. As long as it helps the profits roll in, helping others is fine. But in the end, they will foist responsibility to others.

“For us, we will trade with all this in mind as each bank assesses its role in the global finance arena… knowing that they will begin raising rates as soon as possible, and sometimes even before. When they do, it will give us huge opportunities to profit. Rising rates almost always guarantee soaring currencies.

“Particularly I would look for the U.S. dollar, Europe, Aussie and United Kingdom. Australia will provide the real runaway as long as China can get some exports up and running. If this recovery gets some legs (which is still problematic in my mind), they already have the upper hand with an interest rate multiple times higher than the others.”

Will you profit from this trend? Have Bill help you reap the benefits by checking out Master FX options Trader.
The Fed’s announcement hit just about every market…bonds, stocks, currencies and commodities.
No surprise that the Fed’s announcement hurt bond prices. Not only did they forecast the end of their official purchases, but that “leveling out” talk also hints of higher interest rates, and thus lower bond prices. The yield on a 10-year jumped as much as 10 basis points, to 3.7%, on the news. But this morning it’s already given it back on the heels of the latest retail and jobless numbers.
Stocks rallied in advance of the FOMC meeting in expectation of some kind of good news. Up 1.3% before the announcement, the S&P 500 seemed content with the Fed’s lilywhite forecast and finished up 1.2%.
The dollar was perhaps yesterday’s biggest loser. That brief “good for the economy, good for the dollar” trade from last Friday is dead in the water. Traders took no comfort in the Fed’s soothing announcement and bid the dollar index down a full point, to 78.2 as we write.
Thus commodities are on the up and up. Gold’s up about $10, to $957 an ounce. Oil gained a buck and is now just below $71 a barrel.
“I had the unique opportunity,” writes Byron King, “to tour two different oil sands operations near Fort McMurray, in northern Alberta. I saw a massive open-pit oil sands mine, and the associated reclamation effort, operated by Syncrude Canada Ltd. I also visited an in situ oil sands recovery project called Surmont, operated by ConocoPhillips.

“When we think about the concept of ’Peak Oil’ today, we need to keep in mind what we’re talking about. The curves show oil output peaking in so many parts of the world. This phenomenon is quite real, as long as you understand that it’s the light, sweet, easy-flowing oil that is getting harder and harder to find, certainly in significant quantity.

“But there are a lot of other hydrocarbon molecules out there. Most of those molecules are not light, sweet crude oil. Indeed, most of the hydrocarbon molecules that the world will use in the future will be ’heavy,’ with lots of carbon atoms and not so many hydrogen atoms.

“Here’s a graph from oil services giant Schlumberger that estimates the world’s heavy oil and bitumen resources. Canada’s 400 billion cubic meters of bitumen translates into something like 1.4 trillion barrels of oil equivalent. How much is that? Well, it’s about SEVEN times the total oil reserves of Saudi Arabia.

“Sure, there are still issues about land disturbance, settling ponds, water usage, gas usage and myriad of other things that come up when you’re spending billions of dollars on a major mining effort. But Syncrude has built its business model around dealing with the ’other’ issues, and not just moving oil sands and recovering oil products. Don’t underestimate the ability of the Alberta government to regulate its energy producers. This is a long way from Appalachia.

“Meanwhile, we’re talking about literally billions of barrels of bitumen (or oil equivalent) that the process makes available to the North American marketplace. And if the United States wants to get onto its environmental high horse about the source of the hydrocarbons from the oil sands — and tax or ban their importation — there are other buyers in the world. Like the Chinese, who have racked up many frequent flyer miles on their treks to Fort McMurray.”

There are stocks to own no matter who wins the battle over Canada’s oil sands… find them here, in the Outstanding Investments portfolio.
One surprise batch of data today: France and Germany are technically out of recession. Both nations reported 0.3% GDP growth for the second quarter today. Given that the two are now Europe’s biggest economies, that’s surprisingly good news.

Should make for some fireworks from the PIIGS (Portugal, Ireland, Greece, Spain and an extra I for Italy) when the two start pestering the ECB to raise rates.
“You mention that the short interest on stocks fell 12% in two weeks,” a reader writes. “No surprise there. With the SEC issuing its rule prohibiting ’naked short selling,’ risking personal insolvency to predict falling prices is now illegal. And just as there is now no ’downtick rule’ or mark-to-market accounting (not to mention the federal government’s interdiction against accurate financial reporting — a.k.a. ‘stress testing’ — and its outright ownership of significant areas of the economy, subsidized by the taxpayers), there is now no investment whistle to blow to sound the alarm for the unsuspecting public.

“Of course, much of the unsuspecting public is now so caught up in the economic game of musical chairs known as the Obama administration that they are too busy (and broke) to pay attention. This does not bode well for the futures of our children or our children’s children … you know, the ones to whom we are passing the buck!”
“I served in the U.S. Navy for 8 years and did my share of ’spending like a drunken sailor,’” another reader writes. “I take offense at the notion that drunken sailors spend like power-mad politicians. Drunken sailors only spend what is in their pocket or what they won playing poker on the ship, but nonetheless once they’re broke, drunken sailors quit spending (and usually pass out).

“Please have your readers try to find a more appropriate analogy to wasteful spending by crooked politicians because those of us who were, and the ones who still are, drunken sailors spend within our means on things that are important to us (booze and babes). Thank you for your attention.”

The 5: Point taken… no sense in giving drunken sailors such a bad name.

Source: Budget Insanity, FOMC Down-Low, Oil Sands Investing and More!

More importantly for the future of both companies, the combined portfolio boasts the largest oil-sands resource position, a vital but difficult source to mine.

“It’s a good opportunity for Suncor to snap up some good assets at fairly depressed prices,” Greg Smith, managing director of London-based investment adviser Fat Prophets U.K. Ltd., told Bloomberg. “Oil sands are the legitimate solution to the long-term energy problem but it’s a lot more costly to get the oil out of the ground.”

The merged company will also feature:

• A resource base with approximately 7.5 billion barrels of oil equivalent (boe) of proved (developed and undeveloped) and probable reserves, on top of an estimated contingent resource base of approximately 19 billion boe.
• A Strong cash flow from current crude oil and natural gas production of approximately 680,000 boe per day.
• A position in every major oil development project on Canada’s East Coast.
• Low-cost international crude oil and natural gas production from the North Sea, North Africa and Latin America.
• A strong Canadian retail brand.

Also, Suncor expects the merger to save $1.3 billion through the elimination of redundant spending and by targeting capital budgets on high-return, near-term projects.

“This merger creates a made-in-Canada energy leader with the assets, cost structure and financial strength to compete globally,” Rick George, President and Chief Executive Officer of Suncor, said in a news release. “The combined portfolio boasts the largest oil sands resource position, a strong Canadian downstream brand, solid conventional exploration and production assets, and low-cost production from Canada’s east coast and internationally.”

Ron Brenneman, Petro-Canada’s president and chief executive officer, said the merger reduces capital requirements, increases operating efficiencies and integrates already complimentary company operations.

“The increased scale provides more stability in volatile markets, plus the financial and organizational capability to successfully take on large-scale projects in the future,” said Brenneman, who will take the role of executive vice chairman in the merged company.

The all-share deal values Petro-Canada shares at a 25% premium, and gives Petro-Canada shareholders 1.28 common shares of Suncor for every share they own. Shareholders of both companies have to approve the merger, and both companies expect the merger will be completed in the third quarter.

Source: Suncor Buying Petro-Canada for $15 Billion, Consolidating Canadian Energy Industry

Time to “Go Underground” for Great Returns

Of course, you might think one of the last places for toe dipping would be the oil and gas industry. A recent OPEC announcement that no additional production cuts were planned for March should serve to keep oil prices low… for now.

That’s not good news for drillers, producers and anyone else in the oil industry supply chain. Many deep-water projects need oil prices of $60-70 a barrel to be considered economically viable.

But there’s one exception: pipeline operators. You see, they get paid to move or store oil and natural gas products.

One operator that sits apart from the rest is TransCanada Corporation (NYSE:TRP). TransCanada is actually two businesses: a pipeline operator and a power producer.

Its revenues are split nearly equally between the two businesses. And with shares down nearly 40% in the last year and trading at just 11 times projected 2009 earnings, the stock is sitting at historical lows.

In its pipeline operation, TransCanada owns and operates pipelines in both Canada and the U.S. It moves oil and gas from drilling sites to tank farms, refineries, processors and electrical power utilities.

Right now, the company is building its Keystone pipeline that will carry crude oil from Alberta’s oil sands operations to refineries in the south-central U.S. This line was one of four proposals that eventually won out over the competition.

It’s also applied to build a second 1,703 mile-long line that will carry crude oil, and it would supply mid-western pipelines and refinery operations in the states.

These projects aren’t cheap: this one has a projected cost of nearly $3 million dollars… per mile. But that’s fine as TransCanada has plenty of free cash flow to pay for it.

Unlike most other pipeline operators, TransCanada’s business model affords it some measure of protection from wild swings in volume and oil and gas prices, as it typically signs long-term contracts with its customers.

That’s a big plus, and one of the reasons TransCanada typically trades at slightly higher P/E multiples than its competitors.

And in a market where it seems every day another company announces it’s slashing its dividend to preserve capital, TransCanada announced just the opposite: effective at the end of March, it’s increasing its dividend. The stock now sports a yield of nearly 5%.

In summary, TransCanada is a great conservative way to play the oil & gas sector, and represents the best of the pipeline bunch.

Source: TransCanada Corporation (NYSE:TRP): Stock of the Day

Chris Mayer explains in The Daily Reckoning why investing in Africa holds such potential for profit:

Africa increasingly is right in the middle of the global quest for natural resources. It has the highest ratio of light and sweet crude in the world – the best-quality stuff you can find. And most of its oil – some 83% – comes from large fields that produce at least 100 million barrels per day.

Meaningful amounts of premium oil in large fields explains why Africa attracts so much investment. Between 2002-2006, the big oil companies tripled their spending in Africa.

The recent discovery of oil sands in the Congo by Eni, a big Italian oil group, lends more credence to the idea of Africa as the future of global oil supply. Eni hasn’t said how much resource its vast acreage might hold. But the Financial Times reports early samples suggest, “The area as a whole could hold more oil than Eni’s entire reserves of 7 billion barrels of oil equivalent.” That would put Eni’s resource on par with the huge Kashagan field in Kazakhstan. Eni potentially doubled its oil reserves with this one African find.

Right now, Africa produces only about 12% of the world’s oil output. By 2012, that could be 30%. No wonder, then, it has become such a competitive battleground for the oil companies. In a recent auction, India’s state oil company bid $321 million for an Angolan oil block. A Chinese oil giant bid $725 million. Guess who won?

It’s not just about oil, either. Africa holds tremendous amounts of natural gas, minerals, and natural resources of all kinds. Much of it is in places where it’s easy to do business. But there is often a fragile social fabric, which seems ever on the brink of a civil war or a coup or worse.

In Niger, for example, you will find some of the world’s largest deposits of uranium. Niger plans to double its output over the next several years.

Companies from all over the world – Australia, Canada, China, India, and France – scramble to lock down claims. But the uranium deposits lie in the ancestral home of the nomadic Tuareg. The Blue Men of the Desert (so-called due to the color of their favored indigo dyes) return to old ceremonial grounds to find red flags marking uranium deposits. The result is predictable – battles between the Niger army and Tuareg fighters, and bloodshed.

Yet the rewards dangling before the world’s eyes are so great. Many companies will walk the edge of that precipice for a shot at glory. A longtime holding in my Capital & Crisis advisory, Canadian Natural Resources has a mix of West African oil properties that could be significant. Another longtime holding, electrical infrastructure specialist ABB Ltd, has a big power project in Namibia and a growing presence in Africa.

Betting on Western companies that have this sort of backdoor exposure to Africa is my preferred modus operandi.

It’s far safer, for one thing. But I wouldn’t mind investing in more of a pure play if I could find a company that offers enough safety and enough upside. In my Mayer’s Special Situations letter, we recently doubled our money in Vaalco Energy, a small West African oil explorer and producer, in about eight months. So there are success stories here.

Profit Watch editor Manraaj Singh says the huge sums of money flowing from China to Africa will create great investment opportunities:

China has already invested $30 billion in Africa’s oil and gas industry. And most of that has gone to places that most Western investors would never have touched: Sudan, Chad, Equatorial Guinea, Angola, Nigeria….

Now it plans on investing $5 billion in the West African country of Niger. This is one of the poorest countries on earth. It ranks in the bottom five on the United Nations’ human development index. And the country is battling an insurgency by the magnificently blue-cloaked, be-turbaned, camel-riding Tuareg nomads in the north of the country. But the Chinese don’t seem remotely concerned. They plan to pump the country’s first barrel of oil next year. And to get it out of the country, they are going build a 2000-kilometre oil pipeline and a refinery with a capacity of 20,000 barrels a day.

Here’s another country about to become an economic annexe of the Middle Kingdom…

While we’re on the African oil industry, here’s a bit of very interesting news. Angola has now dethroned Nigeria as Africa’s biggest oil producer. Nigeria has held the top spot for decades. But militant attacks in the oil rich Niger Delta and worker strikes have undermined the country’s oil industry. In April, Angola produced 1.87 million barrels of oil per day. Nigeria produced 1.81 million barrels.

We aren’t in Nigeria. But our brilliant African play puts us in the thick of Angola’s booming economy. It owns airlines in the region and is setting-up a massive logistics centre in the country’s capital, Luanda.

That means Africa gets its proper gigantic sizing. It is truly a massive landmass.

It’s also fitting that it sits close to the center, because Africa is a big part of the future of natural resource exploration and production. In some sense, it’s retaking its historical preeminence. For instance, consider the former rich trading cities in the East.

Zanzibar, Dar es Salaam, Mombasa, Mogadishu, Mumbai, Mangalore… all trading cities along the fabled rim of the Indian Ocean. These east African trading cities thrived between the 12th and 18th centuries, with ships sailing in and out on monsoon winds.

Africa had good harbors and plentiful fish and lots to trade with India and Arabia. Ties between India and Africa, especially, strengthened under the common influence of Islam and the Portuguese. (Portugal colonized both Goa and Africa’s coast.) Africa is also home to a large population of ethnic Indians, which helps bridge trade further. One of Africa’s better known industrialists – Manu Chandaria – was born in Kenya, but his parents are from the Indian state of Gujarat.

These historical ties and those old trade routes are reviving once again. In the spring, Delhi hosted the first Indian-African summit. Trade between India and Africa tops $25 billion per year. Nigeria, for example, accounts for 10% of India’s crude oil imports. But China’s trade with Africa is a lot more – $55 billion annually. The reason for this boom in trade? A hunger for the natural resources of Africa.

Africa increasingly is right in the middle of the global quest for natural resources. It has the highest ratio of light and sweet crude in the world – the best-quality stuff you can find. And most of its oil – some 83% – comes from large fields that produce at least 100 million barrels per day. Meaningful amounts of premium oil in large fields explains why Africa attracts so much investment. Between 2002-2006, the big oil companies tripled their spending in Africa.

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The recent discovery of oil sands in the Congo by Eni, a big Italian oil group, lends more credence to the idea of Africa as the future of global oil supply. Eni hasn’t said how much resource its vast acreage might hold. But the Financial Times reports early samples suggest, “The area as a whole could hold more oil than Eni’s entire reserves of 7 billion barrels of oil equivalent.” That would put Eni’s resource on par with the huge Kashagan field in Kazakhstan. Eni potentially doubled its oil reserves with this one African find.

Right now, Africa produces only about 12% of the world’s oil output. By 2012, that could be 30%. No wonder, then, it has become such a competitive battleground for the oil companies. In a recent auction, India’s state oil company bid $321 million for an Angolan oil block. A Chinese oil giant bid $725 million. Guess who won?

It’s not just about oil, either. Africa holds tremendous amounts of natural gas, minerals, and natural resources of all kinds. Much of it is in places where it’s easy to do business. But there is often a fragile social fabric, which seems ever on the brink of a civil war or a coup or worse.

In Niger, for example, you will find some of the world’s largest deposits of uranium. Niger plans to double its output over the next several years.

Companies from all over the world – Australia, Canada, China, India, and France – scramble to lock down claims. But the uranium deposits lie in the ancestral home of the nomadic Tuareg. The Blue Men of the Desert (so-called due to the color of their favored indigo dyes) return to old ceremonial grounds to find red flags marking uranium deposits. The result is predictable – battles between the Niger army and Tuareg fighters, and bloodshed.

Yet the rewards dangling before the world’s eyes are so great. Many companies will walk the edge of that precipice for a shot at glory. A longtime holding in my Capital & Crisis advisory, Canadian Natural Resources has a mix of West African oil properties that could be significant. Another longtime holding, electrical infrastructure specialist ABB Ltd, has a big power project in Namibia and a growing presence in Africa.

Betting on Western companies that have this sort of backdoor exposure to Africa is my preferred modus operandi.

It’s far safer, for one thing. But I wouldn’t mind investing in more of a pure play if I could find a company that offers enough safety and enough upside. In my Mayer’s Special Situations letter, we recently doubled our money in Vaalco Energy, a small West African oil explorer and producer, in about eight months. So there are success stories here.

Ryszard Kapuscinski, the late journalist, once wrote that Africa was too large to describe. Africa was “a veritable ocean, a separate planet, a varied, immensely rich cosmos.” (The Heat of the Serengeti Plain, 1962) “Only with the greatest simplification,” he wrote, “can we say ‘Africa.’ In reality, except as a geographic appellation, Africa does not exist.”

I think the same holds true today. But one generalization is safe to make: Africa is in the thick of the race for more natural resources.

Good investing,

Chris Mayer Editor’s note: Chris Mayer is the editor of Capital & Crisis, an investment advisory we read religiously at DailyWealth. If you’re an investor in agriculture, mining, energy, and infrastructure, Capital & Crisis will become some of your favorite monthly reading. Click here to learn about one of Chris’ top ideas right now.

Source: A Potential Oil Sands Boom You’ve Never Heard Of

“As the post-Memorial Day hangover lingers, and $4 per gallon gasoline becomes a national reality, expect more and more daily energy prognostications,” says William Patalon III in Money Morning.

“Goldman Sachs Group Inc. (GS) already is on record for $200-a-barrel oil. As you all know, our own Keith Fitz-Gerald has projected a crude-oil price of $225 a barrel. Do I hear $250? What about $5 a gallon gasoline by July 4th?

“Sometimes, these daily price gyrations take on lives of their own, but at the end of the day, the basic laws of supply and demand always work themselves out.”

There’s a new oil rush going on in Alberta, Canada, says Alex Green in InvestmentU: “Alberta’s oil sands are the largest known reserve of oil on earth containing between 1.7 and 2.5 trillion barrels.”

“For decades, these sands weren’t even considered part of the world’s oil reserves because the oil there wasn’t economically extractable at prevailing prices using then-current technology. But times have changed… And the new gold rush is on.

“Here’s the kicker: Exploration of Alberta’s oil sands is virtually risk-free. You can’t drill a dry hole here. There’s no drilling at all. It’s a mining operation – and the reserves are thoroughly outlined. So what you really need is a company with plenty of machinery, money and manpower to dig it up and process it as quickly as possible.”

Read on here to find out the one undisputed blue-chip play on Alberta’s oil sands.

Indonesia, the only OPEC member in Southeast Asia, will pull out of the group as aging fields and declining production force the region’s biggest economy to boost imports.

Energy Minister Purnomo Yusgiantoro will sign a decree today to exit the Organization of Petroleum Exporting Countries, he told reporters in Jakarta. The nation, a member since 1962, has been considering leaving the body in the past three years.

As OPEC shrinks in numbers, there’s a new oil rush going on in Alberta, Canada.

“Alberta’s oil sands are the largest known reserve of oil on earth containing between 1.7 and 2.5 trillion barrels,” says Alex Green in InvestmentU. (Saudi Arabia, by comparison, has only 262 billion barrels of proven reserves. In fact, all OPEC nations combined have less than 900 billion barrels.)

“For decades, these sands weren’t even considered part of the world’s oil reserves because the oil there wasn’t economically extractable at prevailing prices using then-current technology. But times have changed… And the new gold rush is on.

“Here’s the kicker: Exploration of Alberta’s oil sands is virtually risk-free. You can’t drill a dry hole here. There’s no drilling at all. It’s a mining operation – and the reserves are thoroughly outlined. So what you really need is a company with plenty of machinery, money and manpower to dig it up and process it as quickly as possible.”

Read on here to find out the one undisputed blue-chip play on Alberta’s oil sands.

The good news is that there is new oil production capacity in the pipeline this year and next,” says Dan Denning in The Daily Reckoning Australia.

“Keep in mind that the final investment decision on the projects entering into production this year was made anywhere from 3-6 years ago. That shows you how far in advance you have to plan for new production (assuming you’ve even found oil in the first place).

“There are some massive LNG and natural gas projects coming on-stream between 2011 and 2015. Gazprom, Shell, BP, and ExxonMobil all look like big winners, should oil prices stay high and pass through to higher LNG prices.”

Crude prices jumped on Monday in electronic trading as news of the attack broke, but analysts said the impact on prices spilled over into Tuesday, when exchanges on both side of the Atlantic re-opened after the long weekend.

“Is it demand? Is it speculation? Is it OPEC punishing George Bush for the war in Iraq?” asks Dan Denning in The Daily Reckoning Australia. “OPEC thinks there’s plenty of oil. It’s the declining U.S. dollar that’s to blame. OPEC says that for every one percent decline in the dollar oil rises by US$4, and vice versa.

“The solution to high oil prices, then, is not increased supply or reduced demand, but a stronger U.S. dollar! Well, there is certainly some truth to that, but it is not likely to happen any time soon. As a tangible good whose supply cannot be increased by a central banker, the oil price (a little like the gold price) tells you there’s too much paper money chasing too little stuff.”

Alexander Green in Investment U has identified a new, highly profitable oil source: “Alberta’s oil sands are the largest known reserve of oil on earth, containing between 1.7 and 2.5 trillion barrels. (Saudi Arabia, by comparison, has only 262 billion barrels of proven reserves. In fact, all OPEC nations combined have less than 900 billion barrels.) For decades, these sands weren’t even considered part of the world’s oil reserves because the oil there wasn’t economically extractible at prevailing prices using then-current technology.

“But times have changed… And the new gold rush is on.

“In Alberta’s oil sands, energy companies don’t drill for oil. They dig it up. After excavation, giant trucks three stories high – carrying up to 400 tons of oil sands – carry it off to a processing plant.”

Read on here to find out how to cash in on the tar-sands “black gold” rush with this oil mining company.

Approved by the FDA in early 2006, Sutent is the first drug to be simultaneously cleared for use in two different types of cancer – kidney and stomach. Sales leapt to $600 million last year and may cross the $1 billion mark this year… giving it “blockbuster” status.

Those revenues would make the average biotech stock explode. Onyx Pharmaceuticals, for example, enjoyed a similar launch with kidney-cancer drug Nexavar in 2005. Shareholders saw 300% gains in two years.

So who made a killing on Sutent? No one. That’s because Sutent accounts for less than 5% of its maker’s sales. And despite Pfizer’s success with the drug, its revenues are essentially flat. Shareholders are down 30% since the launch.

Compare that decline with Genentech, the world’s biggest biotech and the cancer market’s biggest player. Its stock is up roughly 60% since its top-selling cancer drug, Avastin, was approved in 2004.

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Penny Stock set to drill Canada’s largest oil sands field.

Canada’s single largest oil sands holding – over 707,700 acres – is now controlled by a tiny $4 stock

They’re conducting tests to determine how much oil is buried beneath their land… Preliminary estimates are 60 BILLION barrels of oil.

The results are due back in any day… that’s when I expect this tiny company’s share price to rocket to $20… $30… possibly even $50 a share.

To read more on the story, click here.
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Good cancer drugs command huge price tags, some as much as $65,000 per year. And cancer causes more deaths than any other disease. The cancer-drug market is forecasted to double in the next five years to $85 billion per year.

So Sutent was Pfizer’s first salvo in the battle for Genentech’s market. The company has boosted its cancer research spending to roughly $2 billion per year, about 20% of its massive research and development budget. And it has 18 new cancer drugs in its pipeline.

Yet, as long-time Growth Stock Wire readers know, I believe Pfizer’s efforts are too little, too late… The drugmaker has already lost $6 billion in annual sales in the last two years as blood-pressure drug Norvasc and allergy drug Zyrtec have lost patent protection. And Sutent can’t compare to Pfizer’s biggest winner, Lipitor, which loses patent in 2011.

Pfizer would need a dozen or more drugs just like Sutent to replace the $12 billion in lost sales from its Lipitor franchise. The company would be enormously lucky to turn one or two of its 18 other candidates into a blockbuster product, let alone 10 or more.

Pfizer’s efforts in the cancer field are admirable. And, yes, Sutent is a fantastic drug. But the company’s hard work and big spending won’t save its shareholders. Pfizer will be dead money for years to come.

The same is true for the rest of Big Pharma. Sales worth $100 billion are set to go off patent by 2012. The big drugmakers won’t be able to innovate their way out of that.

What they will do is try to buy their way out, cherry-picking the best drugs in development from the biotech sector by buying entire companies. Of course, there’s a limited number of attractive biotechs… and a dozen or so big drug companies on the prowl. Pfizer and its peers will have to pay biotech shareholders hefty premiums to win the bidding process. In the end, Big Pharma investors lose, biotech investors win.

It’s likely Pfizer – or some other big drug stock – is hiding out in your retirement portfolio. If so, the position is down 30% or more over the last four years. Do yourself a favor: Dump your shares immediately and consider taking a look at the biotech sector.

Pfizer and the rest of Big Pharma may not fall very much from here, but even the biggest blockbusters won’t give these stocks the boost they need.

Good investing,

Rob
Source: Do Yourself a Favor and Dump These Stocks Immediately