Central Asia and Africa look set to be the biggest winners as nervous energy importers look for alternative supplies far from the volatile Middle East. Let me show you an unusual way to profit from this trend.

As tensions rise in the Middle East over Iran’s recent missile launches, one glaring fact comes home to us: Energy resources located far from the madness of the Middle East have never been more valuable.

The big winners from this are going to be Africa and the Central Asia. We’re already positioned to profit from West Africa’s oil boom through our investment in one small AIM-listed company. Increasingly, I’ve been looking for the best way for Profit Hunter readers to cash-in on the scramble for Central Asia’s energy resources.

The New Great Game

In the 19th century, Britain and the Russian Empire contested for strategic influence in Central Asia. Historians dubbed it the Great Game. Today, we’re seeing a much more diverse bunch of players in the region. The Russians are still in there, but so are the Americans, the Chinese and even the Indians.

In the past few years, these countries have been setting-up military bases across the region. The Americans have several bases in Central Asia, including Afghanistan. The Chinese and Russians have a military presence there and even India, the smallest player of the lot, has set-up an air force base in Tajikistan.

And it’s all about protecting their growing energy interests in the region.

There is a huge amount going on here

I’ve talked quite a bit about how China has already invested more than $30 billion in African oil and gas assets in order to lock-up a secure supply of energy for its industries. But it’s a long way from Africa to China. So, the Middle Kingdom’s rulers are looking for energy sources closer to home that are going to be harder to disrupt if there’s ever an international conflict.

Good thing for them that they’re right on the doorstep of one of the most energy-rich regions on the planet…

Right now, Russia is the biggest player in Central Asia’s energy industry. Its gas monopoly, Gazprom, is the biggest buyer of Central Asian gas. But China is now building a alternative pan-Central Asia gas pipeline that will link the Caspian Sea gas reserves to its energy-hungry market.

This is the first major independent gas link connecting Central Asia with eastern markets while bypassing Russia. China’s pipeline will start delivering gas by 2010 and should be completed by 2013.

Again, we’re seeing something similar happen in Kazakhstan, the region’s biggest oil producer. About four-fifths of Kazakhstan’s oil is now exported through Russia’s pipeline system. Half of the rest is exported through the Georgian Black Sea port of Batumi. The rest goes to China, which wishes to quadruple its oil imports from Kazakhstan from 100,000 to 400,000 barrels per day by the end of the decade.

As part of their economic drive into the region, the Chinese are now setting-up an extensive network of railway links to the oil-rich regions of Central Asia Their network will begin in the western Chinese province of Xinjiang and run to Kyrgyzstan, Uzbekistan and Kazakhstan.

The new rail links are meant to break China’s dependence on sea routes which are closely monitored by US military ships, for its energy supply. The scale of China’s plans in the region is already setting-off alarm bells in the S government and in Indian oil companies seeking oil assets in Central Asia.

Now India itself is on the verge of signing a $7.5 billion deal with Iran to build a natural gas pipeline that will run across its old rival Pakistan and help provide the energy it needs to fuel its economic growth.

Meanwhile, the Americans are promoting a $7.6 billion gas pipeline that will run from Turkmenistan down through Afghanistan, Pakistan and India. Turkmenistan is sitting on the biggest gas reserves in Central Asia. The pipeline is part of the Americans’ plan to keep Iran isolated by providing India with an alternative source of energy and to break Russia’s dominance of Central Asia’s energy resources.

How you could profit from this

Oil hit another new high of $147.50 last week and that could go a lot higher if Israel and the US actually do launch a strike on Iran. Add-in growing energy demand from India and China, and you can bet that the contest for Central Asia’s energy resources is just getting started.

It’s all fascinating to watch as a geo-political contest, of course. But what we’re interested in is a way to profit from the development of Central Asia’s energy resources. And the number of actors involved in this new scramble means that we could find that opportunity just about anywhere.

Just last month we saw a Mongolian oil-exploration company listing here in London. Incidentally, that’s the first Mongolian company that I’ve come across listed on any international market.

Fortunes are going to be made by those positioned to benefit from the flood of new investment flowing into Central Asia’s energy sector. Here at Profit Hunter, we’re keeping our ears close to the ground on this opportunity. In the meantime, you can read all about the totally off-beat backdoor play that we found on the other super-hot energy region, West Africa, by clicking here.

Regards,
Manraaj Singh
Editor
Profit Hunter

Sources: The Struggle for Central Asia’s Energy Resources