Mega Profits from the Oil Reserve 8 Times Bigger Than Saudi Arabia’s

Earlier this month, I questioned whether the recent spike in oil prices was a potential bubble. The price of crude has more than doubled in a year and there are some reasonable doubts whether oil can maintain these levels.

No one can say for certain, of course.

But whether prices continue to rise or not, there are plenty of opportunities out there for investors looking to capitalize on the world’s long-term needs for oil. Some believe the meteoric rise in oil we’ve seen over the last three years is a temporary phenomenon. T. Boone Pickens isn’t one of them.
 

The long-time oilman, and current chairman of BP Capital Management, was recently asked in a 60 Minutes interview when he thought we’d see $1.50 a gallon at the pump again. “We won’t ever see $1.50 a gallon again,” said Pickens. “No, that’s gone.”

It’s tough to disagree. On the demand side, citizens of the wealthy West aren’t using any less oil, nor are the up-and-coming Tigers of the East.

On the supply side, just look at many of the world’s biggest exporters: Iran, Nigeria, Venezuela, Saudi Arabia and Russia. It’s a virtual rogues’ gallery, filled with nations that represent tyranny, corruption or instability.

Fortunately, the world’s single-largest oil deposit sits right here in North America. Time magazine calls it “Canada’s biggest buried treasure.” It’s an area with up to 2.5 trillion barrels of oil, locked in Alberta sand. That’s eight times the total reserves of Saudi Arabia, enough to satisfy the world’s demand for petroleum for the next century.

This is easily the world’s most exciting energy story.

And one publicly traded company is supremely positioned to earn billions from this region in the months ahead.

The Competition For Oil Is Heating Up

In May, the International Energy Agency (IEA) revised upwards its estimate of world oil demand, squashing hopes that a significant decline in oil prices is imminent.

Demand growth this year is running at its fastest level in 24 years. Last year, world oil use was estimated at 82.6 million barrels a day. The United States burns a quarter of that. But competition for oil is heating up.

Emerging markets - and particularly giants like China and India - are rapidly industrializing. According to the U.S. Energy Information Agency, world demand for oil is expected to increase 54% over the next 25 years.

Unfortunately, American oil production has been on the downswing since 1970. And many of the world’s major oil suppliers are either indifferent or downright hostile to U.S. interests. Where can Americans look for a steady, reliable source of black gold?

How about 900 miles north of Montana, in Alberta, Canada?

Jed Clampett Never Imagined…

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.

There, the sands are heated in a cell where the oil comes to the top of the water and the sand drops to the bottom. This oil froth is then sent to an upgrader and eventually to a refiner. Is this oil really as good as the stuff coming from Saudi Arabia?

Actually, it’s better. According to Clive Matter, Chief of Shell Canada, this oil is “absolutely as good as it gets. In fact, it even trades at a premium because it’s high-quality crude oil.”

And 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.

That’s why you should own Suncor Energy (NYSE: SU).

The Blue Chip Oil Sands Play

There are dozens of small companies flocking to Alberta for a piece of the action. But in this capital-intensive business, why gamble on the small fry? We suggest you opt for the undisputed blue chip play: Suncor.

Based in Calgary, Suncor is an integrated energy company. It extracts and upgrades oil through its oil sands operations near Fort McMurray, Alberta. Its operations throughout Western Canada produce natural gas.

It operates a refining and marketing business in Ontario, with retail distribution under the Sunoco brand. And it has operations in the United States and retails its products under the Phillips 66 brand. It also manufactures the gasoline additive ethanol.


Low oil production means more profit for Exxon

Recently we told you about oil execs explaining to congress how $123 billion in profits should entitle them to an additional $18 billion in the form of subsidies. I realize many of you out there have a lot of sympathy for their position and have spent the intervening time hounding your Congresspersons on their behalf. I mean, this is America and that means energy corporations have the right to do whatever they want - and if we don't like it we can buy a bicycle (I recommend a bicycle regardless. They are great for your health). One of the reasons these companys' hands are out-stretched beggar-like is because (they claim) they need money for further exploration and development. I don't know why they didn't have this part of the equation in their business model to begin with but hey, everyone makes mistakes. Year after year after etc. etc..

How my eyebrows did raise then when reading this article about Exxon (XOM) not increasing oil production so as to keep their record profits high, on Business Week. It is common practice now for oil companies to simply trade any capitol invested in new projects for the equivalent in oil so the countries are paying them to drill directly from their oil reserves. So why do they need our money again?

I know this may sound like a direct quote from Captain Obvious but oil companies like Exxon don't really care if Americans are struggling to keep their houses and buy food because of their desire to see higher profits which is reason number 643 why I intend my next new car to be electric. End rant.

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