Dick Cheney's Plan Worked Perfectly... for the Chinese
By Matt Badiali
July 28, 2009
Today's situation in Iraq isn't what Dick had in mind.
From 1995 to 2000, Cheney served as CEO of oil-service giant Halliburton. He developed a strategic energy plan that hinged on one thing – U.S. domination of the Middle East. Then in 2001, attacks on the U.S. gave the newly minted vice president exactly the political climate to further his aims.
On March 20, 2003, the United States attacked Iraq – home to the world's third-largest oil reserves. Later that same year, President Bush stood on the deck of the USS Abraham Lincoln and declared the "mission accomplished" in Iraq.
But our occupation angered the entire Muslim world. Enraged teens from all over the region flocked to Iraq and joined the insurgency. That didn't exactly entice oil companies into the region. The idea of trying to pump oil in a shooting war was a little too much risk for nearly everyone.
On the other hand, our invasion liberated the Kurds, a repressed people in northern Iraq long hated by the former regime. While our forces fought insurgents in the south, the Kurds consolidated the north. Out of the rubble rose a semi-autonomous and oil-rich state – Iraqi Kurdistan.
The relative safety and incredible oil riches proved a strong lure to companies willing to take political risk. Few U.S. companies braved the conflict, but a Canadian company called Addax Petroleum was one of the earliest into the region. Founded in 1994, Addax braved political risk to become the largest oil producer in Western Africa.
In 2004, the company entered Iraqi Kurdistan and soon partnered with Turkish oil company Genel Enerji. Addax took on a 36% interest in the Taq Taq field, a potentially world-class oil discovery. Wells in Taq Taq produced as much as 29,000 barrels of oil per day during testing. That's an enormous amount of oil from a single well...
As the war in the south cooled and U.S. forces prepared to leave, Kurdistan set up export routes – by truck at first, then by pipeline – to sell its oil to the world.
I told readers of the S&A Resource Report about Addax in early May 2009. That was just before oil exports began at Taq Taq. I thought our investment in the company would be long and profitable... I was half-wrong.
Just weeks after oil exports began, Sinopec – a Chinese quasi-national oil company – put in an offer to buy Addax at $52 per share. (For Resource Report readers, that represents a 53% gain in a couple of months.)
That was the first of several Iraqi oil investments by Chinese firms. The partnership between Chinese National Petroleum Company and British Petroleum won the only production license awarded in Iraq in June. The two companies will produce oil from the 17.7 billion barrel Rumaila Field, one of the biggest "elephants" ever discovered.
The majors will continue to take on Iraqi oil production deals over the next few months. Thing's haven't played out the way Dick Cheney imagined all those years ago... but then, what has?
Shareholders in the major oil companies aren't going to reap a huge benefit from these kinds of deals. The real moonshots are junior oil companies with exploration rights in Iraq. If you want the chance for 1,000% gains (or 55% gains in a few weeks), find a company looking for elephants in Iraq.
Good investing,
Matt Badiali
P.S. Normally, I wouldn't recommend going near a place like Iraq – the risks are huge. But in this case, I think the rewards can be more than worth it. If you're interested in taking a chance on making enormous gains on a tiny investment in Iraqi oil, click here for the whole story. |
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Oil-services climb... Colombian driller Ecopetrol hits a new high, sector fund PXJ up 20% from July low. |
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Agricultural giant Archer-Daniels-Midland hits 52-week high after 17% July jump. |
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Sugar hits three-year high... rumored global shortfall drives prices up 55% this year. |
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Earnings today... Coach, Norfolk Southern, Office Depot, US Steel. |
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Last |
Change |
52-Wk |
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78.43 |
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1.43 |
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| VIX |
23.09 |
-1.45% |
-1.49% |
| HUI |
361.15 |
+0.22% |
-10.37% |
| 10-Year Yield |
3.67% |
-0.04 |
-0.32 |
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Industry |
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WES |
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SolarWinds |
SWI |
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Magellan Midstream |
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MU |
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Schering Plough |
SGP |
Big Pharma |
Mellanox Tech |
MLNX |
electronics |
Constant Contact |
CTCT |
marketing |
Bridgepoint |
BPI |
for-profit ed |
NewMarket |
NEU |
chemicals |
CAE |
CAE |
defense |
China Southern |
ZNH |
airlines |
Cerner Corp |
CERN |
health IT |
Wipro |
WIT |
software |
Bio-Reference Labs |
BRLI |
medical research |
VanceInfo Tech |
VIT |
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Universal Forest |
UFPI |
lumber retail |
FormFactor |
FORM |
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Inergy |
NRGY |
gas distribution |
AmeriGas Partners |
APU |
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TEPPCO Partners |
TPP |
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Archer-Daniels |
ADM |
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Vanda Pharma |
VNDA |
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Holly Energy |
HEP |
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BCSI |
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Euronet Worldwide |
EEFT |
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Suburban Propane |
SPH |
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WMS |
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Sinopec Shanghai |
SHI |
synthetics |
Kubota |
KUB |
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China Fire |
CFSG |
industrial products |
Buckeye |
BGH |
oil & gas pipelines |
Cninsure |
CISG |
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Semtech |
SMTC |
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HLTH |
HLTH |
health IT |
Copa Holdings |
CPA |
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MV |
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Baidu |
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online search |
Ebix |
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software |
Calumet Specialty |
CLMT |
oil & gas refining |
Lance |
LNCE |
snack food |
NuStar |
NSH |
oil & gas pipelines |
TC PipeLines |
TCLP |
oil & gas pipelines |
Sunoco Logistics |
SXL |
oil & gas pipelines |
Cree |
CREE |
semiconductors |
Addax Petroleum |
ADXTF |
oil & gas refining |
Ecopetrol |
EC |
oil & gas drilling |
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| Company |
Sym |
Industry |
N8 Concepts |
NECO |
clothing stores |
Hampton Roads |
HMPR |
bank |
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