How to Take Advantage Of The Deepwater Crude Boom
Imagine owning Exxon Mobil twenty years ago… now up 1,208%. Or, shares of PetroChina, the world’s largest oil company, which are up 889% since this decade began.
This is the kind of investing in offshore oil opportunity we’re talking about, because a massive energy breakthrough just took place…
It happened 27,000 feet beneath the seafloor. It involved a stunning new discovery of offshore oil, or deepwater crude as it’s sometimes called.
27,000 feet is long way down. It’s about the same distance down as some commercial flights are up.
Just five years ago, we didn’t have the technology to find or gain access to oil that deep. Now we do. And a few bold explorers are coming across huge, untapped resources…
Take, for example, the biggest offshore oil find in the western hemisphere — and maybe the largest field anywhere — for at least 30 years…
It’s an area almost 500 miles long and 100 miles wide… with the potential to hold 100 billion barrels of oil… possibly the largest single oil prospect anywhere in the world. It’s so new that the geologists and engineers are still working to figure out how big it is.
But right now, I’ve heard informed estimates that this new oil bonanza might turn out to be bigger than all the reserves in Iran or Russia. Even bigger than the legendary Ghawar oil field in Saudi Arabia. In fact, it’s bigger than almost all the oil fields in Iraq put together.
This is the game changer. Fortunes will be made.
The discovery that I’m talking about is off the coast of Brazil. The initial well located an oil reservoir that the Brazilians have named “Tupi.” Just this one field holds 8 to 12 billion barrels of recoverable oil. It’s about the size of the giant field at Prudhoe Bay, Alaska. And there’s MUCH more to come.
This one offshore oil find is turning the industry upside down. News of a find this big has opened up the playbook for more discoveries… especially so for several well-equipped oil companies and service providers.
In the next page or two, I’ll explain why investing in offshore oil could offer you windfall profits. And I’ll give you a few ideas on how to play the deepwater crude boom in your portfolio.
This is an industry bound to skyrocket and now’s your chance to get a piece of the action. Let’s get started…
Offshore Oil Investing
Understanding the Critical Subsea Technology
Could you work beneath 9,356 feet of seawater? That’s almost two miles, and no human being can survive in water that deep.
How about going down there in a submarine? Could a Navy nuclear submarine operate that deep? Nope. I can’t tell you how deep Navy submarines dive (it’s classified). But I can say that 9,356 feet is more than four times deeper than the crush depth of even the most powerful sub.
Human beings aren’t meant to go that deep. So, the trick is to build equipment that can do the work that needs to get done. And there are only a handful of companies in the world that can do that.
To top if off, getting to the sea floor is only half the battle. Once you reach the seafloor, you need to go through another 10,000-20,000 feet of rock and salt formations to get to the oil. The chart below gives you a quick feel for it…
In short, offshore oil exploration work will require phenomenal levels of investment. Invest in the companies providing that infrastructure and you’re set to grow wealthy. I’ll show you how to play it in a second…
But first, if you’re still skeptical about the prospects of drilling in water 10,000 feet deep… and then through 10-20,000 feet of salt formations, I can understand. So here’s proof that deepwater crude is only a matter of time – direct from one of the world’s leading oil men…
Offshore Oil Investing…
Because “There’s Nothing Left to Drill” On Land!
The world’s oil exploration and production is migrating offshore into deep water. Because, as scholar of the oil patch T. Boone Pickens said, “There’s nothing left to drill.”
T. Boone had a darn good point. There are far fewer onshore opportunities now than there used to be. Most of the biggest onshore oil and gas prospects are either already drilled — North America’s been drilled like a pin cushion — or locked up for environmental or political reasons, like the Arctic National Wildlife Refuge in Alaska or Venezuela’s Orinoco Belt.
Offshore Oil Investing
Moving Further Offshore, Into Deepwater
It used to be that the shallow coastal areas were good bets. Over the past few decades, the shallow coastal waters yielded immense volumes of oil and natural gas. In the U.S., oil companies have been drilling in the shallow waters of the Gulf of Mexico since the 1940s. They even drilled offshore Southern California in the 1960s. But the good shallow offshore prospects are pretty much drilled by now. So, the industry is moving further offshore into deepwater, defined as more than 1,000 feet.
Deepwater crude is a key focus of the international majors. Why? Well, as I mentioned above, the onshore areas in the U.S. are mostly drilled-up. Other large swaths of land are off limits. And overseas, the big international companies are frozen out of many regions due to resource nationalism and related politics. Most oil-prospective countries have their own national oil companies (NOCs), like Saudi Aramco, or Pemex in Mexico, or Petroleo de Venezuela (PdVSA).
So what does a large, Western oil company have to do? Go offshore, where the new energy frontiers are located, and the competition from NOCs is much less.
The energy industry has new geological models and better geophysical technology and data. Today, we’re benefitting from vast improvements in signal processing and data crunching. We live in a time of revolutionary advances in drilling capability.
So here’s the bottom line. What used to be trackless, wave-tossed ocean is now prime oil patch real estate. Today we are seeing phenomenal success rates for exploration, along with super high-output wells.
Offshore Oil Investing
The World’s Most Significant New Discoveries
Some of the world’s most significant new discoveries are coming from deepwater. Earlier, I mentioned the 8 – 12 billion barrel Tupi field that Brazilian state-owned Petrobras found a few years ago offshore Brazil. In a recent trip to Rio di Janeiro, I actually laid my hands on some of the tools that made the trip down to the bottom of that well, through a mile and a half of water and over 4 miles of rock.
Now that the Brazilians know what they’re looking for, the Tupi discovery is only scratching the surface. Almost every month there’s another report of new deepwater crude finds from offshore Brazil.
But the deepwater crude is not restricted to Brazil. You also see significant investment and discovery in the Gulf of Mexico, off West Africa, in the Mediterranean, in the North Sea, in the Asia-Pacific Region. And eventually, it’s going to move up north into the Arctic.
Close to home, some of the newest deep-water fields in the Gulf of Mexico are scheduled to produce nearly 250,000 barrels of oil per day when they reach peak output. There’s much, much more coming from offshore oil investing.
Offshore Oil Investing
Extracting the Deepwater Crude
It’s one thing to find deposits of deepwater crude. It’s quite another thing entirely to extract all that oil. Once you find the oil, then you have to invent a system for bringing it up and ashore. Somebody has to design the system, engineer the equipment, schedule the massive — miltibilion dollar — construction effort. Just the logistics are a major project in and of themselves.
Then, after it’s installed at the bottom of the oceanic abyss, you have to be able to run the project for years. It’s an astonishing level of technology.
The engineering and logistical hurdles of operating far from shore, in open ocean, are immense. Then there’s also the extreme water depth, and the high temperature and pressure of fluids that come up from below the seabed.
You have to figure out how to handle underwater oil and gas when it’s flowing at pressures of tens of thousands of pounds per square inch. You also have to determine how to get it ashore from hundreds of miles out at sea. And, of course, you have to manage the program. You have to be able to drill and maintain wells and equipment over time.
Offshore Oil Investing
More Deepwater Crude Profits Are On The Way
As you can see, finding offshore oil and extracting deepwater crude are complex and expensive tasks. But, if you know the right companies to look at, investing in offshore oil could make you a fortune.
The easiest way to play the boom in offshore oil is to invest in the companies doing the exploration. Ones like Petrobras, the giant Exxon Mobil, and major independents like Hess.
If you’re looking for a little more speculation, try looking at the smaller companies supplying the technology – the ones making the drill bits… the ones building the offshore oil drilling rig ships… and the ones providing the 3-D and 4-D maps of the ocean floor.
We’re sure the price of oil will continue to appreciate over the years — in true peak oil fashion. We also believe your best chance to profit is by owning the companies that can get the hard-to-find offshore oil out of the deepwater.
You have my word that these offshore oil-investing opportunities will be exciting and lucrative!
Thanks for reading…
Energy Editor for The Daily Reckoning