Byron King

While BP has been busy spewing oil into the Gulf of Mexico, many other oil companies have been busy finding oil under the waters of other gulfs, seas and oceans. In fact, Brazil’s state-controlled energy giant, Petrobras (NYSE:PBR), just announced a major oil discovery in offshore Angolan waters. Water depth is about 1,500 feet. The “net pay” zone is almost 1,500 feet of oil-bearing reservoir, far below the seabed. The preliminary estimate is that there are over 500 million barrels or recoverable oil in place. That’ll likely grow, as additional wells go down over time. It’s always nice to strike oil.

The offshore block, where the discovery is located, is operated by Italian oil company Eni, which holds a 35% stake. Petrobras and Statoil each hold 5% stakes. Angola’s national oil company (NOC), Sonangol, holds 15%. The balance is held by SSI Fifteen Ltd. (20%), France’s Total (15%) and Falcon Oil Holdings (5%).

It may not seem like a big deal that Petrobras and Statoil are 5% owners in this discovery. Except this is just the tip of the iceberg for these two oil companies. Petrobras and Statoil each hold many other Angolan blocks, with much larger interests. What’s going on is that they’re drilling, exploring and proving up their acreage, but spreading the risk among numerous firms and using other people’s money.

Notice the truly international nature of this one large discovery. You’ve got Brazil’s Petrobras and Norway’s Statoil. Then there’s Angola’s home team NOC, Sonangol, which seems a very competent firm from my dealings with them. You’ve got French and Italian companies. Plus, a large US independent. This kind of risk sharing is the nature of things these days, particularly with super-expensive deep-water exploration.

The moratorium on drilling in the Gulf of Mexico will only accelerate the “internationalization” of oil exploration. With the moratorium, deep-water drilling rigs will leave the Gulf. The newest, most modern, most capable rigs (and the “safest,” if you REALLY care about safety) will be the first to go. They’re in demand from firms like Petrobras and Statoil to drill in places like Angola and Namibia.

Then the US-based offshore work force will migrate to other things. The vendor base and supply chain will contract. Wells that don’t get drilled in the next six months in the GOM won’t be around in 18 months to supply oil. It’s going to come back around and hurt the US very badly as time goes by.

Not to put too fine a point on it, but this moratorium on deep-water development in the Gulf of Mexico is national energy suicide. It’s pure folly. It’s political theater, from pathetic, energy-ignorant politicians who want to give the appearance of doing something.

So you’re reading it here. The US is sowing the seeds for its next major energy crisis by screwing up its domestic deep-water oil industry. But meanwhile, the moratorium will create new urgency to explore and develop deepwater projects elsewhere in the world. I recently told the subscribers of Energy and Scarcity Investor about a small Canadian oil developer with BIG acreage offshore Namibia. Out of deference to my Energy and Scarcity subscribers, I can’t divulge the name of Company “X”. But I’ll share a few details about it, just to give you a flavor of the terrific investment opportunities that are now emerging.

Company “X” holds astonishingly large acreage in oil prospective waters in the southerly regions of Namibia’s offshore. We’re talking about HUGE amounts of prospective oil resource – in the billions of barrels. Yes, billions.

How good is the acreage? Well, let’s look at the neighbors. You’re known by the company you keep. Petrobras holds the Namibian blocks to the north. Shell holds the South African blocks to the south. Company “X’s” acreage also surrounds a multi-trillion cubic foot natural gas discovery. This natural gas field also contains oil. The oil comes from an “oil kitchen” that the seismic indicates is deep, and to the west, of the gas field. And that’s EXACTLY where Company “X” holds prime acreage.

What else? Well, if you do the plate tectonic reconstructions, you can see that Namibia used to be right next to what’s now Brazil, in South America. And what part of Brazil did Namibia used to be close to? Why, the pre-salt areas off Brazil which hold oil resources in the range of 100 to 200 billion barrels – although the Brazilians hate it when people like me use such large numbers. “We really have not found all that oil, not officially,” one Brazilian told me. No, not yet. But it’s just a matter of time.

To be perfectly accurate, most of the Namibian offshore doesn’t have the miles-thick salt layers that we see in Brazil. But that’s just an issue of the “seal” over the oil-bearing structures. The Namibian waters, instead, have miles-thick shale formations acting as a seal over the oil-bearing strictures.

In many respects, the shale cap makes for better seismic and better drilling conditions. Shale tends to be more transparent to seismic energy, which makes for better resolution of the deep structures. That makes for more accurate drill-hole placement.

Plus, those Brazilian salt-beds are a pain, as the Halliburton people have explained to me. When you drill in deep, thick salt the salt tends to move in a “plastic” manner. It squeezes the hole thinner. Sometimes, the salt-squeeze even sort of “grabs” the drill pipe. Bottom line is that it makes for tricky down-hole operations.

Despite these challenges, exploration activity is heating up on both sides of the southern Atlantic Ocean. On the eastern side, the “Namibian Oil Rush” is still in the early stages. Opportunity abounds.

Byron King
for The Daily Reckoning

Byron King

Byron King is the editor of Outstanding Investments, Byron King's Military-Tech Alert, and Real Wealth Trader. He is a Harvard-trained geologist who has traveled to every U.S. state and territory and six of the seven continents. He has conducted site visits to mineral deposits in 26 countries and deep-water oil fields in five oceans. This provides him with a unique perspective on the myriad of investment opportunities in energy and mineral exploration. He has been interviewed by dozens of major print and broadcast media outlets including The Financial Times, The Guardian, The Washington Post, MSN Money, MarketWatch, Fox Business News, and PBS Newshour.

Recent Articles

In the Downdraft of Hormegeddon

Bill Bonner

The economist Milton Friedman didn’t go far enough when he said, “Concentrated power is not rendered harmless by the good intentions of those who create it.” Oftentimes, that power is rendered more harmful -- to the point of Hormegeddon -- the better the intentions behind it. In today's essay, Bill Bonner highlights the conditions necessary for popular delusions and the disasters they lead to. Read on...


Addison Wiggin
Health Care Costs: Still the Pig in the Federal Python

Addison Wiggin

Right now, health care makes up about 25% of the federal budget. A scary statistic to be sure... But here's an even scarier one: health care's portion of the federal budget doubles roughly every 20 years. Yikes! Addison Wiggin explains why this is and what needs to change to prevent health care from taking up half the federal budget. Read on...


Six Signs Your Government’s Too Big

Chris Campbell

Is your government too big? Find out in today’s Laissez Faire Today with six “red flags” to look out for. Chris Campbell covers everything from one ObamaCare whistleblower to the strange case of our new Ebola czar. Read on…


McDisaster: Fast Food Is Dying – Make a Killing From It…

Greg Guenthner

McDonalds stock is getting crushed right now. Shares have been in a tailspin since June. But it’s not just Mickey Dee’s. Coca Cola shares are in freefall, too. Bad news for them. But if you want to rake in a pile of easy money, it could be great news for you. See, Americans just aren’t choking down this junk like they used to. The fast food burger, fries and a Coke are just down payments on an early coronary - and Type II diabetes. And everyone’s finally gotten the message. So how can you play the trend? Greg Guenthner explains…


In the Year 2024

James Rickards

Panopticon goggles? Severe market panic in 2018? Gold confiscation by 2020? Jim Rickards' shocking thought-piece in the spirit of A Brave New World or 1984. Click to see how markets, economics, your money, gold, privacy, wealth building and more look a decade from now in the year 2024...