A Big Prize in The Global Energy Game
“Kazakhstan is one of the biggest prizes in the great game of natural resource control,” reports Chris Mayer.
“Many of the world’s largest oil companies are now active in Kazakhstan. Today, Kazakhstan has about 3% of the world’s oil reserves. Vast areas remain unexplored. And more than $130 billion in spending is on tap for the region.
“China would love to expand its oil supply from Kazakhstan. It helps diversify away the risks China takes by relying heavily on oil from the Straits of Hormuz (out of the Persian Gulf) and the Straits of Malacca (from across the Indian Ocean; the U.S. Seventh Fleet controls these Straits, only adding to China’s oil security concerns). By getting its oil from an overland source, China is less susceptible to oil blockades. That must make Chinese defense ministers smile.
“But Russia has ambitions here as well, in spite of a cruel history toward Kazaks. That makes things much more complex. Kazakhstan’s closest ally is Russia, historically speaking. About a third of the population is of Russian descent. And the two countries maintain a tight dialogue. The president of Kazakhstan meets with Putin once a month.
“Even the U.S. has tried to make nice with Kazakhstan, but it runs a distant third. Kazakhstan is like the girl everyone wants to date in high school.
“Meanwhile, billions of dollars from oil sales flows to Kazakhstan’s coffers. Oil and gas now make up nearly 60% of the country’s exports. Economic growth tops 8%.
“To invest in the boom directly, you can own a Kazakh oil producer. The one that stands out is JSC KazMunaiGas. JSC is the second largest producer of oil in Kazakhstan. Even if you have no intention of buying a Kazakh oil producer, this is a fascinating story on the face of it.”
That’s just a quick, edited snippet from the latest issue of Mayer’s Special Situations. If you seek sharp contrarian thinking and an off-the-beaten-path approach to value investing, MSS is where’s it’s at. Learn more about Chris’ high-end offering, here
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