Arctic Oil Investment Opportunities
Peak Oil Puts Russia on High Alert
You must have to have a serious set of stones to work for Greenpeace these days.
Last week Greenpeace activists in a tiny inflatable boat raided a Russian ship in a remote section of the Arctic.
Seeking to stop Gazprom from drilling in Arctic waters, these six activists occupied a giant rig for 15 hours in the southeastern section of the frigid Barents Sea.
They finally bailed after being hit with chunks of metal and hosed with ice water.
I'm not sure what's crazier — a handful of activists taking on a rig full of pissed-off Russians... or the fact that the world's oil addiction is so strong, we're willing to spend hundreds of billions of dollars to get at roughly 360 billion barrels of oil equivalent.
That's right. I said “oil equivalent.” Not crude.
As you know, the difference between the two is more than just semantics...
Oil-producing nations and energy organizations all over the world love to pull the wool over our eyes when boasting vast oil resources by using the term “oil equivalent.” This scam is nothing new.
Still, 360 billion barrels of oil equivalent is nothing to shrug off, either.
The USGS estimates about 90% of the Arctic's oil and gas resource is located in seven Arctic basin provinces from Alaska to Russia to Greenland.
And make no mistake about it; the race is on to suck those basins dry.
But it won't be easy — or cheap.
A $31 Billion Bet
In Barrow, Alaska, Royal Dutch Shell has been fighting for access to the Arctic's bounty of oil since 2005, after it paid the government $2.2 billion for drilling rights.
After seven years of dealing with lawsuits, regulatory obstacles, and a handful of other delays, Shell was finally given the go-ahead to begin earlier this year.
However, it's still going to be a long and costly process to tap that oil...
Before even drilling its first well, Shell will pony up about $4.5 billion for this project: $2.2 for the leases and about $2.3 billion for equipment, assembly, and personnel — all to just find economically recoverable oil.
If it's found, the cost of drilling production wells, installation of permanent platforms, and the construction of offshore and onshore pipelines will tally up a total of roughly $31 billion.
From start to finish, the ETA is between seven and ten years on production.
This is not a cheap project to undertake, and the time commitments alone are nothing to trivialize.
In fact, after dealing with some very reluctant ice and a few issues passing Coast Guard inspections, the company's July start date for drilling was delayed. This presents a frustrating situation, since Arctic waters are only accessible from July through October.
But the threat of Peak Oil is still very real.
And it should come as no surprise that Shell would be willing to invest more than $30 billion over the course of about 15 years to get at what's expected to be about 20 billion barrels of oil.
This is NOT for Amateurs
As Peter Hutton from RBC Capital said, “This is a game for seniors, not juniors, this is a game for people who have long-term vision and deep pockets, it's high risk, but potentially-high reward. It requires patience from the operator but also from investors.”
For all those folks who question the reality of Peak Oil, look no further than the time and capital being ponied up to chase the last remaining spot of untouched product.
And for the record, when you look at crude — not “oil equivalent” — there's about 73 billion barrels in the Arctic, or less than three years of total global demand based on current rates of consumption (and not accounting for increased demand in emerging markets).
So yes, I'm beyond bullish on oil and gas...
Particularly the domestic stuff that's been sitting in abandoned oil wells for decades.
It's like taking candy from a baby!
Thanks to a new enhanced oil recovery technology that's now being used by BP, Chevron, and Halliburton, U.S. oil production is about to triple.
And you better believe we're getting a piece of that action.
The company responsible for this new technology is starting to get smoked out by Wall Street sleuths, but it'll take a few more months before the mainstream knuckle-draggers pick up on this one... which is precisely why we're loading up now.
Bottom line: As tensions heat up in the Middle East, and the Arctic drilling season comes to a close, producers are now doubling down on enhanced oil recovery in the United States. And this is the premier player on the block.
To a new way of life and a new generation of wealth...
@JeffSiegel on Twitter
Jeff is the founder and managing editor of Green Chip Stocks, a private investment community that capitalizes on opportunities in alternative energy, organic food markets, legal cannabis, and socially responsible investing. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor's page.
Energy Demand will Increase 58% Over the Next 25 Years
After getting your report, you’ll begin receiving the Energy and Capital e-Letter, delivered to your inbox daily.