I wish you could have seen what I awoke to last Saturday morning.
My room was perched on a slight hill, in a clearing overlooking the edge of the water.
Through the picture window just beyond the foot of my bed, I could see the green outline of a giant lake’s mountainous rim sloping gradually into the blue vastness.
The only thing wrong with the image was the clock on the nightstand.
It claimed that it was 2 PM… I almost never slept past 7 in the morning.
And then I remembered…
I was 13 times zones from home.
Welcome to Gusinoye Ozera — Goose Lake to us English speakers.
Located just a few dozen miles from the Russian/Mongolian border — not far from the famous world’s deepest lake, Baikal — the area around Goose Lake populated by a grand total of about 2,300 permanent and several hundred part-time, very wealthy residents.
It was the dead middle of central Asia; 2,000 miles from the nearest ocean and about as far away from the big city as I’ve ever gone.
Which initially made it all the more confusing why my buddy Jouquin picked this location, over all the others in the world, to build a 7,000 square foot home.
And why others like him seemed to be doing the same.
That was until I opened my eyes and saw that view.
And not long after, the smell of the roasting meat that I remembered from the previous night came back, and pulled me out of bed.
Born in Argentina, Jouquin Ramos (not his real name) was brought to the states by his family as a child back in the early 70s.
He was kind of tall, gangly, and lately, seemed physically adverse to any clothing besides light linen pants, loose-fitting short-sleeve shirts and footwear that didn’t require socks.
But that was the mistake most people made with Jouquin.
His easy demeanor and the eternal appearance of being headed to a party (or back from one) hid the sort of drive that few had.
He knew what he wanted from an early age — and knew how to get it.
After college, with the help of some seed capital from his uncle, Jouquin got his start in the shipping business.
Since then, like a whirlwind, he’s had his fingers in everything from metals to oil.
His true passion, however, involved finding views just like this one… and making them his own.
Of the 6 or 7 homes that I knew him to own, most were in places where “nobody could find me no matter how hard they looked”, as he liked to say.
But this took the cake.
If the 9 hour flight from Dulles wasn’t enough, it took another 7 on a private charter just to get to within helicopter distance of the house.
When all was said and done, the view had cost me over 20 hours in various air vehicles and God knows how many permanently gray hairs…
But as I sat down at a table on giant stone terrace and watched Jouquin’s kitchen staff assemble an impromptu breakfast right where I sat (according to Jouquin, freshly delivered caviar alone accounts for several thousand dollars in fuel costs every time he makes the visit), I realized it was all worth it.
Like many of my friends, Jouquin is a true global capitalist; an entrepreneur who built himself up from anonymity by knowing where to invest ahead of the curve.
“The markets do not tolerate personal preference,” he always told me. “Do not treat your investments like your wife. Treat them like your girlfriend. Once your interest dissipates, cut the strings.”
I’d just finished eating the mind-bending braised pig-belly (a local favorite), and settled back with a glass of champagne when Jouquin stood up from the table.
I could tell by his urgency that my relaxation was going to be short-lived that day.
“Come on,” he said, waving my up from my chair. “I’ve got something to show you.”
“You have something to show me?” I asked, letting my eyes make a demonstrative pass over the storybook landscape unfolding from the patio’s edge. “Are you serious?”
“Yeah man, this is nothing, come on… I want to show you something really big. Something important. In the next ten years, it’ll could make this whole region the next Dubai.”
I guess I don’t need to tell you that no matter how relaxed I may have been at the time, when a guy like Jouquin refers to something as “really big”, it doesn’t take me long to change gears…
Within 15 minutes we were back in his helicopter, settling into the two-hour trip back to the airport in Irkutsk.
I almost couldn’t believe my eyes as I set foot back into the very same charter jet I’d gotten off of less than a day before.
When we touched down just a little less than 90 minutes later, however, there were no mountains or lakes or untamed wilderness to greet us. There was no fresh air, or clear skies, or kitchen staffers waiting to bring me my next ounce of prized caviar.
There was nothing but an old airbase, dotted with aging buildings, rusty hangars, and trucks that looked like they may have seen combat against the Nazis in their younger days.
We were processed into the country of Mongolia by a single man who took a cash payment instead of any form of documentation or a declaration of goods, and we were on our way.
As our rented Land Cruisers took us away from the airfield, the desolation just continued.
Who would ever want to be out here? I asked myself.
Moreover, who would ever want to leave that lake house — with a smile on his face — and spend half the day getting here?
Forty teeth-rattling minutes later, our two-car caravan pulled to a stop.
The only thing that really distinguished our destination from the road we took to get there was a chain link fence, with warnings written out in a foreign language I could tell was neither Russian or Chinese.
“Here it is.” Jouquin said, spreading his arms before the vast expanse of dust. “You’re looking at the future, my friend.”
“The future” was a handful of utility vehicles, some construction equipment, and a couple one and two story metal-roofed buildings…
… And stacks and stacks of building material, some of which already had a fresh coating of rust on it.
“Ok, Jouquin,” I sighed. “What’s the punch line? Where are we?”
“Welcome to the heart of the new Dubai! This is where it all begins,” he said with a smile so big I started to wonder if maybe he’d been sneaking drinks on the plane.
“You brought me all the way out here, for this? You know how much I wanted to take a dip in that lake?”
“When I tell you what’s under your feet, my friend, I think you’ll want to take a dip in this one much more.”
It made me feel silly, but I looked down at the ground, like I’d missed something initially.
Just as I’d thought… dust and rocks. I looked at Jouquin, slightly annoyed now.
“Look closely,” he said, his smile fading. “Look around you… what do you see?”
He looked at me, then glanced over at a stack of building material several hundred feet from where we were standing.
And then it hit me. It was everywhere. Mountains of it.
“Bingo,” Jouquin grinned. “Pipeline. Several hundred miles worth.”
I looked at the ground again.
“You’re standing on over 6 billion barrels of oil, my friend,” Jouquin said, tapping the dirt with his foot.
This is the point where my memory became a bit hazy.
Luckily, I had plenty of time to collect myself on the flight back to Irkutsk…
And plenty of time to digest the magnitude of what my old friend had just shown me.
This oil reserve — one of the biggest ever discovered — had initially been owned by the Soviets under Stalin.
However, after finding oil that was geographically easier to access, they shelved the development of the site until a later time.
That time, of course, never came… The USSR fell apart in the early 90s, and with nobody to develop the site, the region was left abandoned.
“Chinese domestic oil production hasn’t been able to keep up with demand since 1992.” Jouquin told me as we sipped chilled vodka in our plane seats.
“They were at a 60% deficiency 4 years ago… Soon, they’ll be the biggest oil consumers in the world, but instead of shipping it in from the Middle East, or drilling out at sea, they’ll be pumping it out of the ground right here, and piping it across straight across the border.”
“Six billion barrels,” I said to myself, “that’s over $430 billion worth.”
“At today’s prices,” he added, “and not only that, but it’s some of the easiest oil to get to in the whole world. The reserve’s one of the shallowest known. I know it didn’t look like much, but that site I just showed you holds over 600 million barrels all by itself, and they’re just a couple of weeks away from production.”
He paused. “This is going to be some of the last cheap oil on earth, my friend.”
It was a striking revelation, and from then on after, other things started to make sense to me as well.
It was no accident that Jouquin had chosen this lakeside tranquility for his vacation home. In fact it was no accident that dozens of other wealthy venture capitalists were flocking to this once untouched piece of real estate.
The smart money always came ahead of the next boom.
The plane landed and we returned to his lake house in the early hours, but now it wasn’t so easy to relax.
The next morning — or I should say, afternoon — Jouquin told me all about the outfit that owned and operated that field we’d visited.
They’re small — valued at $107 million — but with the reserve lying just a few thousand feet beneath the surface (1500-6000 feet), they’re also in the best spot imaginable to benefit from their estimated 638 million barrel share (11%) of Mongolia’s entire awakening oil empire.
With increasing demand and scarcity of supply, however, crude prices could surpass 2008’s peak and reach as high as $150/barrel by summertime…
Which would push Mongolia’s total oil wealth up toward the $1 trillion mark.
Best of all, the world’s second biggest consumer of oil, China, has already earmarked $30 billion to ensure that they get first crack at it.
In a time when the Middle East is scrambling for a way to maintain post-oil economies, Mongolia — overlooked by the cheap oil rushes of mid twentieth century — is about to ride the Chinese oil-craze into a golden age.
Ultimately, it’ll bring hundreds of billions — perhaps even trillions — into the region… Which is exactly what Jouquin and his neighbors are banking on.
Personally, I don’t think I’ll be buying up any land around the Mongolian border anytime soon.
I will, however, be taking a closer look at this company.
With an oil reserve already valued at more than 400 times the company’s current market cap, we could be looking at one of the last great oil-empires during its very infancy.
For more on this company, and the rest of the story of Stalin’s Lost Oil… click here.
To your wealth,
Publisher, Energy and Capital