A NEW CHINA SYNDROME IN THE MAKING
(from strategic stealth maneuvers to corral oil resources)

As the only hard-money power in the world, with a mountainous hoard of cash and gold at its disposal….to throw around as it pleases….there’s a new –China Syndrome- in the making. That is, China, has been embarked on a strategic stealth maneuver of spending some $200 Billion to corral as much of the global oil sources as it can get.

Besides securing the volumes of oil it must have for its ever expanding domestic needs, the purpose of that is to also reduce America’s share of that available global oil supply, thereby diminishing its capabilities as a competing world power against it. Combined with the needs of India and the rest of the rapidly expanding developing economies, such a strategy aims to contain America’s influence and standing in the international community.

Simply put, China has been quietly buying up equity positions in a number of outfits engaged in the development of oil field resources. In an otherwise capital intensive industry, the presence of such a deep-pocket capital source, ready and more than willing to infuse the huge amounts of capital needed to develop such oil resources, China has significant leverage from that “soft power” to dictate the terms and conditions for what it will get in return for such largesse. In plain terms it requires a return in kind (barrels of oil) from any production output achieved, and at a deeply discounted price besides. The result is…. China will get large volumes of oil at a cost well below what anyone else has to pay for it on the international oil market. In turn, besides its relatively cheaper labor costs, that helps maintain its competitive price position for its exports to the rest of the world, and the continuing golden floods of revenues received from that. It is a magnificent ROI concept….on steroids!

The following are some of those equity moves, as reported in several commodities market research reports:
– Argentina/Bridus Corp : $3.1 Billion for a 50% stake in Bridus’ development holdings, including offshore acreages in Argentina, Bolivia, and Peru.
– Venezuela/PDVSA: $16 Billion over 3 years to develop the Junin 6 field for a higher production levels.
– Canada/Athabasca Oil Sands Corp: $1.9 Billion for a 60% working interest in the Mackay River and Dover prospects.
– Argentina/YPF: Up to $17 Billion for 75% of YPF, which holds 50% of Argentina’s refining capacity, and 40% of its oil output.
– Iraq: $30 Billion for development rights of the Rumalia field (the one US Troops liberated), worth 17 Billion barrels for China.
– Iraq/Addax Petroleum: Acquired for $7.19 Billion. Addax is in the top 5 independent producers in W. Africa, averaging 135,000 bpd output.
– Russia/Rosnef &Transnef: $10 Billion loan at 6%p.a in exchange for 302,000 bpd. At a discount for 20 years.
– Russia/LukOil: $25 Billion long term loan in exchange for 300 million tons of crude from the South Khyluchuya field, via pipeline (already built).
– Japan/Nippon Oil: Acquired a 49% interest of its largest refinery, the Osaka refinery, with output capacity of 115,000 bpd (Note, a big chunk of Japan’s oil imports comes from America’s North Slope field in Alaska).
– Brazil/Staoil: $3.07 Billion for 40% stake in its offshore field (one of the largest deep water fields).
– Brazil/Petrobras: $10 Billion, in exchange for 200,000 bpd for ten years (2019).
– Venezuela/PDVSA: $12 Billion, to double 500,000 bpd output for China, by 2012.
– Iran : $2 Billion deal to develop the Yadavan field, plus some $100 Billion over 25 years for a 51% stake in the field, with an initial 720,000 bpd output in the first seven years.
– Nigeria/NNP: $23 Billion to build a refinery to add a 750,000 bpd output to present levels.
– Nigeria/NNPC: $2.3 Billion for a 45% stake in the OMLI 30 field (about 500 sq.mi.).

These investment maneuvers do not bode well for America’s economic recovery efforts because they help maintain the $100+ cost per barrel, thus making its oil based energy costs too high, inhibiting industrial and business activity, and thus extending its anemic job growth. In short, it clearly weakens America’s economic and military capabilities, further eroding its position as a super-power.

Nevertheless, America does have its own economic “weaponry” to offset such developments. The principal one being the option to accelerate the further development of its own newly discovered domestic oil resources, whose combined reserves are estimated to be larger than Saudi Arabia and the rest of the Middle East combined. This would allow it to effectively “secede” from the international oil market, and its petroleum based energy costs. These resources are in addition to the North Slope resources of Alaska. They are:
– The Baaken oil shale fields of Montana
– The Green River fields of Wyoming
– The Eagle Ford fields of Texas
These alone could cover America’s energy needs for the next 50-100 years.

And to all that, new extraction technologies have renewed activity in the old formerly “depleted” fields of Louisiana, Texas, Oklahoma, Pennsylvania, W.Virginia, Indiana, and Illinois. Lastly, there is also a long dormant field in Nebraska (tested and capped off back in the 1960s) whose size is estimated to be equal to the old Texas and Oklahoma fields combined.

Well, the reality is that, while “green” energy technologies are making great strides and advances, they still have a long way to go to compete with the versatility of such oil resources. Wind, solar, geothermal, etc., have their place in our national energy plan, but, for right now, if we want to revive our economic health and position in this world, we can’t wait until tomorrow to develop those resources.

Tomorrow…. is already here.

CENTURION