Friday, August 10, 2007
Early this year, I introduced DailyWealth readers to Li Ka-shing…
If you're unfamiliar with Li Ka-shing, he's China's richest man… and the majority shareholder of Husky Energy. With some of the best heavy oil refining assets in North America, Li and the team at Husky understand the future of North American oil as well as anyone in the world…
You see, Canada has an estimated 175 billion barrels of crude oil locked in its tar sands. In fact, much to OPEC's chagrin, Canada's heavy oil reserves have vaulted it to near the top of the list of oil-rich countries. OPEC actually fought the recognition of tar sand as oil reserves.
But it's hard to dispute the fact that tar sand is oil, when Canada's oil exports to the U.S. grew by 1.9 million barrels per day in 2006 – from tar sand alone.
I believe the flood of Canadian oil is so important that I've built an investment strategy around it. I targeted small, integrated oil companies whose strategies involve building infrastructure to handle tar sand crude oil. I think those businesses will be the next major oil companies.
In addition to profiting from Husky's 14% rise in the past 15 months, S&A Oil Report readers are in on the tar-sand boom with our position in $34 billion Marathon Oil. I described Marathon's forward-thinking strategy last November…
That is exactly the plan that Marathon is putting into place. Its pipelines and refineries in Detroit and Kentucky are ideally located to handle Canadian bitumen.
Marathon just put out a request for proposals from Canadian tar-sands operators. By soliciting bids from all the companies now working in the tar sands, Marathon could lock up a long-term feedstock solution for those refineries. There is the potential for a great and innovative partnership that could catapult Marathon and its partner to major status.
Imagine, a major oil company with domestic crude supplies. Marathon wouldn't be subject to nationalization, parasitic governments, and unfair royalty agreements.
Well, rather than finding a partner, Marathon just bought the whole kit and caboodle with its recent purchase of Canadian producer Western Oil Sands for $5.5 billion.
The Western acquisition fills Marathon's needs very well. Western has 577 million barrels of synthetic proven and probable reserves… and three times that amount in "contingent" reserves.
Along with Husky, Marathon is great play on America's thirst for oil… and both have safe reserves and refining assets in North America. I can't imagine a better place to start looking for the world's next major oil companies.
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