Best Oil Plays in 2008

Bedlam in Pakistan and the Young Tigers of Oil

A Taipan Publishing Group Strategy Report
By Irwin Greenstein, Senior Research Analyst, Taipan Publishing Group

The shock waves from the bomb that killed former Pakistan Prime Minister Benazir Bhutto in December reverberated into January to blow the cap off $100 oil...and that creates a perfect opportunity for oil investors to get in on the best oil plays in 2008.

Don’t be surprised to see oil easily sail past $100 a barrel. In fact, by March you could see oil hit $120. That may seem far-fetched, but here’s the real eye-opener: As Pakistan drives oil to record highs, three tiny oil producers friendly to the West could hand you a windfall.

In a moment, I’ll tell you about these three Young Tigers of Oil -- and their amazing profit potential. But first, an important insight into Pakistan’s explosive impact on oil prices…

You see, the real oil story behind Pakistan is that it’s geographically cursed. Pakistan is bordered by the oil-thirsty neighbors of China and India -- as well as al-Qaeda sanctuaries of Iran and Afghanistan.

Best Oil Plays: To the South, Chokepoint Alley

Pakistan’s southern border runs along the Arabian Sea, one of the world’s vital shipping lanes for transporting oil from Saudi Arabia and Iran. The Arabian Sea encompasses “Chokepoint Alley,” which includes the oil-tanker-laden Strait of Hormuz and Bab el-Mandeb.

Up to 20 million barrels of oil per day pass through these treacherous chokepoints. Geographically, Pakistan is in a no-win situation when it comes to oil.

Unless you know this -- and most people don’t -- you get slapped by sticker-shock when oil hits $100 per barrel in the aftermath of Benazir Bhutto’s tragic assassination.

Pakistan Reveals Best New Oil Plays

In the meantime, Wall Street and big media want you to blame $100 oil on China, Iran or Venezuela. These are the “fast-food staples” for energy reporters and analysts on tight deadlines. Oil investors who bought into that hogwash also bought into Exxon Mobil (XOM: NYSE), BP (BP: NYSE) and Chevron (CVX: NYSE) -- and actually did pretty well for themselves.

But the biggest oil investor gains from Pakistan’s cursed location are with three tiny oil producers already trending upward as oil heads toward $120 by March.

Of course, these little oil-producing gems are not for scaredy cats. They’re strictly for investors with a penchant for extraordinary investments.

Best Oil Plays in 2008: The Young Tigers of Oil

And that means riding the three Young Tigers of Oil for all they’re worth. We’re talking about Vietnam, Cambodia and Thailand.

Once you find out more about the Young Tigers of Oil, you’ll immediately see why they could be the best oil plays of 2008.

Vietnam already pumped nearly 1 billion barrels of crude as of 2005 -- up from an estimated 130 million barrels in 2004. Most of these wells are offshore and include the Hoang Sa and Truong Sa group of basins.

Today, key players in Vietnam oil include ConocoPhillips (COP: NYSE), Korean National Oil Corp., SK Corp. of South Korea and PetroVietnam.

The vitality of Vietnam’s oil industry recently attracted Wall Street’s Morgan Stanley. On December 28, 2007, Morgan Stanley quietly paid $217 million for a 10% stake in Petrovietnam Finance Corp. (PVFC), the financial arm of Vietnam's state oil firm.

And we expect more big money to pour into Vietnam oil as Pakistan’s politics deteriorate. That’s because Vietnam’s offshore reserves still remain largely unexplored. With oil rocketing toward $120 in the coming months, expect to see wells popping up like crazy in the waters off Vietnam.

But Vietnam is only part of the bigger story.

Best Oil Plays: Pakistan Could Ignite Profits in Cambodia

The instability around Pakistan could also reap gains for oil investors in Cambodia.

Cambodia will start pumping oil from offshore fields by 2009-2010. More important, though, three clues indicate that Cambodia’s reserves could be far bigger than officially stated.

Clue No. 1 is that China’s state-owned CNOOC oil monopoly got in as early as 2006, hinting that Cambodia’s National Petroleum Authority may be playing coy with lowball estimates of 400 million and 700 million barrels in reserves.

The second clue is that respected institutions such as the U.N., World Bank and Harvard University pegged Cambodian oil reserves at upwards of 2 billion barrels.

The third clue is that Japan, France and Kuwait have been sniffing around Cambodia lately for oil deals. The potential billions from these three countries could hit Cambodia anytime now -- as Pakistan continues to drive up oil prices elsewhere in the world.

Best Oil Plays: Thailand Output Up 500%

To the north, Thailand's crude oil output is expected to reach 30,000 barrels a day by next year -- a 500% increase from 2007. The boost is attributed to $300 million and $500 million in new investments, according to Thailand’s Department of Mineral Fuels.

The beauty of Thailand’s oil production is that it’s inland and less expensive to extract than the offshore reserves of Vietnam and Cambodia.

So when is the time to get in on the Young Tigers of Oil? Given the market’s hypersensitivity to the Middle East, today is the perfect time to act.

Best Oil Plays in 2008: Oil Producers Friendly to the West

The situation in Pakistan is unraveling fast. And there are only a few politically stable places left in the world to explore for oil... That translates into a profit premium for oil investors.

With oil breaking $100 and gas creeping toward $3.50 per gallon, Americans will want to know -- will demand to know -- where we can get cheap, painless oil. We’ve been monitoring this situation closely, and will continue to do so. But the bottom line is the Young Tigers of Oil could make headlines anytime now as the last new hope for Western-friendly oil. So this may be your last chance to take advantage of the best oil plays in 2008 and reap gains from Big Oil.

Originally published January 9 , 2008.

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