Monday, September 12, 2011

I am bullish on Canada---By Shan Saeed

Every day, more than $43,390,000 will begin a journey from Hardisty, Alberta, Canada.
It’ll enter the United States at Morgan, Montana. From there it’ll pass through Steele City, South Dakota, Illinois, and Nebraska before entering into Cushing, Oklahoma...It will end its journey in Houston, Texas. When all is said and done, the $43 million will have traveled 1,980 miles.

I’m talking about the proposed $7 billion Keystone XL Pipeline that will carry over 500,000 barrels of crude oil from the Fort McMurray oil sands projects to the United States. Two weeks ago, the Obama administration approved the controversial pipeline project. And who can blame them?

With the unemployment rate at 9.2%, most published reports say Keystone XL will create 120,000 jobs — 20,000 in actual pipeline construction and 100,000 indirectly in supplies and services. These are jobs that can start immediately.

To give you an idea of how important this is to the United States — and to Obama in particular — even the liberal pro-environment rag, the Washington Post, published a piece on August 28th entitled, “Say Yes to Canadian Oil Sands”:

I would be crazy to turn my back on this. I have advised my clients to buy Canadian dollar since this commodity backed currency would continue to upsurge because of Oil. In a global oil market repeatedly threatened by wars, revolutions, and natural and man-made disasters — and where government-owned oil companies control development of about three-quarters of known reserves — having dependable suppliers is no mean feat.

USA already import about half of her oil, and Canada is her largest supplier, with about 25 percent of imports. But its conventional fields are declining. Only oil sands can fill the gap. As I’ve mentioned at least a hundred times now, Canada has the second-largest known oil resource in the world at an estimated 175 billion barrels.

Sure, the vast majority of these reserves are oil sands, also known as tar sands and “dirty oil” to environmentalists, but these are proven reserves. Probable reserves could be higher, with estimates between 500 billion and 1 trillion barrels.

Right now, Canada exports over 1.7 million barrels of oil to the United States..You do the math. Canada could supply us with oil for centuries. It’s almost inexhaustible. And that’s why I call it "the forever bull market."

Moreover, Canada is a pro-resource government; newly-elected Prime Minister Stephen Harper is an oil man. Canada is friendly and its neighboring USA, making transportation costs more affordable and efficient.

So the Keystone XL Pipeline could substantially reduce U.S. dependency on oil from the Middle East and other regions, according to a report commissioned by the Obama administration. The report suggests the pipeline — coupled with a reduction in overall U.S. oil demand — "could essentially eliminate Middle East crude imports longer term.

I agree with the Washington Post: It would be crazy to turn down the Keystone XL Pipeline. But there’s more to this story that makes me insanely bullish on Canadian oil sands stocks...You see, its not the only ones competing for Canadian oil sands.

The Chinese are there, too.

Sinopec, a Chinese state-controlled oil company, has a stake in a $5.5 billion plan drawn up by the Alberta-based Enbridge company to build the Northern Gateway Pipeline from Alberta to the Pacific Coast province of British Columbia. This past June, Alberta Finance Minister Lloyd Snelgrove met with Sinopec and CNOOC, China's other big oil company, and China's largest banks. The proposed Northern Gateway Pipeline is making progress. And it could start construction at the same time as Keystone XL.

Right now, a Chinese citizen consumes only 3% of the oil the average American consumes. If Chinese per capita oil consumption increases — and it most surely will — the price of oil will have nowhere to go but up...

And it will make Canadian oil sands that much more valuable. In fact, if Chinese per capita oil consumption increases to 17% of that of an American, the Middle Kingdom will essentially consume 88 million barrels per day.

That’s right — China alone will consume the current daily global production that exists. To put it another way, the world oil complex would have to produce over 150 million barrels a day.

With Canada sitting on 175 billion barrels of proven reserves, it is going to become the most important oil exporter of this century. And oil sands production companies like Suncor, Canadian Natural Resources, and Husky will become the Exxon, BP, and Chevrons of the world.
But there are also lesser-known names that will provide much higher rates of return on investment for you...Bullish on Canadian economy

Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK

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