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I'm Reiterating my Buy rating for Suncor Enegy (NYSE: SU) first recommended on February 25, 2009 at a price of $18.35. Continue reading Consider Suncor, because the future belongs to owners of oil sands
China National Petroleum Corp, parent of PetroChina Comapny, Ltd. (NYSE: PTR) has gotten rights from the Canadian province of Alberta to drill for oil. But the company plans to do it the hard way.
One of the hopes for replacing dependence on current oil reserves is to drill into tar sands. The ground contains a substance that can be converted to oil, but the process of separating out the material that can be refined is very costly. Then again, so are oil prices. As the price for crude sits near $70 a barrel and China looks to the need for oil and gas to keep its economy moving, tar sands drilling may actually make economic sense.
According to Wikipedia: "Oil sands may represent as much as 2/3 of the world's total petroleum resource." If oil demand continues to rise, tapping this resource may become critical.
Right now, China has no way to get much more than its share of the world's oil production. The economies of Europe, Japan, and the U.S. need the fuel just as much as the big Asian country. But if China is willing to make the investment, it could start to change the game. The communist government does not have the public company P&L issues that big oil companies do. It can put down huge sums of money if it thinks tar sands could solve its problem in the decades ahead.
And that would give China an edge.
Douglas A. McIntyre is a partner at 24/7 Wall St.
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