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Monday, September 25, 2006

The Search For Oil Is On

By Yaser Anwar, CSC of Equity Investment Ideas

This past week I talked about how I expect Devon Energy to benefit from the recent oil discovery. Well the Journal went one step further and highlighted how the energy honchos are on the look for the next big find.

The discovery of oil 20K feet below the sea floor of the Gulf of Mexico by Chevron, Devon Energy, and Statoil two weeks ago may just spark an “oil rush” to find crude in deep water.

“The development could herald a vast energy-producing region in the U.S.'s backyard,” says the WSJ. “Similar cutting-edge technology could be used to find oil in a number of other regions around the world, including Mexico, Mauritania and Malaysia.”

WSJ says that deep-water oil exploration is accelerating around the globe. Energy honchos such as Exxon Mobil, BP, Royal Dutch Shell, and Petroleo Brasileiro are best equipped to invest in deep-water drilling. But smaller companies like Devon and Anadarko Petroleum are also joining with the big boys.

In addition to the Gulf of Mexico, other deep-water oil discoveries have been found off the coasts of Brazil, Nigeria, and Angola, says the Journal.

As for prospects of new discoveries, the South China Sea and the coasts of India, Pakistan, Mauritania, Egypt, Malaysia, and Mexico offer potential oil and natural gas finds.

Robert Esser, director of global oil and gas resources for Cambridge Energy Research Associates, says that deep-water oil “is a major source of new production as it expands more in the Gulf of Mexico and Brazil and especially in West Africa.”

Even with the recent discoveries and the big Da Vinci like look out going on, investors should realise that it takes minimum 5-7 years for extraction of oil from these discoveries, not to mention the billions of dollars. The present government has been open to granting incentives to the oil companies, however if democrats get elected, I'm not too sure they will continue to flow.

Esser tells the WSJ that oil produced by deep-water wells will increase from two million barrels per day to 10 million barrels a day by 2015.

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