One tiny region of Iraq is about to explode onto the world stage.
And speculative traders who get in early could make a fortune over the next few years...
Longtime
Growth Stock Wire readers know Iraq is one of the largest oil regions on Earth.
It is officially credited with about 115 billion barrels of proven oil reserves. It's the
second-largest oil reserve in the world. But recent reports indicate another 45 billion to 100 billion barrels of oil could exist under Iraq's western and southern deserts. All told, Iraq could have more than 400 billion barrels of oil.
The bulk of the country hasn't been explored with modern technology. But that's changing.
In April 2009, a tiny, unknown, $86 million oil company drilled a well called the Shaikan-1 in the northern Iraq province of Kurdistan. It hit a giant oilfield. The well flowed 18,038 barrels of oil per day. The engineers believe that field holds more than 19 billion barrels of oil. The company's shares soared 2,200% over the next 18 months.
The average production from four Shaikan wells is 10,000 barrels per day. It would take about 33 Eagle Ford Shale wells to equal the flow rate from a single Shaikan well. Remember, the Eagle Ford is a massive shale region rich in oil and gas in the U.S.
That's the kind of opportunity that exists in Kurdistan today. Some of the largest oil discoveries of the last five years have come from the region that's just one-third the size of Texas. That's why major oil companies like Chevron, Total, ExxonMobil, and China's Sinopec are all there.
Shaikan is one of the largest onshore discoveries in the last decade. However, it's far from unique. Exotically named oilfields like Kurdamir, Tawke, Taq Taq, Miran, Garmian, Chia Surkh, and Mirawa are all big new discoveries in Kurdistan.
And like most investors, you've probably never heard of them. But that's about to change.
Last week, Kurdistan shipped its first oil exports to Europe through a new pipeline that transports crude
oil from Kurdistan to Turkey.
On May 23, the Kurdistan Regional Government announced that a tanker loaded with over 1 million barrels of crude oil departed from the Turkish port of Ceyhan and headed toward Europe.
The government says it will be the first of many sales of its
exported oil through the newly constructed pipeline.
Matt Badiali told the
S&A Resource Report subscribers about this catalyst in December.
He said:
The pipe will carry about 1 million barrels [of oil] per day by 2015. A second, parallel pipeline will push exports to 2 million barrels per day by 2019.
Let me put that in perspective. By 2015, Kurdistan's oil exports will be equal to the oil production of Alaska, California, and Nevada combined. By 2019, its exports will be equal to 27% of U.S. daily production.
Yes, you read that correctly. In about five years, this tiny segment of Iraq will send a volume of oil equal to 27% of the entire U.S. production down a pipeline to Turkey. That's not its entire production, either. That's just the export oil to Turkey. |
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Kurdistan's huge oil-export growth potential is why some of the world's biggest oil companies are in the area. And it's why speculative investors could make a lot of money investing in oil companies in the region as more investors realize the area's potential.
But there are also risks to investing in Kurdistan.
There has been an ongoing dispute between Iraq's central government (located in its capital city of Baghdad) and the autonomous Kurdish region over the latter's ability to sell oil.
The Baghdad government is claiming sole authority over all Iraqi crude (it's afraid Kurdistan will keep all the money made from exporting oil for itself) and is declaring any independently sold oil as "smuggled." Baghdad has even stopped sending national budget funds to Kurdistan until a resolution is made.
To date, the two sides haven't reached an agreement. But that hasn't stopped the Kurds from beginning to export their oil.
And the exports will likely continue out of necessity.
Matt addressed this in the
S&A Resource Report.
The Kurds need the oil to go to market... and they will get it there. But Baghdad isn't supplying the cash from the southern oilfields to support the government in the north. It's up to the Kurds to generate their own taxes... and it will come from oil production.
That's why everyone I met in Kurdistan takes production for granted. It's going to happen... because it must happen. The Kurds are making it happen. |
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With massive amounts of money from exports on the line, it's likely the two sides will reach a deal.
And while there is still risk to investing in the area, the potential gains are just too big to ignore.
We recommend looking into oil companies with exposure to the area like
Genel Energy (LSE:
GENL) and
Oryx Petroleum Ltd. (
TSX: T.OXC,
Stock Forum).
Genel is the largest independent oil producer in Kurdistan. Oryx has four discoveries in Kurdistan and expects its first production this quarter. These companies will benefit as more oil is found and exported from the region.