Chevron Corporation: Time to Buy Abu Dhabi

It wasn't so long ago that China through one of its three state controlled oil companies attempted to buy the American, now defunct Unocal. In the end, Chevron (CVX) rescued the day and acquired Unocal.

To recap the events we first have to comprehend that oil and energy sources have become the new point of contention between east and west. Hopefully this will not lead to (military) confrontation, but one never knows. For over a decade, China has realized that the sole danger to its economic growth is insufficient energy. With over 50% imported and likely to climb in the future, China is competing head on with the United States for energy resources. The U.S. consumes over 20% of global oil production. As China's appetite for oil grows and new production can not keep up with the future demand, control of production has become a top priority for both countries.

Neither the U.S. nor China is content with just buying oil from other nations. Both want to control production and the resource rights. The immense advantage that China is exerting in Africa is that it does not stipulate any requirements from foreign governments as to how oil revenues are used. Western companies play a heavy role in global politics and usually link deals to the likes of human rights, ecological preservation, education and other democratic values that are usually funneled through the back door via the World Bank. At times the companies agree to directly build a school or road. The Chinese do business with the controlling government and make no demands. The more morally corrupt the government is, the more likely the country is aligned with China. In fact, China has shown that it is willing to sell its veto right at the U.N. for a price. This is how China has gained influence with Sudan, Iran and recently Chad.

Harvard Education Doesn't Help

Learning from the failed attempt by China to buy Unocal, Middle Eastern countries realized that it would be difficult if not impossible to gain direct control over strategic American oil production assets and technology. Many of the top oil officials and ministers are well educated, some are Harvard graduates. Western education bestows upon the graduates the necessary knowledge of mechanisms, mentality and methods as to how one is to achieve goals without bringing undo attention to what otherwise might be a public relations fiasco. This is how the world works and everyone may have interests that may conflict with others. Everyone has a right to live and prosper.

Likewise, everyone has the right to protect their own interests as well. What the professors and some overseas students at Harvard may not have taken into account is the advent of blogosphere. No matter how well educated you are, to concoct a scheme that will get by blogosphere unnoticed is practically - no, definitely impossible. As the adage goes, you can fool some of the people some of the time but you can't fool all the people all the time. Blogosphere is ALL THE PEOPLE ALL THE TIME.

Buying America through Canada

When it comes to selling energy assets to Canadians and Europeans, Americans do not perceive this to be a strategic threat. Had it not been for the ill-fated oil embargo from 1973, Middle Eastern countries would not be considered a threat either. However, history can not be undone.

Knowing this, coupled with recent attempts to purchase various port properties, the state owned (emphasis once again on state owned) Abu Dhabi National Energy (Taqa) company announced today that it is acquiring the Canadian PrimeWest Energy Trust (NYSE:PWI) at $26.75 per share.

Just recently, PrimeWest purchased several oil and gas assets in the U.S., Montana, North Dakota and Wyoming. This is a litmus test to see what happens. Total PWI production is about 60,000 barrels a day, so from a production standpoint, nothing stands out. From the acquisition perspective, Taqa is buying a Canadian company. Few know that Taqa is testing the response or lack of a response to acquiring the American production assets.

In response, we think that Abu Dhabi should reciprocate and sell some production assets to Chevron. We are sure that the United Arab Emirate's government has no problem with this… after all, fair is fair!

With PR like this Herald Tribune article, it's a cinch to snatch the goose that lays the eggs and sell back the eggs. After all, Abu Dhabi isn't interested in more oil, only socially responsible renewable energy! This time it's MIT's turn, not Harvard. Oh, what the enlightened will do for money…insure that when oil runs out and we all use solar energy, that this too will be imported from Abu Dhabi!

Disclosure: A ton of conflicts, as American analysts and long CVX.

Comments

[calvino:]

It appeared that the pinks shirted cowboy Harper had decided to preempt the buy out. After all, the shares were trading higher before he sprung the Halloween trick on Canadian investors and destroyed about forty percent of their investment. Thus it looked like the Canadian pensioneers were subsidizing Aboo booboo. The Toronto Sun ran the story giving credit to a leak from the finance ministers office and pwi dropped like a rock. However at six pm, pink shirt held a press conference and assured us all that the deal was good to go. In the parlance of Mario Puzo, it appears that someone got to him and pinks shirt changed the call at some point in the afternoon. Democracy at work, but we elected the shrubster, so Canadians have nothing on us now, despite their claims to the contrary.

2007 Oct 27 12:05 AM

[CrossProfit:]

SA readers,

To understand what calvino is talking about see the following article for background:
communities.canada.com...

CrossProfit

2007 Oct 27 07:35 AM