Gazprom Neft (GZPFY.PK), the oil production subsidiary of Gazprom (OGZPY.PK), has stated in its 2007 Annual Report that it expects to more than double oil output to 2.0 million barrels per day by 2020 from a production average of 864,000 bpd in 2007.  A production figure of 2.0 million bpd would be higher than all other individual Russian oil producers, if they do not achieve significant production growth going forward: Lukoil’s (LUKOY.PK) production in 2006 was 1.92 million bpd and Rosneft’s (RNGZY.PK) annual production average in 2006 was 1.6M barrels per day. 

Gazprom Neft's production target is assessed to be attainable, mainly due to the Company's ownership of the massive, and largely undeveloped South Priobskoye oil field, one of Russia's largest known oil fields, known in Russia as "the Pearl of West Siberia." Additionally, Gazprom Neft has also indicated that Gazprom will transfer its oil fields -- containing an estimated 5 billion barrels of possible oil reserves -- to Gazprom Neft. 

It will be argued in this article that Sinopec should see significant reserves growth over the next 1 to 5 years, more than doubling current reserves, due to reserve additions in both domestic (Chinese) and international areas. Sinopec as covered in an earlier article has a substantial exploration and production division with proven reserves under SEC reporting guidelines of approximately 3.77 Billion Barrels of oil equivalent (86% oil) - compared on a reserve basis to Conoco Phillips (COP) (at 6.85 Bn BOE (42% oil) ex affiliates -- mainly Lukoil) and Chevron (CVX) (7.85 Bn BOE, excluding affiliates). Expected growth in Sinopec's reserves and production, based on Sinopec's statements concerning oil and gas development activities, should make Sinopec approximately equivalent to both Conoco Philips and Chevron on a reserves basis over the next five years.

Potential Reserve Additions Within China:

Gazprom (OGZPY.PK), Russia's largest company and the world's largest natural gas producer, has released projections for future expected production of natural gas until 2030 on its website, which overall show moderately growing production and comfortable maintenance of gas export capacity.

Gazprom's projections stand in contrast to doubts raised by several analysts (the reports of whom will be discussed below) as to whether or not Gazprom can maintain production at current levels. Criticism of Gazprom's future production has been mainly directed toward potential decline rates at current producing fields and the perceived lack of initiative by Gazprom to bring new fields online.

Losses at Sinopec's (SNP) refining division have been driven by the high world market price of oil and a fixed price for gasoline within the domestic Chinese market. It is noted that Sinopec presents its financial results in an unusual manner -- reporting its refining activities in a separate division from its marketing (gasoline stations and pipelines) activities, in an apparent effort to show losses, in order -- it is argued here -- to influence China's Ministry of Finance for direct subsidies and China's central government for price increases in the domestic price of gasoline. If Sinopec's refining and marketing divisions were kept together, the company would not have shown losses in this division in any year since 1997, without subsidies (up until 2006, the last date for which year end segment data is available).

Future increases in the world price of oil is likely to be met with some increases in the Chinese domestic price of gasoline -- according to statements from China's National Development and Reform Commission [NDRC] -- leading to most likely manageable losses at Sinopec's refining division. Future higher world prices for oil and natural gas will benefit Sinopec's underestimated and rapidly growing Exploration and Production division.

TSX Group (TSXPF.PK), the stock exchanges group of Canada, is the 7th largest stock exchanges group in the world by market capitalization of listed firms. TSX Group is attractively priced, with positive operating prospects, and therefore represents an attractive acquisition candidate. The exchange industry is rapidly consolidating, driven by the competitive advantage of larger exchanges vis-à-vis smaller exchanges in terms of capital raising for listed firms. Further, exchanges exhibit high operating leverage, and therefore mergers make sense from a financial and competitive standpoint. These factors make TSX Group a compelling long term buy at the time of the writing of this article (early 1/08).

TSX Group Overview

TSX Group holds the major stock exchanges of Canada, including the Toronto Stock Exchange, the Vancouver Venture Exchange, NGX, the main Canadian natural gas exchange, and, with the merger announced at 12/07, the Montreal Exchange. TSX Group holds strong positions in listed mining and oil and gas firms, as TSX is the largest exchange for mining as defined as the combined market capitalization of listed firms, and ranks #1 of all stock exchanges in terms of the total number of listed oil and gas firms.

Petrobras (PBR) announced the Tupi discovery in the Santos Oil Basin of between 5-8Bn barrels at 11/07, which appears to be recoverable numbers of oil and natural gas equivalent, as opposed to total resource numbers (of which recoverable oil is a fraction). The Tupi oil find generated significant enthusiasm both inside and outside of Brazil -- to the extent that the Brazilian President Luiz da Silva (Lula) declared in a speech concerning the oil find that "God is Brazilian." Not only is the 5-8Bn barrels very large in itself, but, according to Petrobras CEO Gabrielli, Tupi is just a "tiny'' part of the total Santos Basin reserves.

The main questions that come to mind for the interested investor are: first, how much daily production can be expected from Tupi? And when will production come online? Further -- related to the first two questions -- how expensive will the Tupi field be to produce? And, further, what are the technical challenges to production? Overall, these questions can be grouped into a single overall question: How profitable will Tupi be for Petrobras? This article will explore these questions, to the extent that the information has been made public as of the date of the writing of this article (12.07). Note that the author is not a petroleum geologist, so it is possible that mistakes will be found herein regarding technical issues -- the author has attempted to cite every assertion concerning technology issues with regards to the Tupi Oil Field.

Structured Investment Vehicles -- otherwise known as SIVs -- have attracted considerable attention in the media over the past several months. But investors and the general public are still, to a large degree, in the dark concerning what exactly SIVs are, what they are invested in and to what degree they pose a threat to the overall economy. Information available to the general public on SIVs concerning real operating and financial data is sparse, which has provided a fertile breeding ground for tales of financial meltdown, Armageddon and woe, and less occasionally, an article that states everything is fine. (Articles which investors have seen on a daily basis almost over the past few weeks from the financial media).

The lack of publicly available information concerning SIVs can be illustrated by the fact that, if one searches both Google and Edgar (Edgar contains filings with the SEC), an interested investor cannot find a prospectus or even a company website for the largest SIV, Cullinan Finance, associated with HSBC (HBC) -- which, according to Wikipedia, holds an estimated $27Bn of assets (and note that Wikipedia is the first hit on the results page for a search on Google for Cullinan Finance, at the time of this writing, and only two paragraphs about the SIV are included in Wikipedia). And there is not a separate company website for Gordian Knot, the largest SIV sponsor according to the Wall Street Journal -- at least the author is not able to find one in the first three pages of a search for "Gordian Knot" on Google. The lack of public information is due to SEC regulations, in which the prospectuses and documentation for the SIVs are only made available to registered and qualified investment funds.

Anglo Platinum (AGPPY.PK) is the world's largest producer of platinum group metals [PGM], producing on an annual basis approximately 40% of the world's production of primary platinum from its South African operations. Anglo Platinum is unique in the (limited) platinum group metals universe (note that only two countries and produce platinum group metals on a large scale, South Africa and Russia) in that it has large reserves of proven platinum reserves -- verses probable and measured and indicated reserves -- translating to a future capability to maintain and increase production without corresponding large capital expenditures to start up new mines.

Introduction

The publicly owned exchange industry is comprised of the firms that own and operate the world's major and minor stock and commodity exchanges. The exchange industry is a relatively "new" industry, in the sense that almost all of the publicly owned exchanges went public -- that is, demutualised (meaning to transition to a for-profit corporation from not for profit) -- from 2000 onward.

Most of the largest exchanges are now, as of 2007, publicly owned including the NYSE Group (NYX), NASDAQ (NDAQ), the Hong Kong Exchanges Group, the Chicago Mercantile Exchange (CME) and London Stock Exchange, for example. Notable exceptions are the AMEX (which plans to demutualise in 2007 to 2008), all Indian and Mainland Chinese exchanges, all Japanese exchanges, and all Latin American (exchanges except those with ties to BME of Spain).

Petrobras (PBR), the national oil company of Brazil, is unique in the oil major universe in that it not only has a relatively low valuation on the basis of proven reserves, but also has strong prospects for increasing oil and gas reserves and production. In addition, Petrobras is the first oil major to move significantly into ethanol distribution and production. As such, these facts make Petrobras a compelling long term buy.

Petrobras operates in three main divisions: 1) Upstream: PBR develops oil and natural gas reserves mainly off the coast of Brazil, 2) Downstream: PBR refines and markets petroleum products mainly in Brazil, and 3) Ethanol (or the Distribution segment): the Company distributes and exports ethanol. Petrobras’ Upstream and Ethanol divisions are discussed below.

CNOOC (CEO), founded in 1982 by the Chinese government with the responsibility for the development of China's offshore oil and natural gas reserves, is the smallest of China’s “Big 3” oil firms, alongside PetroChina (PTR) and Sinopec (SNP). CNOOC’s share price has risen this year based partially on the strength of the Chinese stock market and also partially on the strength of CNOOC’s future oil and natural gas prospects. This article will focus mainly on CNOOC’s future oil and natural gas prospects, in both offshore Chinese and International areas. Overall, CNOOC’s future growth prospects are very positive -- particularly in international areas-- and therefore the company still represents good value at the current date of this writing over the intermediate to long term.

Brief Overview of the Chinese Oil Industry

At first glance, the idea of mining a type of oily mush – oil sands -- by gigantic shovels in the far north does not sound like a profitable or even a particularly appealing idea. However, contrary to this impression, oil sands mining is very profitable at current oil prices, rivaling conventional oil production in terms of profitability per barrel of oil. The profit potential of oil sands has led to an explosion of activity in the Albertan oil sands regions, indicated by the fact that the total area of Canadian oil sands (over 30,000 square miles) is majority -- over 61% -- leased by oil firms currently, up from only 31% leased in late 2006, according Alberta Energy. The rush to lease land in Northern Alberta is driven by significant advantage for the firms holding the long term leases in all areas of the oil sands territory. Further, at a premium in terms of profitability are those areas in which oil sands can be mined verses “in-situ” methods, as mining oil sands – digging the oil sands from the surface and moving them to extraction facilities -- is a more reliable extraction method at the current date of this writing (10/07) and slightly more profitable than the alternative method of oil sands extraction, “in-situ” production – the heating of oil sands below the surface and then collecting the melted bitumen.

All in all, an analysis of the Canadian oil sands industry indicates that the more established firms with significant lease holdings of land in the mineable regions of the Canadian oil sands regions – namely, Syncrude, Suncor, Imperial Oil and the Athabasca Oil Sands Project – should sell at premiums compared to less established oil sands firms.