East Africa: The New Oil Frontier

I haven’t seen this kind of interest — this sense of excitement — over an oil find since the Bakken…

And the big money is flowing in just as fast. 

Tullow Oil just inked a deal with France’s Total and China’s CNOOC to sell two-thirds of its East African oil assets in Uganda’s Lake Albert Rift Basin for $2.9 billion.

The Albertine Basin could hold 3.5 billion barrels of oil.

Production is expected to start soon and could reach 150,000 to 350,000 barrels of oil a day.

Thai PPT just crushed Shell’s bid for Mozambique’s Cove Energy with a $1.8 billion takeover bid that’s sure to spark a bidding war…

The UK is offering humanitarian aid and security assistance in Somalia with hopes for a stake in the region’s energy find.

U.S. drone strikes are assisting in an offensive against al-Shabaab militia in the Horn of Africa.

And Norway’s oil and gas company, Statoil (NYSE: STO) — along with Exxon Mobil (NYSE: XOM) — announced it found natural gas in Tanzania’s India Ocean in the Zafarani exploration well in offshore Bloc 2.

Gas reserves in that area are estimated at about 140 billion cubic meters so far…

And that was all just in February.

Again, we haven’t seen this much smart money flock to an area since we broke the Bakken story years ago. And it will only continue.

The U.S. Geological Survey believes more than 71 billion barrels of oil lie under East Africa.

A Canadian company exploring in Puntland expects to extract crude in the next 20 to 30 days…

The company is looking at two very large fault block prospects with internal estimates of potential oil volumes over 300 million barrels of recoverable oil. My colleague Christian DeHaemer has had a strong buy out on this stock since last summer. The share price has nearly doubled in that time.

Other surveys indicate as much as five billion barrels.

There could be even more under the Indian Ocean, which has a comparable potential to that of Kuwait’s 100 billion barrels of proven oil reserves.

So as war drums beat over the Strait of Hormuz, drillers, investors, and consumers alike are turning their attention to East Africa — especially since this region could become a major oil exporter to hyper-growth countries like China and India.

Just to keep up with this demand, Asia has turned to West Africa for more crude.

In February 2012 alone, West African exports increased 2.15 million barrels a day, the highest level in months.

The demand potential that billions of people will have on the oil market is mesmerizing…

Because once demand picks up, any company operating in oil-rich East Africa will rocket, just like Kodiak Oil (NYSE: KOG) and Brigham Exploration have in the United States:

The Wall Street Journal reports:

“What is becoming very clear is that price signals are emanating more and more strongly from the East,” said Jorge Montapeque, global director of markets and pricing at Platts.

The oil demand is mostly coming from Japan, South Korea, Singapore and India — nations with swelling energy needs, extensive refining capacity, or both.

Buying East African drillers now is like buying the Bakken region before anyone knew about it.

As soon as one of these companies hits pay dirt, there’s no telling how high these stocks will run…

Stay Ahead of the Herd,

Ian Cooper

@IanLCooper on Twitter

Ian Cooper has been trading stocks and options for 12 years. He contributes options, stock, and energy commentary to Wealth Daily, Wealth Wire, and Options Trading Pit. He’s the Coach behind Options Trading Coach, a beginner’s guide on how to trade options. Ian teaches thousands of loyal subscribers the many ways to be profitable from options rather than simply buying stocks alone. For more about Ian, take look at his editor’s page.