If at first you don't succeed, move on to the next opportunity.
Although China's CNOOC
CNOOC will be buying its license from a Nigerian company by the name of South Atlantic Petroleum -- a company supposedly controlled by a former Nigerian government official. Interestingly, the state-owned Oil & Natural Gas Corp of India originally had a deal in place to buy the same working interest for about $2 billion, but the deal fell through when India's cabinet would not approve it.
Assuming that estimates of the amount of recoverable oil and gas in the field prove accurate, CNOOC will be paying about $4.60 per barrel of oil equivalent. That looks cheap, but you should consider some relevant factors.
First, the estimates provided by the operator of the field, French energy giant Total
Still, if things go right and CNOOC hits its target of about 80,000 barrels per day from this field in 2008, that'll be a significant contribution (the company produces about 410,000 barrels per day now). What's more, energy companies need to add reserves if they are going to grow. Is this is a risky investment? Sure. But it almost goes without saying that you have to take some risks in the oil business if you want to make money.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).