One of the more rewarding aspects of being a Fool contributor is to strike up a conversation with readers who are knowledgeable about my primary interests.
I had such an experience last week. I'd earlier written about the efforts in Canada to gather more dependable data on the environmental effects of crude production from oil sands in Alberta. Due largely to the tremendous growth in the output of synthetic crude oil from the oil sands, Canada -- through the likes of such companies as Suncor (NYSE: SU) and Nexen (NYSE: NXY) -- has surpassed Saudi Arabia as the biggest supplier of crude imported to the U.S.
Opinions from a reader
My article elicited an interesting response from a Canadian reader knowledgeable about oil sands. During a part of our back-and-forth conversation on oil sands production and whether he expected the growing concerns about the environmental effects of oil sands production to ultimately decrease the crude output from Alberta, he said U.S. demand isn't growing, but that the oil sands have been able to pick up the slack from a faltering Venezuela and Mexico. However he still sees the environmental concerns and access to markets limiting its long-term growth.
But then came what I believe was his most significant observation, one to which we pay far too little heed in our country. He sees the U.S. being systematically outflanked by China in regards to energy. China has been busy securing oil reserves and building nuclear power plants, while domestically we haven't seen anywhere near that kind of movement.
China's nuclear progress is no joke. In addition to 13 reactors currently functioning on the mainland, the country has 25 being constructed, with others in the planning stage. You get the point: Nuclear energy isn't simply an area in which we're falling behind. Rather, it seems to me to be an important piece of the energy puzzle that we're ignoring -- clearly to our own detriment.
China's oil shopping list
But before we exit the Alberta picture, and in light of the comment about China's worldwide quest for oil, it's important to note that the big country isn't out of the loop in the oil sands. China Petroleum & Chemical Corp. (NYSE: SNP) -- aka Sinopec -- earlier in the year forked over $4.65 billion for ConocoPhillips' (NYSE: COP) 9.03% stake in Syncrude Canada, the world's biggest synthetic crude producer.
Returning to the oil and gas front, in the middle part of last year, Chinese interests and Brazilian authorities completed a deal whereby, in exchange for 200,000 barrels a day of Brazilian crude, China would help Petrobras (NYSE: PBR), Brazil's state-owned oil company, with its ambitious exploration and production plans.
Also, CNOOC (NYSE: CEO), the big enchilada of Chinese offshore oil and gas production, has agreed that Bridas Corp., its oil production joint venture with Bridas Energy Holdings, will pay $7 billion for BP's (NYSE: BP) 60% stake in Pan American Energy, Argentina's second-largest oil producer. The deal is likely to be completed early next year.
China heads south
Finally, China is moving beyond the world of hydrocarbons in its expanding South American dealings. Just last week, the country's big utility, State Grid Corp., reached an agreement worth $1 billion that would allow it to acquire seven Brazilian power transmission companies.
In addition, State Grid will obtain a 30-year concession that will permit it to operate other power-transmitting infrastructure that will serve Rio de Janiero and Sao Paulo. In return, State Grid is expected to obtain earnings of about $110 million per year.
So it appears that my reader's comments regarding China's global spread are accurate and likely even prophetic. Given this set of circumstances -- which includes the growing importance of the offshore in oil and gas production, I would urge energy-investing Fools to keep an especially close eye on both China's CNOOC and Brazil's Petrobras.
