The big theme in the April issue of Australian Small-Cap Investigator was Europe. To be precise, that if Europe is ever to recover economically, it must develop its own energy resources.
Take the following quote from a September 2011 report from the European Union:
‘More than half of the EU-27′s energy comes from countries outside the EU – and this proportion is rising. Much of this energy comes from Russia, whose disputes with transit countries have threatened to disrupt supplies in recent years – for example, between 6 and 20 January 2009, gas flows from Russia via Ukraine were interrupted’. Europe’s energy position is dire.
And as the EU points out, it’s getting worse.
But even we didn’t fully understand how dire it is for Europe until the other week. That’s when the scale of the problem hit.
You may have seen in Money Morning that my old pal and Diggers & Drillers editor, Dr. Alex Cowie, spent three days at the Australian Petroleum Producer and Explorer Association (APPEA) conference in Adelaide.
He was moving and shaking it with some of the biggest names in the Australian energy industry, and he came back with a lot of news to share with his readers. But there was one item in particular that caught our eye.
It was a chart from BHP Billiton Petroleum’s presentation. When we saw it our chin nearly hit the floor.
Here it is:
What strikes you about this chart?
Well, if you read along the line of the world’s largest natural gas reserves, you’ll see only one European nation – Norway.
Europe. A continent with a population larger than the US, but with barely a fraction of the US’s proven natural gas resources. The gas is there, it just needs the economic environment for companies to exploit it.
The fact is, if Europe wants to remain a developed continent, its energy position just isn’t sustainable.
In time, Europe will need to ditch the folly of green and renewable energy sources, and embrace the only energy source that can meet Europe’s long-term energy needs – natural gas.
As a senior energy exec wrote to us in an email the other week:
‘The challenges you have outlined re undertaking exploration in Europe are REAL.
‘However like most challenging environments it creates opportunities for those who move early and have the fortitude to stick with it.’
The last sentence struck a chord. Getting in early and having the patience to stick with it is the core to small-cap investing.
We won’t always get the timing right but the long-term fundamentals and the potential reward for backing the Euro-Energy story early make now the ideal time to punt on this sector.
Kris Sayce
Editor, Australian Small-Cap Investigator
From the Archives…
Free of the Dragon: Why the Energy Market Doesn’t Need China
2012-05-25 – Kris Sayce
China Stirs Up Troubled Waters in the South China Sea
2012-05-24 – Dan Denning
How Chinese Stocks Are Fading Fast
2012-05-23 – Lars Henriksson
LNG: Why Australia Will Be a New Global Gas Leader
2012-05-22 – Dr. Kent Moors
A Shocking Week for China’s Economy
2012-04-21 – Dr. Alex Cowie
