New Energy Superpower

A new energy superpower emerges from Central Asia pulling a trump card against Mother Russia.

Massive trucks slip across frozen tundra... Russian bosses in their fur hats with the earflaps yell guttural commands to thousands of workers... and Vladimir Putin chews his cheeks in frustration.

“You must drill more!” he cries, and whips out his checkbook. “Nine billion,” he says. “Get me gas…”

In Europe, they are dancing in the streets...

You see, news from Asia Times Online has a tiny Caspian country rivaling Mother Russia for regional energy dominance.

Russian natural gas accounts for 40% of all European Union imports, and the EU has been desperately searching for other providers. It’s been rushing around the Caspian Sea and the Mediterranean like mad trying to scare up energy supplies and pipeline partners.

In fact, Hungary held important meetings with Azerbaijan to expand economic ties in sectors like energy… Specifically the Nabucco Project, a 3,000 km pipeline that will bypass Russia and ship natural gas from the Caspian Sea to the EU.

And oil and energy ministers from Egypt, Jordan, Syria and Lebanon met on September 7 to approve measures to link a 1,000 km Arab gas pipeline to the European network. Once it’s complete, that is. More than $800 million has been invested in the project already.

But the race is on, and Russia’s fighting back.

On September 9, a deputy energy minister from Russia announced it will buy Oman’s 7% stake in the Caspian Pipeline Consortium, a pipeline that will ship crude oil from Kazakhstan and Russia to the Black Sea.

Russia desperately needs to maintain control over EU gas supplies, as the European Union is its top customer.

Energy Opportunities With Ex-Soviet States

Russia may be losing friends, though, as former Soviet States publicly stand against Russia’s aggressions. Places like Azerbaijan, Turkey, Ukraine, and Turkmenistan are still doing business with Russia. (How could they not?) But they are also starting to compete with Russia now that European investors are building consortiums and alliances for new energy projects.

This will be a great opportunity for ex-Soviet States to take center stage. Investors in emerging and frontier markets could find some great energy opportunities in the Caspian Sea area, and also in the Middle East.

(Don’t discount Turkey, either. I think this region will become a major energy hub, particularly with the Nabucco Project.)

In an announcement on October 13, British consultant group Gaffney, Cline & Associates valued Turkmenistan’s natural gas resources for its new Yoloten-Osman field at 4 trillion cubic meters… at least.

On the high side of the estimate, this field could contain as much as 14 trillion cubic meters.

The U.S. consumes 604 billion cubic meters a year, so this is a massive find! It’s also five times the size of Turkmenistan’s previous favorite field.

This new reserve estimate came as a big shock to Russia’s Gazprom (GAZP: Russia), who’d picked up a giant contract with Turkmenistan’s state-owned energy company, Turkmengaz. The contract, signed on July 25 earlier this year, meant Turkmenistan would export 50 billion cubic meters a year to Russia through 2009.

That July 25 deal didn’t include the Yoloten-Osman field.

And now, international energy companies are circling like sharks with the scent of blood in their nostrils. But the thing is, everyone’s got an ulterior motive. Russia wants to maintain its near-monopoly on all natural gas flowing into Europe. Europe wants to get out from under Russia’s energy dominance. And the U.S. wants to “put Russia in her place.”

Only China appears to be concerned with the actual fuel, and boy is there room for demand growth there! Most of China’s electricity comes from coal-fired power plants… Somewhere in the neighborhood of 75%, in fact.

So it’s a four-way tug of war, and Turkmenistan stands to benefit hugely as the flag in the middle.

Rise of the Turkmen With the Potential to Boom

Here’s what MK Bhadrakumar from Asia Times says of the matter:

“Russian newspaper Kommersant made an innocuous-sounding reference on Wednesday, quoting a source in Gazprom to the effect that the Russian monopoly’s famous July 25 agreement with Turkmengaz does not involve Yoloten-Osman. It seems, in other words, that Russia held in its hands a chimera when it fancied that the July 25 agreement put Gazprom in complete charge of all of Turkmenistan’s exports. Surely, that is proving to be a misconception of Himalayan proportions.”

And Russia sure needs that 50 billion cubic meters. It ships nearly two-thirds of all its natural gas production to Europe, and the Turkmenistan gas helps it fulfill its contracts.

Now, it’s a race for the development of this natural gas field, and investors all across the globe are just drooling for the chance to get their hands on an estimated 4 trillion cubic meters.

Remember, that’s the low estimate. The Yoloten-Osman field could hold as much as 14 trillion cubic meters. In fact, Turkmenistan’s combined reserves are estimated to be able to support exports of 150 billion cubic meters for the next 250 years…

Here’s the tricky part, though. Lot’s of players in the region, but many are 800-pound gorillas: European companies like Eni (E: NYSE), Total (TOT: NYSE), and StatoilHydro (STO: NYSE) among others. These guys already have a presence in the Caspian Sea region, in Kazakhstan and Azerbaijan.

There is only a handful in the country with the potential to boom.

A Small-Cap American Company in Turkmenistan?

It wasn’t easy, but I came across an American company with a drilling rig in the Caspian Sea right off the coast of Turkmenistan. That company is Parker Drilling (PKD: NYSE).

Here’s the thing… The company’s “enterprise value” – meaning the value of all its assets, etc. – is more than 70% higher than its market cap. Enterprise value is $871.92 million while market cap sits at about $511.8 million (intraday on November 6).

What that means is this company is severely undervalued, and just got halved by the markets for no real reason.

With a profit margin of 13.96% and an operating margin above 23%, this is a decent little company. Quarterly revenue and earnings looked good in Q2 2008 as well, with 44% and 34% growth year-over-year.

But Morgan Keegan downgraded the stock to market perform from outperform on October 16, and I think that’s due to falling oil prices, which may not affect a drilling and services company like Parker Drilling the way it might affect a producer.

Revenues and income from international operations increased drastically year-over-year in the second quarter as well. Look at these numbers:

International Revenue Growth
Onshore: up 88%
Offshore: up 53%

International Income Growth
Onshore: up 177.6%
Offshore: up 131.6%

Parker Drilling (PKD: NYSE) may just be the perfect small-cap company for easy access to this amazing, game-changing find in Turkmenistan.

And this is just one way to get in on this exciting emerging market. In fact, Chris DeHaemer, editor of Crisis Trader, has just discovered another moneymaking opportunity for you to consider. You see, on October 13th a $5.7 trillion energy reserve was confirmed. That has thrust the world’s superpowers into a “resource stare-down”… and put you in the catbird seat.

Take a few minutes and learn all about this trade – and your potential for gains of up to 190 times your money in this Bonus Special Report.