“The scramble for energy security in booming northeast Asian economies has produced a breakthrough deal – a long-term LNG export contract between Woodside (ASX:WPL) and Taiwan’s huge CPC Corporation that could add up to $45 billion,” reports Nigel Wilson in today’s Australian.
Did someone say energy security? OPEC is unlikely to use oil as a weapon in exactly the way Hugo Chavez would like, as a blunt instrument to humiliate and punish America. But then, why would it have to? Oil already IS a weapon by virtue of where it’s located…and how it gets to those who want it most.
The chart below from the OECD (taken from IEA data) shows the chief oil trade routes of the world. You can see that for Asian importers of Persian Gulf crude, oil has to get through both the Straight of Hormuz and the Straights of Malacca before it gets to Japan, Korean, Taiwan and China.
In a normal world, this isn’t a problem. But we don’t live in a normal world. We live in a world where the demand for energy is running smack bang into limits on supply. And we live in a world where energy trading has become a new great geopolitical game.
It’s important to put Australia’s energy assets in this perspective. Australia is relatively close to Asia. And Australia has a portfolio of energy assets that should grow in value as oil itself becomes scarcer. LNG is at the top of the list. Thermal coal is next. And eventually, when geopolitical reality catches up with local politics, uranium.
The Daily Reckoning Australia