PropertyInvesting.net: Property Investment Special Reports

104: Oil & gas – how can I benefit from the boom?

PropertyInvesting.net   Team

Oil prices have risen from $20/bbl to $60/bbl in the last four years. Gas prices are also buoyant – with energy demand increasing dramatically. There has been a boom in countries that produce oil and gas as prices have escalated. It seems unlikely oil and gas prices will drop significantly because:

• China and India are expanding at a fast pace and need at least 10% extra oil and gas each year
• USA shows few signs of reducing it’s demand
• OPEC to a large extent controls the price of oil by reducing supply when prices drop
• Russia now controls most of the 9 million barrels produced from the country and 25% of gas exports to Europe
• Large infra-structure costs to expand production, and higher costs will likely not lead to a big growth in supply – the OPEC nations are probably not expanding production fast enough

Countries and cities which are heavily reliant or exposed to revenues from oil and gas exports are enclosed in the listing below (in order of lowest risk – ease of investment first). If you invest in property in these countries or cities you will also be exposed to this oil & gas boom. This was flagged a year ago for Aberdeen in Scotland and indeed, property prices rose 27% in 2006. Norway has also boomed as has Canada.

• Norway – Bergen, Oslo, Stavanger, Kristiansand  (low risk, easy to purchase)
• Scotland – Aberdeen
• Canada - Calgary
• Russia – Moscow, St Petersburg, Siberia, Sakhalin
• England – London  (global oil centre, Middle East finance)
• Qatar – Doha  (biggest gas field in the world – LNG centre)
• Holland – Den Haag, Rotterdam, Assen, Groningen, Amsterdam
• USA – Houston, Dallas, Galveston, Baton Rouge, Bakersfield, Green River (coal)
• United Arab Emirates - Dubai
• Australia – Perth, NW Shelf coast
• France – Pau (Total technical HQ)
• Egypt - Cairo
• Oman – Muscat
• Malaysia
• Brunei – Badar Seri Begawan, Seria
• Saudi Arabia – Riyadh, Hufhuf, Dhahran
• Venezuela – Caracas
• Azerbaijan - Baku
• Kazakhstan – Alma-Ata 
• Angola - Luanda
• Algeria - Algiers
• Libya - Tripoli
• Nigeria – Lagos, Port Harcourt, Warri
• Columbia – Bogotá
• Equatorial Guinea 
• Turkmenistan
• Yemen
• Ecuador
• Congo - Brazzaville
• Iran
• Iraq           (high risk, difficult to purchase/title)

Many of these countries use huge amounts of oil and gas and do not export – USA is one example. However, the benefit to the local economy when oil prices rise in cities like Houston, Dallas, Oklahoma and Bakersfield is huge. The long term future of coal in the Green River Valley area of Wyoming is huge – it IS the new boomtown area and is likely to stay so - as coal becomes an ever increasingly important part of the USA’s energy mix. A little known fact is that the USA has more barrels of oil equivalent hydrocarbons that any other country in the world – mostly locked up in “high grade” Anthracite coal which is mined in Wyoming. The open cast coal seams are up to 80 metres thick – coal is transported by rail to coal burning power stations – many in populated areas of the NE of USA. So if you want a completely different type of property investment, you might like to consider buy-to-let in oil, gas or coal producing towns. The big increase in employment, high wages, housing shortages, and large energy and services companies needing rental accommodation for their workers often leads to high rental yields, low voids and increasing house prices – overall very high returns on investment. Some oil towns are now global centres of oil & gas technology and development – examples include Aberdeen and Houston. So as long as the oil price stays relatively high at $60/bbl – property investment in such oil towns should do very well.

Norway is worth a special mention. The Government have done a fantastic job in the last twenty years slowly developing their oil & gas fields, re-investing the revenues wisely and giving Norway hugely positive balance of payments and stable sustainable future. The small population and high oil production along with high oil prices will feed through to the local populations – prices of properties of all types will increase (city apartments, coastal weekend retreats – holiday homes, company rentals etc).

back to top