Navellier Growth: your source for market-beating growth stocks

For a bunch of communists, the Chinese have turned out to be great capitalists.

I'm referring, of course, to the race for black gold: Crude oil–the global currency and the new gold standard.

As I mentioned recently, China's economy expanded 10.6% in the first quarter of 2008, and hovers around 8% for the year. If this growth rate persists, over the next several years it will be impossible for China to meet its internal energy needs. By 2030, the number of cars in China is projected to grow 90 times! In the U.S., transportation accounts for 70% of the 21 million barrels of oil consumed each day. If by 2030 China produces–and drives–more cars than the U.S., imagine the exponential impact a country of 1.2 billion people will have on crude oil supplies!

Beijing cannot currently cope with the energy demand that's risen alongside its tremendous growth. As a result, China's major cities experience blackouts and severe oil shortages–cab drivers have to line up at gas stations before dawn just to fill up their tanks! If they arrive late to the scene, their work day is over before it even begins.

Here's the problem: China is one of the world's largest energy importers, second only to the U.S., yet they lack the capacity to meet their energy needs. Without access to more crude oil, China's economy will come to an abrupt halt.

The solution: Actively increase cooperation with foreign oil companies through bids, mergers and acquisitions. Has this strategy worked in the past? In some form or another, yes.

China's First Step Abroad

Think back to 2005, when the China National Offshore Oil Corporation (CEO)–a Global Growth Buy List stock–made an $18.5 billion bid for Unocal, a then major U.S. oil producer. Although China was eventually forced to abandon the bid for political reasons, it thrust CNOOC into the international limelight. The bid marked the first-ever corporate takeover battle between the China and the U.S.

Now fast forward to 2008. Four Chinese oil companies–CNOOC among them–are assessing fields in Iraq to bid for exploration rights alongside American oil giants Exxon, Chevron, BP, Shell and Total. The wider Arab world suspects that the U.S. went to war with Iraq for oil, which plays to China's favor because the Iraqi Oil Ministry will be less likely to question China's motivation.

Obviously, the risks associated with exploration and drilling rights in Iraq are high–particularly with regard to the region's political uncertainty. But China's reputation precedes it. China's political non-interference policy has gained the country blanket access to oilfields in Sudan and Chad. This is a huge advantage China holds over the West. China doesn't link political conditions to its oil business ventures abroad–a promise the U.S. simply cannot make.

China's oil pursuits are not limited to the Middle East. Earlier this month, in fact, CNOOC offered $2.5 billion for Norway's Awilco Offshore. The acquisition would increase China's number of drill rigs and access to more international markets.

How Can We Profit from China's Oil Business?

The opportunities are endless! Aside from owning China's third largest oil producer, CNOOC, in Global Growth, there's a whole list of companies that will profit as China continues to flex its muscles. And all four of my services have profitable plays to offer.

Consider this: Most Chinese companies are state-owned, and one of the reasons for China's growth spurt is the government's strategic, long-term thinking. China doesn't want its foreign oil reserves to dry up in a few years because demand will continue to outpace supply. This means the country has shifted its focus from U.S.-based energy companies that are running dry to Canadian-based ones. Canada has massive crude oil reserves locked up in tar sands–a supply that's projected to last for at least the next 50 years! Companies like Deer Creek Energy and Canadian Natural Resources are potential takeover targets for China.

Actual oil reserves aside, consider the technology that's required to produce and refine oil as China expands! I have a handful of companies across all four of my services that offer the infrastructure support required to upgrade Chinese refineries. For now, China can handle light grades of crude coming out of Africa and Russia. But when it comes to refining heavy sour–or even extracting the oil from the tar sands in Canada!–China is currently stuck between a rock and a hard place.

That's where the oil service companies come into play. These firms manufacture and engineer energy equipment and services. Economically speaking, it makes more sense for China to upgrade its refineries and expand its reserves through joint ventures as opposed to buying flat out major crude producing companies. But whatever strategy China ultimately employs to fulfill its ever-expanding energy needs, there are plenty of profitable opportunities available to investors!

PortfolioGrader Pro, my FREE stock ranking tool, has listed CNOOC as an A-rated stock for 12 consecutive months. The Chinese oil firm recently reported that its first-half net profit climbed 35% thanks to the company's focus on crude production. Imagine, as CNOOC expands its operations and becomes more profitable, I expect the company's price per share to really take off!

To learn more about the other companies I'm recommending to subscribers looking to profit from China's quest for oil, sign up for one of my services today!