chsdbacks Chapter 356 The Heart of Oil
Chapter 356 The Heart of Oil
The chains of the oil embargo were finally broken on March 18, but the gears of the world economy had been permanently altered. Oil prices did not return to their previous levels and stabilize at a new equilibrium, hovering between ten and twelve dollars per barrel.
On April 10th, in the strategic assessment room of the Lin family in Hong Kong, the air was filled with the smell of coffee and paper. Lin stood in front of a huge settlement table, his pen moving among the complex charts and data as he spoke.
"As of the end of last month, the daily oil production we effectively controlled was 3.2 million barrels, accounting for approximately 5.8% of global production. In addition, through technology agreements, service contracts, and long-term purchase arrangements, we can significantly influence another 2.1 million barrels per day. Together, we directly or indirectly influence more than 5.3 million barrels of crude oil per day, approaching 10% of global production."
Flip through the chart to see a global asset distribution map.
"Our proven reserves are approximately 42 billion barrels. In terms of transportation, we have 38 very large crude carriers (VLCCs) at operation, with a total deadweight tonnage of 11.4 million. We own or lease oil storage tanks in 22 major ports around the world, with a total capacity of 240 million barrels. Downstream, we have seven refineries in which we hold stakes or have a combined daily processing capacity of 1.8 million barrels."
He turned the page and went to the finance section.
"Direct financial gains from this crisis: $1.54 billion in profits from the futures market, and approximately $700 million in gross profit from spot grey market transactions, totaling $2.24 billion. Current holdings of various oil company equity stakes, valued at approximately $6.8 billion. Energy-focused investment funds under management, with a total size of $12 billion. In addition, approximately $3.5 billion in long-term stable deposits attracted through specific channels."
Finally, there is an abstract summary about influence.
"We have 37 'friends' in key sectors of the five Middle Eastern countries who can regularly provide inside information or exert influence. In the parliaments of major European and American countries, there are 89 members of parliament who receive funding from our Political Action Committees (PACs) or similar institutions and maintain communication on key issues. We have 12 policy research institutions and media outlets that we fully or partially control. We have signed six cooperation agreements with non-governmental armed forces that have actual control in certain regions."
After Alexander finished speaking, he continued, "The petrodollar cycle has already started. The secret agreement between Washington and Riyadh is taking effect: Saudi Arabia guarantees to continue selling oil in dollars, the United States guarantees the security of the Saudi monarchy, and Saudi Arabia will redirect most of the influx of petrodollars back to purchase US Treasury bonds and Wall Street financial products. This closed loop has already begun to turn."
"Where do we stand in this new system?" Lin Yan leaned back in his chair, his gaze sweeping over the crowd.
Albert leaned forward slightly: "We're not the architects of the system, that's America. But we're probably one of the smartest tenants in the system. We have real oil wells and tankers in our hands, we got the most lucrative piece of the financial pie during the crisis, and now we've also obtained a large sum of money with extremely low costs and extremely long terms through Saudi investment channels."
Marcus added, "Moreover, we've worked on several key 'valve' points, such as the port of Tripoli. When the pressure on the entire system increases, we have the ability to slightly tighten or loosen a particular valve, affecting the supply tightness and price levels in a localized area. This ability is sometimes more valuable than simply owning oil fields."
The dust settled, and profits were in hand. In the latter half of 1974, the Lin family began to convert some of their astonishing oil profits into new assets for the future.
In July, $800 million flowed into Canada to acquire a 12% stake in uranium mining giant Kamek, quietly stepping into the nuclear energy sector.
In August, the Lin Institute for Advanced Energy was registered in Singapore. Its first five-year plan received a grant of US$50 million, with a focus on solar photovoltaic technology. This milestone was more than a decade earlier than the historical trajectory of large-scale industrialization.
In September, good news came from the North Sea. Northwest of the Ekofisk oil field, an exploration company controlled by the Lin family discovered a new oil field named "Snorri," with preliminary estimates of reserves as high as five billion barrels. The Lin family's joint venture acquired a 40% stake in the field.
In October, through the efforts of a charlatan monk with deep roots in the Soviet Union, the first secret contact was made in Vienna with representatives of the Soviet foreign trade department to tentatively explore the possibility of cooperative development of remote oil fields in Siberia. Although ideological barriers and enormous political risks made a substantive agreement seem far off, an informal channel of communication was thus established.
In November, Singapore, an institution called the "Asia Pacific Commodities Exchange" quietly opened, primarily offering spot and forward contracts for crude oil. On its opening day, the trading volume displayed on the electronic screen exceeded one million barrels.
On December 15th, the year-end meeting was held again in Deep Water Bay.
"Counting from the autumn of 1971, it's been three years." Lin Yan closed the final summary report. "The 'Heart of Oil' project has basically achieved its expected goals. We have controlled nearly 10% of the world's oil production capacity and established a complete chain from underground rock strata to refueling nozzles and then to financial contracts."
Alexander adjusted his glasses and stated the figures precisely: "According to the Finance Department, our direct investments in global oil assets total approximately $18 billion. Based on current market fair value, these assets are worth about $42 billion. The return on net assets exceeds 133%. If we include the financial profits we realized during the crisis, the total gains exceed $25 billion."
"Hidden worries are also emerging." Albert's voice was cautious. "A department under the U.S. Department of Justice has begun to focus on certain 'unusually coordinated' transaction patterns during the crisis. MI5 has become interested in the almost 'prophetic' pace of expansion of our companies in the North Sea. Some OPEC countries have begun to review old contracts with foreign oil companies, driven by nationalist sentiments."
"So, the expansion phase has come to an end," Lin Yan set the tone. "Starting in 1975, the strategic focus shifted to consolidation and settling. We securitized some mature, less sensitive assets to realize some profits and increase cash reserves. We transferred equity stakes that might attract too much attention to offshore entities with more complex structures and greater difficulty in tracking them. We cultivated and relied more on local professional managers and partners, and our own people had to step back and move further behind the scenes."
"So, where are the new growth points?" James asked.
Lin Yan gestured, and a new planning diagram appeared on the screen.
"Three directions. First, continue to invest in future energy, especially the research and development of new energy technologies, which is a long-term endeavor. Second, deepen our presence in the Far East market; the economies of South Korea and Taiwan are taking off, and their oil demand will continue to grow. Third, deepen our role in the petrodollar financial cycle, going beyond simply passively accepting deposits to developing more proactive asset management, project financing, and investment banking businesses."
He paused for a moment, his gaze seemingly piercing through the wall, looking into the distance.
"But all of this is based on the assumption that oil remains the lifeblood of the world. You need to start thinking further ahead. Oil dominated the 1970s, so what will be at the heart of the 1980s? And where is the key to the 1990s? You must find the answers in advance, and there's a reward for the correct answers!"