Taking a bet on oil sands
WITH crude oil hitting a record price of US$108 per barrel recently, the search for oil and gas has been more intense than ever due to its high profit margin.
In recent years, investing in the extraction of oil from sand or oil sands is gaining popularity because of the strong demand and high prices of oil.
It was reported by Time Magazine in a recent article that second only to the Saudi Arabia reserves, Alberta's oil sands deposits were described as “Canada's greatest buried energy treasure,” which could satisfy the world's demand for petroleum for the next century.
Some foreign-based companies with local presence have jumped on the bandwagon to attract local investors to invest in land banks in Canada with double-digit percentage yields per annum.
The general idea is to get investors to invest in parcels of land that have oil sands.
Once the land is acquired, oil is then extracted from the sand and later developed into a township usually within five years.
Investors are said to be issued land titles from the Canadian government and will receive capital gains from the land purchased.
OCBC Bank (M) Bhd Head of Wealth Management Lim Wyson said for customers seeking principal protected structured products, the bank currently had on its shelf (March 3 to March 25) a 1 Year Agri-Property Outperformance FRNID (Series 2).
Lim said if the customer did not mind investing in a non-principal protected product and was looking for high yields, the bank had a wide range of dual currency investments for them to choose from.
The key features of the Agri-Property Outperformance FRNID are that the tenure is over a maximum of one year, principal 100% protected if held to maturity or in the event of early termination and the yield could be up to 8% per annum, if predetermined conditions were met.
Lim said the structured product was based on the quarterly performance of six global agribusiness stocks minus the quarterly performance of the Dow Jones US Real Estate Index.
“Although yields/coupon received from this product is dependent on the performance of the equities index, the product does not invest its funds in the stock market.
“In fact, over 95% of the funds are placed in a Malaysian money market instrument and the balance used to purchase options on the underlying assets above,” he noted.
On the key features for the dual currency investment, Lim said the tenure was generally two weeks to a month (customer's choice).
However, he said the principal was not protected and there could be potentially foreign exchange rate risk for the investor.
On yield, Lim said it depended on the currency, tenure and strike rate selected by the customer and the currency pair was selected by the customer (example MYR, SGD, USD, AUD, NZD, GBP, EUR, etc)
He said dual currency investment was an investment with variable terms for the currency of payment.
Investments are made in one currency and in exchange for higher interest rates (generally higher than normal fixed deposit/time deposit of the corresponding tenure) and payment at maturity was made either in the currency of the initial investment or in another agreed upon currency at a predetermined exchange rate.
http://biz.thestar.com.my/news/story.asp?file=/2008/3/24/business/207324...
