Dear Fellow Shareholders,
Experts estimate there are 3.6 trillion barrels of "unconventional" oil potential worldwide compared to 1.2 trillion barrels of remaining conventional oil reserves. As conventional hydrocarbon reserves decline, experts also estimate that 70% of the world's future reserves will be sourced from unconventional oil and gas resources, including oil sands, coal bed methane, gas hydrates and in particular, fractured oil and gas shale.
I am very pleased to say that Trans-Orient is at the forefront of this significant unconventional exploration potential, leveraging sophisticated drilling and completion technology to tap into oil-and-gas-rich fractured shale formations that are the source of major oil and gas generation in the Company's East Coast acreage. When we formulated our strategy in 2005 we recognized that Trans-Orient needed to think "outside the box" and to capitalize on rapidly advancing technology in order to provide shareholders with significant upside. This led us to identifying, negotiating and assembling 100%-control in a multi-million acre play area on the East Coast of New Zealand. This area not only includes the area where fractured shale source rock formations are developed, it also has conventional high-impact exploration prospects and provides multi-target discovery potential not typically found in a small independent.
Our near-term drilling strategy for this large area is threefold. The program provides potential for immediate cash flow, exposure to high-impact conventional exploration and proprietary subsurface data acquisition needed to evaluate the unconventional potential of the world-class Waipawa Black Shale and Whangai Shale source rock formations:
There is much debate regarding oil pricing and it is difficult to predict the future price, however, it is clear that upwards pressure on the demand side will continue. I believe that oil prices will increase further, driven by continued demand from developing countries such as China and India against a tightening availability of crude oil supplies. Though the age of permanent shortage has yet to begin, these events could happen within the next two to three years as world oil demand continues to increase, supply remains questionable, spare capacity continues to diminish, and geopolitical instability appears to be something we will have to live with for the foreseeable future.
It is a very interesting time to be involved in the oil industry. I am pleased to be leading Trans-Orient and look forward to reporting to you in the years ahead.
Sincerely,
Garth Johnson
Chief Executive Officer
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