Personally, I’m sick of BP. I don’t care if they survive. But I am interested in making money off of BP’s problems.

In the mainstream financial press, I’ve come across three ways to do it: Buy BP cheap… or short BP… or buy the Gulf clean-up companies. I don’t like any of them. I have a much better — and less obvious — way for you to clean up on the Gulf.

Here’s one clue…

BP is in talks to sell one of its valuable assets to China — its 60% stake in Pan American Energy (PAE).

It’s not hard to see why BP has so much invested in PAE. PAE is Argentina’s second-largest oil producer. It holds interest in 13 oil and gas production blocks in Argentina and in 10 active oil and gas production development blocks in Bolivia. PAE also holds interests in eight exploration blocks in Argentina and seven in Bolivia.

The Chinese company that BP is talking to sees the opportunity in PAE. It already has a 20% stake in the company that it acquired earlier this year from Argentina’s Bridas. But the Gulf disaster has made it possible for the Chinese company to get more of a good thing. If the deal with BP goes through, it would be bullish for its shares.

Here’s another clue…

BP is talking to this same Chinese company about a stake it just bought in the South China Seas. If BP strikes oil in the South China Seas, it’s required by Chinese law to hand over majority ownership to this Chinese company.

Are you seeing a pattern here as to which company holds the upper hand? Actually, it’s not just with BP. These days, this Chinese company has the upper hand with everybody.

It’s a company IDE’s own Andrew Gordon recommended last July. Its name is CNOOC (China National Offshore Oil Co.), and it’s now up over 30%! In the last six months alone, it’s climbed over 15%. Other oil companies haven’t done nearly as well. ExxonMobil and Brazil’s Petrobras have lost 15% or more. Shell and Chevron, too, are in the loss column. Only ConocoPhillips shows a gain — of 5% — but it’s two-thirds lower than CNOOC’s.

And Andy is still excited about the stock. I caught up with him at the Early to Rise offices last week and had a chance to ask him about the oil industry in general and CNOOC in particular…

Bob: I take it you are still bullish on the energy sector, Andy. Why?

Andy: Not across the board. But on oil, absolutely. You can make tons of money if you just know a couple of things.

Bob: Like what?

Andy: For one thing, you keep hearing that offshore oil production has no future because it’s going to be regulated to death. That’s simply not true. It’s still gonna take off in places like Venezuela, Brazil, China, and Africa. Even Saudi Aramco will be jacking up offshore production.

And forget the idea that oil got a permanent black eye from BP’s accident. That’s total B.S. Do you see anybody boycotting oil? The hybrids were being bought by people who hated oil already. BP’s accident is having zero impact on oil demand.

Bob: So how, exactly, have BP’s problems helped CNOOC?

Andy: BP’s accident in the Gulf of Mexico is the best thing that ever happened to CNOOC. Crude production worldwide has basically flatlined since 2005, so future production has to come from offshore. And that’s CNOOC’s territory.

Bob: Aren’t other oil companies being just as aggressive as CNOOC?

Andy: Are you kidding? CNOOC is the last of the big spenders. Last year, it spent 34% more on production drilling. Only three other oil majors spent more on production drilling, and CNOOC outdid them all.

Bob: And the rest?

Andy: They all cut back. And in the meantime, they’re failing to replace the oil they bring up from the ground. CNOOC, on the other hand, is buying up offshore properties left and right. They’ve been particularly aggressive in Africa.

Bob: How else has BP’s accident helped CNOOC?

Andy: It’s going to mean stricter regulations and, thus, increase the cost of getting oil out of the sea. CNOOC already has a huge advantage there. It is the lowest-cost offshore producer in the world. It brings up oil from the sea for $20 a barrel!

Bob: That’s really cheap.

Andy: CNOOC has said it needs oil to go for at least $30 a barrel to be profitable. With oil now in the mid-70s, the company’s profit is north of 250%. CNOOC’s cost advantage is going from big to GINORMOUS.

Bob: Besides investing in CNOOC, is there any other way to make money off of BP?

Andy: Well, there is — and everybody is missing the boat on this one. Stricter regulations will rejigger the market. But the mainstream press is focusing only on how it will raise the cost of producing oil and, they claim that nobody benefits from that. What they fail to realize is that it’ll create a fundamentally new equipment market for one part of the oil industry. As a result, a handful of companies will see their profits soar.

I’ve picked the best of them for my readers in the next issue of Sound Profits.

Bob: Thanks, Andy. Sounds like another winning pick for you.

[Ed. Note: For more of Andy’s winning stock selections, sign up for Sound Profits. Just click on the link to get all the details on this monthly financial newsletter from our colleagues at Investor’s Daily Edge. They’ve recently released a report about a metals investment that could pay investors 12 – 14 times more than gold, silver, or platinum. But the window of opportunity to get in is closing fast. .]