Energy Ink

Will Chinese investment in the oil sands rattle Canadians?

January 04, 2012

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Speculation about how Canadians view Chinese ownership of domestic energy assets is beginning to circulate once again. In the wake of two recent deals, one of which puts China in charge of an oil sands property for the first time, Claudia Cattaneo at the Financial Post wonders whether Canadians (read: Albertans) are entirely prepared for the implications of increased foreign ownership in the region. The answer, she writes, depends on behavior and performance. Will PetroChina run afoul of Canadian environmental regulations? Or will its subsidiary, Cretaceous Oilsands Holdings Ltd., merely blend in with the crowd?

The same tetchiness prevailed after Chinese refining giant Sinopec paid a hefty $4.65-billion for a minority nine per cent slice of the Syncrude Canada consortium in 2010. Fewer than 20 per cent of 3,000 respondents to a poll later conducted by Canada’s Asia Pacific Foundation felt “comfortable” with a company controlled by the Chinese government making investments in powerful Canadian firms.

Sinopec’s investment in Syncrude now seems quaint. The refining giant shelled out $2-billion and change last fall for Calgary-based natural gas producer Daylight Energy. Cnooc Ltd. picked up distressed Opti Canada Inc. for $2.1 billion at about the same time. Many expect such transactions will continue apace, Dan Healing reports at the Calgary Herald.

But China, of course, is only part of the foreign investment story. A shareholder group that included the Government of Singapore Investment Corporation gave Calgary-based Osum Oil Sands Corp. an early Christmas gift by agreeing to pay $500 million in a Dec. 23 share sale. The money, expected to be in hand by Jan. 18, will help Osum fund a 10,700 barrel-per-day pilot in the hard-to-crack Saleski carbonate.

More significantly, perhaps, the Osum deal reflects an idea that has yet to be seriously tested in Canadian energy politics, and one that is all the more relevant as public hearings into Enbridge Inc.’s Northern Gateway pipeline get under way this month. During hearings before the National Energy Board last summer, Osum cited “strong interest” in firm service offerings on Kinder Morgan Canada’s Trans Mountain Pipeline, which runs from Edmonton to Burnaby, British Columbia.

“Osum has received a number of enquiries from Asian interests concerning both the purchase of our oil production and investment in our projects and it is clear to us that enhancements to export capacity are vital to the growth of our business,” company manager of marketing and commercial development Murray Morrell wrote in a letter filed with the NEB as part of the TMPL hearings. Stephen Dove, a senior oil trader with CNPC subsidiary PetroChina International America Inc., also testified during those hearings that infrastructure “that connects the Alberta basin with China is a priority” for Chinese firms.

Just how sensitive Canadians are to Chinese investment in the oil sands will become more apparent if and when the barrels begin flowing west.

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