JASON FEKETE, Calgary Herald, May 13, 2010
CALGARY — China is bolstering its stake in Alberta's oilsands, just as Premier Ed Stelmach jets to Asia to improve relations with the communist country that's increasingly eyeing the province's bitumen bounty and the shifting geopolitics of energy.
A multibillion-dollar deal announced Thursday will see Penn West Energy Trust partner with a wholly owned subsidiary of China Investment Corporation (CIC) to develop the trust's oilsands assets in the Peace River region of northwest Alberta.
Penn West will contribute assets valued at about $1.8 billion — including oilsands leases — while retaining a 55 per cent interest, while the state-owned CIC will invest $817 million to acquire the remaining interest in the partnership.
The deal is China's third major venture into the oilsands since last fall and part of an emerging trend that has the world's most populous country looking to satisfy its insatiable appetite for energy with Alberta petroleum.
Sinopec, China's second-largest oil producer, revealed last month it's buying a nine per cent stake in Syncrude for $4.65 billion, while Athabasca Oil Sands Corp. announced in late August that PetroChina will buy a 60 per cent share in its MacKay River and Dover projects for $1.9 billion.
"The most important thing in security of supply is diversity of supply,"
explained Gordon Houlden, director of the China Institute at the University of Alberta.
"One thing that shines for Alberta is stability. Oil is almost exclusively in unstable parts of the world," added Houlden, who spent 22 years working on the China file for the federal Department of Foreign Affairs.
Chinese investment in Alberta energy plays will likely continue with assets relatively cheap compared to only a few years ago, he noted.
Asia's latest jump into the tarry sands — the second-largest proven oil reserves in the world next to Saudi Arabia — comes as Enbridge forges ahead with a controversial pipeline from northern Alberta to the port of Kitimat, B.C.
The $5.5-billion Northern Gateway project would open new markets for Canadian crude, but faces heated opposition from aboriginal and environmental groups worried about a potential spill on land or sea.
Penn West officials said they were initially approached by CIC about the Peace River play but later became interested in an equity stake in the company.
China's long-term goals may include a pipeline to the West Coast, although the country and CIC seem content to focus on oilsands projects for now, said Jason Fleury, Penn West's manager of investor relations.
"This is not a departure for them," he said. "They're developing a broader energy policy and their strategy and agenda is very transparent."
More international companies are taking another look at investing in the cost-intensive oilsands now that the recession is in the rear-view mirror, argued Greg Stringham, vice-president with the Canadian Association of Petroleum Producers.
"The strong interest in the oilsands is really an international interest because of the global scale that it is in the size of the resource and the potential development that is here," Stringham said. "They're looking at it really as an investment opportunity in a stable area like Canada."
Stelmach, British Columbia Premier Gordon Campbell and Saskatchewan's Brad Wall fly today to China for a weeklong trade mission that will take them to Shanghai and Beijing, before spending a couple of days in Tokyo to wrap up the tour.
While in China, Stelmach will meet with the China National Petroleum Corporation and be joined by his counterparts for talks with the China Investment Corporation.
Beyond energy issues, Stelmach will also meet with officials from the Chinese Ministry of Agriculture in hopes of reopening the country's borders to Alberta beef and easing restrictions on canola seed.
Houlden from the University of Alberta believes the premier's trade mission to China is critical if the province is truly to tap a mammoth market.
"China is less seen as a distant hazard," he said. "If we do want diversity in exports, we have to spend time in Asia."
