Nathan VanderKlippe, Globe and Mail, Sep. 01, 2011
CALGARY— Enbridge Inc. (ENB-T32.46-0.04-0.12%) has quietly garnered support from a powerful group of foreign interests for its controversial Asian export pipeline, as Chinese investors in Canada’s oil sands become increasingly bold in their ambitions to bring Canadian crude across the Pacific.
The company is in the midst of a multiyear effort to gain approval to build Northern Gateway, a $6.6-billion proposed project that would take crude from the oil sands to the British Columbia coast, where it could be loaded on ships and sent to Asia and California.
To date, only one company, China Petroleum & Chemical Corp. (Sinopec), has been identified as a financial backer of Gateway, after Enbridge raised a total of $100-million in funding from 10 Canadian producers and Asian refiners that agreed to help backstop the cost of gaining regulatory approval.
Sources have now told The Globe and Mail that the list of funders also includes MEG Energy Corp., which is partly owned by CNOOC Ltd., another Chinese state-owned energy company. Each funder gains the right to discounted shipping rates and an option to buy an equity stake at a later date.
In a statement, MEG spokesman Brad Bellows said the company is “not commenting on speculation.” But, he added, MEG is “interested in expanded market access, absolutely.”
Indeed, as Chinese companies pour billions into Canadian energy investments, it’s increasingly clear their interest extends to bringing barrels across the Pacific. Those firms have long argued that their interest in Canadian oil is aimed purely at profit, not simply fuelling Chinese cars with Alberta crude.
But their statements to Canadian regulators show that exporting barrels is a key motivator. Earlier this year, for example, five companies signed up for so-called firm service, or guaranteed access, to a portion of the Trans Mountain pipeline, which carries oil from Edmonton to a port at Burnaby, B.C. Among them is PetroChina International (America) Inc., a subsidiary of Chinese energy giant China National Petroleum Corp.
In testimony before the National Energy Board, Stephen Dove, senior crude oil trader with the firm, said: “at PetroChina International office, one of our main concerns, of course, is supply back to China.”
Mr. Dove called the Trans Mountain arrangement a “first step” in PetroChina’s longer-term ambitions, saying the firm has reviewed how it can participate in “various infrastructure projects as they come up.”
“Transportation that connects the Alberta basin with China is a priority,” Mr. Dove said – a hint that PetroChina may also be interested in Gateway.
It’s not just China. Nearly two dozen companies have asked to be “intervenors” in the Gateway regulatory application, including small Canadian companies, major multinationals like Exxon Mobil Corp. and foreign companies like South Korean conglomerate Daewoo International.
Companies typically intervene when they want to closely follow a project, are interested in using it – by sending crude through Gateway, for example – or have a financial interest in it.
Gateway has stoked such fierce opposition from first nations that some question whether it can be built. But the project holds the promise of dramatically altering Canada’s energy geography, providing for the first time access to a major new – and growing – export market. That has made it an increasing object of global interest.
South Korean trading and construction firm Daewoo International, for example, is hopeful it can provide steel or engineering to the Gateway pipeline. That’s just one part of its Canadian strategy.
The company is also contemplating “investment in the oil sands or natural gas. … We’re interested in investing in critical resources,” and Canada, as a stable jurisdiction with huge reserves, is seen as an important spending destination, said John Kim, a California-based manager with Daewoo. In that context, Gateway is also important as a link between overseas oil buyers and Canadian oil production.
“That pipeline is critical for the Asian market. We’re one of the biggest Asian players in terms of just trading, so we have our eye on this pipeline,” Mr. Kim said. In fact, the company attempted to buy one of the ten $10-million units in Gateway, which can be converted to an equity stake at a later date. It was not successful.
According to several sources, others that have acquired $10-million units include Suncor Energy Inc., French energy giant Total SA and CNPC.
Neither Suncor nor Total would confirm participation, citing competitive reasons. Both companies have, however, publicly supported development of new export markets. Suncor is “potentially a contract or spot shipper” on Gateway, spokeswoman Sneh Seetal said.
Enbridge has declined to identify Gateway supporters, although spokesman Paul Stanway said corporate interest in the project is evidence of its attractiveness.
“The strategic arguments for Gateway are overwhelming, and I think people recognize that,” he said.
Wenran Jiang, a professor at the University of Alberta’s China Institute who has helped co-ordinate Canada-China investing conferences, said claims of support are “not a public relations stunt from Enbridge. The promise of Gateway is extremely attractive to these corporate sponsors, and potential shippers and buyers.”