China Investment Corp. to invest $985 million in Canada’s oil sands

Chinese company invests $985M in Canada oil sands

TORONTO — Canada’s Penn West Energy Trust said Thursday it’s getting a $985 million investment in its oil sands assets from a Chinese company, China’s latest venture into Canada’s oilsands.

Penn West said China Investment Corp. will own 5 percent of its stock and will invest $805 million to form a new joint venture.

Penn West will contribute assets valued at about $1.7 billion to the venture in exchange for a 55 percent partnership interest.

The Calgary, Alberta-based company said in a statement that it will operate the project, which includes 237,000 acres of oilsands leases, and current production of about 2,700 barrels of oil equivalent per day of bitumen and associated gas.

“The deal is an important element of our strategy as it provides for the development of the assets from the current resource appraisal phase through to commercial scale development and production,” said the company.

As the world’s second-biggest oil consumer, China has been increasingly acquiring oilsands properties in an attempt to secure future oil supplies and meet its growing demand for fuel.

Last month, a Beijing-backed oil producer announced the country’s largest deal yet in North America, paying ConocoPhillips $4.65 billion for its minority stake in Canada’s largest oil sands project. Chinese fuel refinery giant China Petroleum & Chemical Corp., or Sinopec, received a 9.03 percent stake in Syncrude Canada Ltd. Last year, Syncrude produced 102.2 million barrels of crude.

Sinopec previously acquired a 40 percent interest in Total E&P Canada’s Northern Lights project in 2008, bumping up its ownership to 50 percent a year ago.

In August, PetroChina Co., Asia’s largest oil and gas company, made a $1.7 billion investment in the Canada’s Athabasca Oil Sands Corp. PetroChina bought a 60 percent working interest the Alberta-based company’s Mackay River and Dover oil sands projects.

Last summer, China Investment Corp. acquired about 20 percent of Vancouver-based Teck Resources Ltd., Canada’s largest publicly traded miner.

“Greater investment will lead to greater production. More importantly, it could lead to a huge, new export market for the oil sands and Asia,” said Vincent Lauerman, president of Geopolitics Central, who specializes in geopolitics and oil market developments.

All of the major oil and gas pipeline systems flowing out of Western Canada are designed to supply refineries in the United States or Canada, and none have been built across the mountain range to the Pacific Coast.

However, Calgary-based Enbridge Inc. has proposed to build a pipeline connecting the oilsands hub at Hardisty, Alberta, to Kitimat, British Columbia, on the latter province’s north coast. But it has said the line will not start up until 2016 at the earliest.

The Chinese are therefore making their plans to invest in oilsands production on the assumption that the Northern Gateway project, and potentially more westbound crude pipelines, will eventually go ahead.

“(The Chinese are) extremely strategic, very thoughtful and doing what they feel is best to secure oil and natural gas supply in the long term,” said Lauerman. “(It’s) just another sign of the things to come for the oil sands, Asian investment and probably Asian markets.”