Saturday, May 12, 2012

China ready to wait; Some C$20B invested in Canada; investment could grow 10-fold over 10-15 years

Gary Park
For Petroleum News

China’s stable of state-owned energy companies has invested about C$20 billion in Canada’s oil sands and shale gas assets — proof positive that Beijing is ready to ride out a stormy passage for pipelines from Alberta, across British Columbia to ship production across the Pacific, says Zhang Junsai, China’s ambassador to Canada.

The delays in approving the key infrastructure elements will not deter China from seeking a key role in the development of those resources, he told reporters in Calgary.

Typifying the Chinese reputation for taking a long-range view of its investments, he said China has access to ample imports of oil and natural gas from Australia, Qatar and Russia, so, if necessary, supplies from Canada can wait.

“There`s investment opportunity because Canada is open for international investment,” Zhang said.

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“If there’s opportunity, Chinese companies will come to take some shares, as I say, to learn from Canada.

“We buy our resources, our energy, from other channels. There are a lot of channels. But we’ll work on Canada’s exports to China or oil and gas. That will happen in the next few years.”

He said the investment to date is primarily directed at improving China’s knowledge of developing unconventional resources and turning a profit.

Prime Minister Stephen Harper has pledged to turn Canada into a global energy superpower by diversifying exports of Canadian oil sands crude and LNG to Asia, but opposition to plans by Enbridge and Kinder Morgan to build pipeline from Alberta’s oil sands to tanker terminals on the British Columbia coast has raised concerns about Harper’s chances of achieving his goal.

However, on the first anniversary of his weeping election victory, Harper said Canada must align itself with the economic winners of the world to ensure continuing prosperity.

“The financial and debt crisis of the past few years may not in many countries be a passing phenomenon,” he said.

“World economic power and wealth are shifting in a way that is historic and we as Canadians must decide that we will be on the right side of that history.”

Harper said the latest federal budget, which contained provisions to streamline regulatory approval of major energy projects, is aimed at sustaining a “vibrant, growing economy for all Canadians, while protecting our environment.”

He said the government’s economic plan looks at the bigger picture and focuses on the longer term.

Investment growth expected
The importance of winning over the Chinese was emphasized by Gordon Houlden, director of the University of Alberta’s China Institute.

He said Chinese investment could grow ten-fold from the current level of C$20 billion over the next 10 years to 15 years.

Beijing-based lawyer Robert Kwauk of Blake, Cassels & Graydon, said that if Enbridge’s Northern Gateway project is approved it is likely Chinese investments in Canada’s energy sector will top the largest single deal so far, when Sinopec acquired ConocoPhillips’ 9 percent stake in the Syncrude Canada oil sands consortium for C$4.65 billion.

“The ball is really in our court to get that pipeline built,” he said.

Xu Xiaojie, a senior researcher at the Beijing-based Institute of World Economics and Politics, said China’s firms want to profit by taking cheap Canadian gas and building LNG pipelines and export facilities and selling the LNG to Asian buyers — not just those in China — who are willing to pay eight times more than North American buyers.

He noted that the gap between supply and price in Asia is currently running as high as US$16 per million British thermal units.