Oil Sands Truth: Shut Down the Tar Sands

Chinese firm buys $435-million stake in Penn West

Chinese firm buys $435-million stake in Penn West to form oilsands joint-venture
Thu May 13 2010
Lauren Krugel
The Canadian Press

CALGARY — China is making yet another push into Alberta’s oilsands, taking on a five per cent stake in Penn West Energy Trust and inking a joint-venture to develop some of the Canadian oil heavyweight’s land.

China Investment Corp. will take on $435 million worth, or five per cent, of Penn West, stock and is investing $817 million in the new joint venture, while Penn West is kicking in assets in the Peace River area of northern Alberta worth about $1.8 billion.

In a statement Thursday, Calgary-based Penn West said it will hold a 55 per cent interest in the joint-venture and will operate the project, which includes 237,000 acres of oilsands leases.

Penn West, known mainly for its vast conventional oil holdings in western Canada, said the properties contain “significant” bitumen resources, though they are currently producing only 2,700 barrels of oil equivalent output per day.

“Penn West is committed to an exploration and production strategy which will fully assess and realize the potential of its extensive resource play portfolio. The joint-venture 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,” Penn West said in a statement.

“The cash proceeds from the joint-venture and the financing provide Penn West with additional financial flexibility to strategically advance the development of its significant ownership of light-oil resources.”

Chinese companies have been acquiring more and more oilsands properties in recent years as the country attempts to secure future supplies of oil to feed a massively growing hunger for the fuel that will only intensify in the decades ahead.

China’s preferred strategy so far has been to join forces with Canadian firms that have the technical expertise to extract the heavy oil from sand and clay.

The Penn West deal was announced a month after another Chinese state-owned company, fuel refinery giant Sinopec, bought a nine per cent interest in the world’s largest oilsands project.

Sinopec spent $4.65 billion (U.S) for a stake in the Syncrude Canada Ltd. partnership, which owns the gargantuan 350,000-barrel-per day mining operation north of Fort McMurray, Alta.

U.S. energy major ConocoPhillips had put its interest on the block as part of a plan to streamline its operations and pay down debt.

Sinopec previously acquired a 40 per cent interest in Total E&P Canada’s Northern Lights project in 2008, bumping up its ownership to 50 per cent a year ago of the French-owned company’s oilsands development.

Another state-owned firm, PetroChina, announced in August it was making a C$1.9-billion investment in two projects operated by Athabasca Oil Sands Corp., which recently made its debut on the Toronto Stock Exchange.

Last summer, China Investment Corp. acquired about 20 per cent of Vancouver-based Teck Resources Ltd., Canada’s largest publicly traded miner. Teck has a 20 per cent interest in the yet-to-be developed Fort Hills oilsands mine.


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