China leases a bit of Alberta's oil patch
State-owned CNPC buys rights to develop oil sands properties
NORVAL SCOTT
http://www.theglobeandmail.com/servlet/story/LAC.20070622.RCNPC22/TPStor...
June 22, 2007
EDMONTON -- In a possible first step toward becoming a producer of Canadian crude, the Chinese National Petroleum Corp., China's largest oil company, revealed yesterday that it has acquired some land in Alberta, with the intention to eventually develop an oil sands project if possible.
CNPC, the largest of China's state-run oil companies, said it won 11 blocks in a Crown Land Lease sale held by the Alberta government in 2006, with the land being awarded to the company in early January 2007, said Zhang Xin, director-general of external affairs at CNPC.
"These moves clearly show our sincere determination to participate in oil sands developments in Canada," he said yesterday at the Canada-China Economic Co-operation Conference in Edmonton.
While state-run Chinese companies are already present in the oil sands - China Petroleum & Chemical Corp. and China National Offshore Oil Corp. have minority stakes in Synenco's Northern Lights project and MEG Energy's Christina Lake development, respectively - no Chinese firm is believed to have previously bought oil sands leases by itself or to have moved toward developing its own oil sands project. CNPC appears to have made the acquisitions anonymously through a land agent, with Alberta Energy's records showing no awards to the company in January, although leases were awarded to several agents.
In an interview, Mr. Zhang played down the importance of the acquisition, saying that it is so small it could be considered "of no meaning." The leases comprise an area of 258.6 square kilometres and contain an estimated resource base of 1.97 billion barrels of crude, although only a fraction of that is likely recoverable, he added.
"This shows our interest, but we need to do much more study to get more information on the technology, the laws, the regulations and the environment. We don't quite understand all those factors yet," he said, adding any project the company might pursue is very far from being defined. He wouldn't comment on where the leases are in Alberta or how much CNPC paid for them.
While the deal might not be on a grand scale, there's little question that Chinese oil titans are scouring the globe for resources to feed an economy that has grown at double digits for the past four years. This week, CNPC subsidiary PetroChina Co. Ltd. said it is seeking to raise $6-billion (U.S.) in a Shanghai listing, with the money to be used to buy oil and gas projects, fund exploration, and build refineries and pipelines. PetroChina also has a preliminary agreement to buy half of the crude transported through Canadian firm Enbridge Inc.'s Gateway pipeline, which is expected to come on stream in 2014 and will take oil sands crude to Canada's Pacific coast.
The involvement of national oil companies, which can operate under government direction and don't necessarily operate as dictated by the market, have been controversial in North America. The U.S. government sought to prevent CNOOC's attempt to purchase U.S. oil company Unocal in 2005. However, South Korea's KNOC and Norway's Statoil ASA, both state-run firms, are already developing oil sands projects in Alberta, setting some sort of precedent.
Alberta Energy spokesman Jason Chance said the province has no problem with the Chinese firm purchasing the leases, as long as it abides by regulations.
"The Alberta government is open for business," he said. "It's important to have an open system."
