PetroChina in $2.2B Canada gas deal

Chinese oil group PetroChina is buying a stake in a big Canadian shale gasfield for $2.2bn, highlighting Chinese energy companies’ growing interest in Canadian resources after the $18bn Cnooc-Nexen deal.

PetroChina, China’s biggest oil company by production, will form a joint venture with Encana of Canada that gives the Chinese company a 49.9 per cent stake in Encana’s Duvernay lands project in Alberta, an area that contains shale oil and shale gas.

It is the second big overseas deal by PetroChina this week, following its $1.6bn investment in the Browse natural gas project in Western Australia on Wednesday.

China’s state-owned oil companies have a mandate to expand their overseas operations at a time when China’s oil and gas imports are surging to meet growing domestic demand.

Canada has been a magnet for Chinese energy investment thanks to its rich resources, open foreign investment climate and stable regulatory environment.

Analysts say that trend is set to accelerate after the Canadian government gave its blessing last week to Cnooc’s acquisition of Nexen, a Canadian oil company with assets around the world. The deal, which is still awaiting approval from US regulators, is the biggest overseas acquisition by a Chinese company.

The Canadian approval sent a reassuring signal to investors about the country’s openness to foreign takeovers.

However, Stephen Harper, Canada’s prime minister, also set out a new policy on acquisitions by foreign state-controlled companies such as PetroChina and Cnooc, which puts new obstacles in the path of such deals, and bans them altogether in the oil sands of western Canada.

The Nexen takeover should not be seen as “the beginning of a trend, but rather the end of a trend”, Mr Harper said.

“To be blunt, Canadians have not spent years reducing the ownership of sectors of the economy by our own governments, only to see them bought and controlled by foreign governments instead.”

Asset deals such as PetroChina’s latest purchase from Encana are unlikely to be blocked under the new rules, analysts believe.

Natural gas, shale gas and deepwater fields have become priorities for China’s oil majors as they try to acquire the expertise needed to tap shale and deepwater fields at home.

Neil Beveridge, oil analyst at Bernstein in Hong Kong, said PetroChina’s investment in the Duvernay project would give it experience in developing “very deep shales” that are similar to China’s own deposits.

Randy Eresman, chief executive of Encana, said the new joint venture would enable the company to “accelerate the pace at which the full production potential of our Duvernay lands can be achieved”. Encana has drilled nine wells in the Duvernay area and estimates that the area contains 9bn barrels of oil equivalent.

Canadian regulators are considering whether or not the deal will require their review and approval, according to comments emailed to Bloomberg.