Canada to review PetroChina’s $5.5bn deal to acquire natgas assets

15 February 2011 16:36  [Source: ICIS news]

TORONTO (ICIS)--Canada’s federal industry ministry will review PetroChina’s planned $5.5bn purchase of a 50% stake in a large Canadian natural gas project in British Columbia province, the ministry said on Tuesday.

The review of the PetroChina deal, and a review of a proposed merger of the London and Toronto stock exchanges, would come as Canada’s rules on foreign investments and takeovers were left unclear after the government blocked BHP Billiton’s $39bn bid for PotashCorp in 2010, observers said.

Thorsten Koeppl, an associate economics professor at Canada’s Queen’s University, said the government had yet to publish a full analysis of its reasons for blocking BHP’s bid.

"[...] One gets the feeling that [the PotashCorp decision] was mainly driven by the fear of a voter backlash in Saskatchewan," where Prime Minister Stephen Harper’s minority Conservatives was concerned about losing seats, Koeppl said.

“Will politics once again trump economics?” he asked in analysis for Canada's national Globe and Mail newspaper on Tuesday.

However, Calgary-based corporate lawyer Craig Spurn said PetroChina’s plan to buy from Encana a 50% stake in the Cutbank Ridge gas assets in British Columbia may face lower regulatory hurdles than BHP/PotashCorp last year, or the planned stock exchange merger.

While the PetroChina deal marked the largest direct Chinese investment in Canadian resources, it would not result in the Chinese state-owned oil major taking control of an existing Canadian business, Spurn said in a briefing on Canadian business television.

Spurn said the PetroChina deal was remarkable in terms of its size, and also because it was for gas, rather that oil sands.

On the other hand, given China’s huge appetite for energy and Canada's need for investments to develop its many energy projects, PetroChina’s move was not all that surprising, he said.

Spurn also said the deal may prompt the construction of a liquefied natural gas (LNG) export facility in British Columbia.

With relatively low North American natural gas prices, “you have to think that the end-game of this [PetroChina deal] will be an LNG export facility on Canada’s west coast” to ship gas to China, he said.

Last year, China’s Sinopec bought a stake in Canadian oil sands firm Syncrude for $4.6bn, triggering concerns about the influence the Chinese state-owned energy and petrochemicals major may gain over Canadian oil resources, including chemical feedstocks.

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By: Stefan Baumgarten
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