PetroChina buys full stake in oil sands project

TORONTO (AP) - China will take over full ownership over a Canadian oil sands project for the first time after Athabasca Oil Sands Corp announced Tuesday it sold the remaining 40 percent of the MacKay River oil sands development to PetroChina for US$673 million.

The deal continues a trend that has seen China's state-owned oil companies invest billions of dollars in exploration or production ventures in Canada, Africa, Latin America and elsewhere

But China's state-owned oil companies have preferred to take non-operating or minority stakes in oil sands projects in Canada until this latest deal.

The deal does not need the approval from the Canadian government under the the Investment Canada Act.

Athabasca had previously sold PetroChina a 60 percent stake in two oil sands projects, including MacKay river, and the possibility of the Chinese taking over full ownership was included in that deal and approved by the Canadian government.

Athabasca CEO Sveinung Svarte said he exercised the option to sell the remaining stake in MacKay River because the company would rather focus on developing projects it wholly owns.

Although it is the first oil sands project to be fully owned by a Chinese firm, there have full ownership deals involving conventional oil and gas companies in Canada. Sinopec bought conventional oil and gas-focused Daylight Energy Ltd. in its entirety last year.

The sale comes shortly after Alberta regulators approved the project.

The first phase of the MacKay River project is expected to produce 35,000 barrels per day, eventually expanding to 150,000 barrels.

Construction of the project will begin next month with startup targeted for 2014.

China is the world's second-biggest oil consumer and has a growing appetite for oil that may one day surpass that of the U.S. which views Canada's oil sands as a pillar of its future energy needs.

Canada is increasingly looking to China to sell its vast oil reserves after the U.S. delayed a decision on the Keystone XL pipeline that would bring oil from Canada to refineries in the U.S. Gulf Coast.

Alberta has the world's third largest oil reserves, more than 170 billion barrels. Daily production of 1.5 million barrels from the oil sands is expected to nearly triple to 3.7 million in 2025. Overall, Alberta has more oil than Russia or Iran. Only Saudi Arabia and Venezuela have more.

Canada's only major oil export market is the U.S. But with the product of oil sands and pipeline delivery to the U.S. under perennial clouds of environmental objections, and with Asian demand growing, Canada wants to diversify its market, and China is eager to oblige.

The Chinese have urged the Canadian government to approve a pipeline to Canada's Pacific coast so that tankers can ship oil sands crude to China. Sinopec, a Chinese state-controlled oil company, has a stake in a $5.5 billion plan drawn up by the Alberta-based Enbridge company to build the Northern Gateway Pipeline from Alberta to the Pacific coast province of British Columbia.

Sinopec also recently paid $4.6 billion for a 9 percent stake in Syncrude, Canada's largest oil sands project. Taking partial ownership has been seen as a way for the Chinese companies to make their investments more politically palatable. Chinese state-owned CNOOC was stymied in its bid for U.S. oil and gas producer Unocal Corp. in 2005. It withdrew its $18.5 billion offer after U.S. lawmakers complained about how the sale would jeopardize national security.

Wenran Jiang, a political science professor at the University of Alberta and a senior fellow of the Asia Pacific Foundation, said the Athabasca deal shows that China knows that Canada is more welcoming to Chinese investment in recent years.

He said China would like to see the oil shipped to China eventually but is also content to produce more oil for the global marketplace at spot prices.

"It works out to be a very good equation with the Chinese capital coming in, with the Canadian jobs created and the oil produced and shipped to the United States," he said.

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