China welcomed to oilsands; No upgrader plans in Asian country's $1.9B investment

The decision by China's government-controlled PetroChina to spend $1.9 billion on two undeveloped oilsands projects owned by Athabasca Oil Sands Corp. is being lauded as a vote of confidence in a global resource.

"This is very positive, basically a green light for the oilsands. They are a very strategic company, and a lot of other companies around the world watch what they do," said Neil Shelly, executive director of Alberta's Industrial Heartland, an association of municipalities in the Fort Saskatchewan area.

PetroChina's decision, announced Monday, represents the first large Chinese investment in the oilsands.

"During the land rush out here, when it seemed everyone was getting into the bitumen upgrader game, the Chinese companies stayed on the sidelines. Obviously, they have taken a hard look at this resource and see this as a strategic play," he added.

While there is no hint of a bitumen upgrader in PetroChina's plans, Shelly thinks the first priority for the industry is to restart stalled extraction projects that will produce the raw material for new Alberta upgraders --which he believes are competitive with similar plants in the U.S.

Canada will apply existing foreign ownership laws to PetroChina's bid, but will not introduce further barriers to investing in the country, Prime Minister Stephen Harper said on Tuesday.

Harper said he recognized that PetroChina's plans were controversial, but committed to using existing Canadian laws to review the transaction and not introducing new legislation to block the deal.

"The government will apply the law that's in place," Harper said. "We've been very clear that in the middle of a global recession, we will not be introducing further barriers to foreign investment."

Current regulations call for an automatic review of any foreign purchase of Canadian assets worth more than $312 million.

However, the laws also allow the government to block any investment that would adversely affect national security. Harper's Conservative government has already blocked one deal, last year nixing the planned sale of a Canadian satellite company to a U.S. rocket maker.

Don Thompson, president of the Oilsands Developers Group in Fort McMurray, said the industry welcomes a new participant.

"It's a positive sign. The oilsands are a global resource, and this just makes that statement fairly clear."

Thompson's experience with Asian investors has taught him that the resource is their primary focus.

"This is a resource play for them," he said.

"What makes the oilsands so investable is you know the resource is there; it is not a resource risk. And increasingly, the technology is proven, so it is less of a technology risk. There is nowhere else in the world you can go to get this size and quality of resource, with so few risks."

For Alberta Energy, the interest is in encouraging a diversity of markets, said spokesman Tim Markle.

All of Alberta's international oil and gas exports now flow to the U.S.

"We don't want to be pigeonholed into one market. New markets invite new opportunity, and this diversity is in Alberta's best interests."

But the Alberta Federation of Labour expressed concern over the arrival PetroChina.

President Gil McGowan said Chinese firms have an abysmal record on workplace health and safety, which became clear when a big Chinese contracting firm was involved in a tank collapse and the deaths of two workers at the CNRL Horizon site two years ago.

"Our concerns are not hypothetical. Chinese firms don't have the same workplace standards as those in North America," he said.

"When you import Chinese managers and workers, you are often importing their work practices."

The AFL also fears adding another pure extraction firm will not help the case for more bitumen upgraders in Alberta.

"The two new pipelines to the U.S. will have the capacity to carry all the expected increases in oilsands production. We will lose the upgrader construction jobs and the many maintenance jobs," said McGowan.

As well, Enbridge's proposed heavy oil pipe project to Kitimat, B.C., would allow exports to Asia.

Edmonton Journal, Tues Sept 2 2009
Byline: Dave Cooper

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