PetroChina Ltd., China's biggest oil and gas producer, said Wednesday it has agreed to pay $5.4 billion for a 50 percent stake in Encana Corp.'s shale natural gas play in northeastern British Columbia in what would be the largest-ever Chinese investment in Canada's energy sector.
Encana, Canada's biggest natural gas provider, said the invesment from the state-owned Chinese firm will allow it to accelerate development of its Cutbank Ridge assets.
Encana CEO Randy Eresman said the deal is the culmination of nine months of talks.
PetroChina's interest represents current daily production of 255 million cubic feet of gas per day, proved reserves of one trillion cubic feet of natural gas and nearly 257,000 hectares (635,050 acres) of land.
"By combining resources with PetroChina in this joint venture, we would expect to recognize additional value through accelerating our pace of development," Eresman said in a statement.
Shares of Encana rose more than 10 percent in after hours trading.
The transaction requires Canadian and Chinese government approval. Prime Minister Stephen Harper's Conservative government blocked Anglo-Australian BHP Billiton's outright takeover of Potash Corp. of Saskatchewan last November but Harper has allowed Chinese companies to take stakes in Canadian energy companies recently.
China has been increasingly acquiring Canadian energy properties in an attempt to secure future supplies and meet its growing demand.
Last April, the Chinese made their first foray into an operating oil sands project, with Sinopec paying $4.65-billion for a nine percent stake in Syncrude Canada Ltd.. Sinopec already had a 50 percent stake in the yet-to-be-developed Northern Lights project, planned by France's Total SA.
A month later, China Investment Corp., a state-run sovereign wealth fund, said it would invest $1.25 billion to help Penn West Energy Trust develop oil sands leases in the Peace River region of Alberta.
PetroChina invested $1.7 billion in Athabasca Oil Sands Corp the year before.
The Chinese are also interested in building a pipeline from Alberta to British Columbia's Pacific coast that will supply supplied crude to China from Canada's oil sands.
The proposed Gateway pipeline is designed to ship about 400,000 barrels per day of crude from Alberta's oil sands to Asian markets. China's interest in Canada's energy sector might raise concerns in Washington where the U.S. is eager to remain a chief market for the oil.
© Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.