Tags: Oil | Thirsty | China | Threatens | U.S. | Hold | Canadian

Oil Thirsty China Threatens U.S. Hold On Canadian Oil

Thursday, 23 December 2004 12:00 AM

According to a report in the New York Times, Chinese oil companies are on the verge of striking ambitious deals in Canada in efforts to win access to some of the most prized oil reserves in North America, even to possibly making direct investments in the oil sands, by buying into existing producers or acquiring companies with leases to produce oil in the region

"The China outlet would change our dynamic," Murray Smith, a former Alberta energy minister told the Times. Smith, who was appointed this month to be the province's representative in Washington said he estimated that Canada could eventually export as many as one million barrels a day to China out of potential exports of more than three million barrels a day.

"Our main link would still be with the U.S. but this would give us multiple markets and competition for a prized resource," Smith explained.

According to the Times, in recent weeks delegations of top executives from China's largest oil companies have been showing up Calgary for talks on ventures that would send oil extracted from the oil sands in the northern reaches of the energy-rich province of Alberta to new ports in western Canada and onward by tanker to China.

China's insatiable domestic energy demand, up 40 percent in the first half of this year over the period a year ago, is driving them to seek rich new sources of oil imports. In Calgary, the Times reports, negotiations with China have focused on the oil sands, an unconventional but increasingly important source of energy for the United States.

"China's gone after the low-hanging fruit so far," Gal Luft, a Washington-based authority on energy security issues told the Times. Luft who is writing a book on China's search for oil supplies around the world told the newspaper "Now they're entering another level of ambition, in places such as Venezuela, Saudi Arabia and Canada that are well within the American sphere."

Canada's oil production from the sands surpassed one million barrels a day this year and was expected to reach three million barrels within a decade. The bulk of output is now exported to the Midwestern United States.

China's interest on soaking up Canadian oil is so great they are reported to be looking at being not merely a customer of Canada's oil, but also a producer of it.

The Times reported that they are considering direct investments in the oil sands by buying into existing producers or acquiring companies with leases to produce oil in the region. Senior executives at energy companies in Calgary told the Times that there are nearly half a dozen deals under consideration, initially valued at $2 billion and potentially much more, and that one preliminary agreement could be signed in early January.

Ian La Couvee, a spokesman for Enbridge, a Canadian pipeline company, said it was discussing an offer to give a Chinese company a 49 percent stake in a 720-mile pipeline planned between northern Alberta and the northwest coast of British Columbia.

That project, expected to cost at least $2 billion, would send as much as 80 percent of its capacity of 400,000 barrels a day to China with the remainder going to California refineries. Sinopec, one of China's largest oil companies, was said by executives briefed on the talks to be the likeliest Chinese company in the project.

"China needs oil resources and has a big market," Qiu Xianghua, a vice president at Sinopec, said in a speech in Toronto this month. "Canada needs markets."

Officials and authorities on Canadian energy supplies insist that despite China's entrance into the Canadian oil market Canada will never turn off the spigot to the United States.

"The pipeline system that connects Alberta to the U.S. isn't going to be lifted out of the ground and put into the Pacific," Daniel Yergin, chairman of Cambridge Energy Research Associates assured the Times. "The flows to the U.S. will continue, but it should be expected and welcomed for China to meet the challenge of its growing dependence on imported oil."

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According to a report in the New York Times, Chinese oil companies are on the verge of striking ambitious deals in Canada in efforts to win access to some of the most prized oil reserves in North America, even to possibly making direct investments in the oil sands, by...
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2004-00-23
Thursday, 23 December 2004 12:00 AM
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