By JUDY McKINNON
TORONTO -- Just days after Canada clarified investment rules
for foreign state-owned investors, PetroChina agreed to pay
2.18 billion Canadian dollars (US$2.21 billion) to buy into a
natural-gas project with Calgary-based
Encana said Thursday that it has reached a deal with Phoenix
Duvernay Gas, a wholly owned subsidiary of PetroChina, to
jointly develop Encana's Duvernay natural-gas-and-liquids play
in west-central Alberta.
The deal gives China's largest listed energy producer a 49.9%
stake in the asset in exchange for an initial C$1.18 billion,
with the remainder payable over the next four years.
A previous joint venture between Encana and PetroChina fell
apart last year after the two sides couldn't agree on final
terms. Encana had agreed to sell PetroChina a 50% stake in
Cutbank Ridge, a large shale-gas project in western Canada, for $5.5
The latest deal is one of four major Chinese energy
investments in Canada this year, with the largest acquisition
being Cnooc's Ltd.'s US$15.1 billion acquisition of
oil-sands operator Nexen - getting the Canadian government's
nod less than a week ago.
In other deals, PetroChina bought the 40% stake it didn't
already own in the MacKay River oil-sands project from Canadian partner
Athabasca Oil Sands in January for C$680 million and it took a
20% stake in Royal Dutch Shell's Groundbirch shale-gas property
in British Columbia for C$1.304 billion in February.
For PetroChina, investments in Canada are part of a broader
goal of expanding overseas production to account for half of
its business by 2015. The state-controlled company produced
62.5 million bbl of oil equivalent in the first half of 2012,
up less than 1% on year, accounting for 9.4% of its total
output, according to its first-half earnings report.
Currently, there are limited outlets for transporting North
American natural gas across the Pacific, but PetroChina, with
Royal Dutch Shell, is taking part in a plan to build a
liquefied natural gas terminal in Kitimat, B.C. It is unclear
whether this could serve as an outlet for Duvernay gas.
PetroChina, which is expected to release a statement on the
Encana deal later today, wasn't able to immediately comment for
On Saturday, at the same time as it announced its approval
of the Cnooc-Nexen, Canada gave the green light to Malaysia's
Petroliam Nasional Bhd. to acquire Progress Energy Resources, a
Canadian natural gas producer, for US$5.2 billion.
Even as Canada approved those blockbuster deals, the
government of Prime Minister Stephen Harper also said the
country would dramatically increase scrutiny on other
investments proposed by state-owned entities.
Mr. Harper said Canada would all but rule out foreign
government-controlled investors from buying a majority stake in
any oil-sands operator and that the government would beef up
any reviews of other deals in other sectors.
The PetroChina deal now stands as an early test of what that
new scrutiny will look like.
Encana said the joint-venture assets contain an estimated 9
billion bbl of oil equivalent. The companies plan to invest
C$4.0 billion in new drilling, completion and processing facilities, it said.
Encana, a gas-focused company, has been stung by a sharp
fall in natural gas prices across North America. The company
has embarked on an aggressive bid to draw in joint venture
partners and shed assets.
"Phoenix's investment demonstrates the tremendous value that
Encana has created in this early life liquids rich play," said
Encana CEO Randy Eresman, "and enables us to accelerate the
pace at which the full production potential of our Duvernay
lands can be achieved."
Dow Jones Newswires