(EnergyAsia, October 24 2013, Thursday) — Faced with declining investor interest in its oil patch and weakening prices, Canada’s Alberta province is pushing against the tide to expand ties with China as a source of capital and a market for its exports.
After last year’s nail-biting finish to CNOOC Ltd’s C$15 billion acquisition of Calgary-based Nexen Inc amid widespread opposition from Canadians, Chinese interest in Canada’s oil and gas reserves appears to have declined. The largest foreign acquisition by a Chinese firm was clinched only after CNOOC Ltd agreed to numerous concessions which significantly raised the deal’s final price.
Worried by Alberta’s slowing resource-based economy, Premier Alison Redford is determined to stretch the limits of Ottawa’s policy on state-owned enterprises of other countries in acquiring large or complete stakes in major Canadian natural resources companies and projects.
Last week, the provincial government announced it had signed an “historic” framework agreement with China to increase energy trade and collaboration.
This pales into insignificance compared with the deals worth hundreds of billions of dollars of oil and gas that Russia, Central Asian countries and, just this week, Brazil have secured with China.
Alberta Energy Minister Ken Hughes was despatched to Beijing to sign what it called the Framework Agreement on Sustainable Energy Development with China’s National Energy Administration chief Wu Xinxiong that “seeks to set out concrete actions to strengthen trade ties.”
“Energy security is a key driver for Chinese energy policy. Alberta’s abundance of energy resources, strong regulatory regime and welcoming environment for investment make the two jurisdictions natural partners,” said Mr Hughes.
Hailed as the first “non-binding” intergovernmental agreement between the Chinese government and a sub-national government of Canada, Alberta said it is aligned with an existing agreement between the Federal Natural Resources Canada and China’s NEA.
The agreement, the climax of an Asian tour that took Mr Hughes and his delegation to South Korea and Japan, was signed at a ceremony witnessed by Chinese President Xi Jinping and Canadian Governor General David Johnston.
While Canada’s rich resource base is undoubted, Asian investors have taken note of the country’s lack of infrastructure to support oil and gas exports, the growing opposition by Aboriginal and environmental groups to resource projects, bickering between the two western provinces of Alberta and British Columbia, and Canadians’ ambivalence towards Asian investments, most of which are undertaken by state-owned enterprises.
China, the economy most targeted, continues to evoke negative sentiments among Canadians. According to a recent survey by the University of Alberta’s China Institute, only 43% of Albertans said they welcomed Chinese investment into the province even though more than 75% said the world’s second largest economy is an important export market for their goods and services.