PetroChina deal likely to go ahead

CALGARY — National security concerns have put the kibosh on some of China’s past attempts to invest in the natural resources sector, but the possible benefits of PetroChina’s oilsands investment will likely be key to whether regulators approve the deal.

CALGARY — National security concerns have put the kibosh on some of China’s past attempts to invest in the natural resources sector, but the possible benefits of PetroChina’s oilsands investment will likely be key to whether regulators approve the deal.

“Certainly, in the current economic climate, people everywhere are much more welcoming of foreign investment from almost anyone than perhaps they would have been before we went into a recession,” Paul Beamish, an international business professor at the Richard Ivey School of Business, said Tuesday.

“Any time a country is in recession and someone is talking about throwing significant investment dollars in, that’s of greater interest.”

On Monday, Athabasca Oil Sands Corp. announced a joint-venture agreement with PetroChina that will see the Chinese company acquire a 60 per cent interest in two of Athabasca’s oilsands properties for $1.9 billion.

The Investment Canada Act requires a review any time a Canadian company with assets of more than $312 million is purchased. That legislation was amended this spring to include a national security test as well.

Speaking to reporters in Calgary on Tuesday, Prime Minister Stephen Harper said that Ottawa would not put up further barriers to foreign investment.

“Particularly when we’re in this period of global recession, restoration of private investment is important for the gradual recovery of the global economy, and of course by implication, the Canadian economy as well,” he said.

“Obviously this is a more controversial investment. I will just say that there are laws in place to review foreign investment transactions when they meet a certain threshold and our government has strengthened those reviews by including a clause that allows officials to examine issues of national security.”

The fact that the deal was framed as a joint-venture allays some possible concerns, said Dany Assaf, a partner with law firm Bennett Jones.

PetroChina would be buying an interest in Athabasca’s underlying assets, not Athabasca itself. The management and operations would remain unchanged.

“It seems to be structured in a way that’s quite pro-active in terms of immunizing itself from some of the most difficult questions that could be asked,” said Assaf.

To date, China’s interests in the oilsands — reserves second in size only to Saudi Arabia’s — has been limited.

Sinopec Corp. has a 50 per cent stake in the Northern Lights project 100 kilometres northeast of Fort McMurray Alta., with French energy giant Total S.A. holding the rest.

China National Petroleum Company bid on and obtained 11 oilsands leases in 2007, and in 2005 the Chinese Offshore Oil Corporation invested $150 million in Calgary-based Meg Energy.

The Athabasca deal would follow some unsuccessful attempts by Chinese companies to secure a steady flow of natural resources to support its burgeoning economy.

In 2005, China National Offshore Oil Corp. tried to take over California-based Unocal Corp., but withdrew its US$18-billion bid amid political furor in Washington over the takeover’s national security implications. Unocal instead merged with fellow U.S. energy firm Chevron Corp.

In June, a US$19.5-billion deal between Anglo-Australian miner Rio Tinto PLC and Chinese aluminum company Chinalco fell through after Australian legislators flagged national security concerns.