China firm set for oil sands joint venture

Calgary
China firm set for oil sands joint venture
Nathan VanderKlippe
RTGAM






Calgary - A Chinese interest is prepared to announce what a Calgary banking source called a "big" joint venture agreement with privately-owned oil sands firm Athabasca Oil Sands Corp.

Rumours of the impending deal, which is scheduled for release later Monday, pushed up shares in several small junior oil sands companies, including UTS Energy Corp. and Connacher Oil and Gas Ltd. , on a belief that major outside investment interests are once again prepared to invest in the oil sands.

"It's great news for the oil sands business. It shows that there are still large, sophisticated, deep-pocketed companies out there prepared to write big cheques," said one Calgary banker.

UTS shares are up about seven per cent; Connacher rose five per cent on morning trading.

Athabasca calls itself the largest leaseholder in the Athabasca region of the oil sands, with 526,000 hectares of net land. It believes it can recover anywhere from seven to 11-billion barrels of crude from that land.

Sveinung Svarte, the president and chief executive of Athabasca, was not immediately available Monday morning. However, in an interview this May, he said the company had spent months searching for joint venture partners.

"That has always been our philosophy to finance our projects," he said then. "We are talking about quite a few billion dollars [in] long-term [capital requirements], and to have a partner coming in and finance a large part of that has been our model."

At the time, he said even with low oil prices, large oil sands properties continued to attract "a lot of interest."

"Even in this market. I would say maybe even more in this market, because I think the buyers have recognized that it's easy to make a deal today," he said. "Because the sellers are a bit more, what shall I say, they expect a bit less than with the price at $147 oil."

The rumoured partner in the deal is the China National Petroleum Corp., which made a $449-million deal for Verenex Energy Inc. in February - although that deal has had troubles proceeding thanks to difficulties in acquiring permission from authorities in Libya, where Verenex has the bulk of its holdings.

CNPC is not, however, the only Chinese company that has moved on Canada's oil sands. Late last year, Sinopec paid about $2-billion for another Calgary company, Tanganyika Oil, which has production-sharing agreements in Syria.

The Athabasca deal shows "that major international companies are game to put up big dough for Canadian oil sands projects. So I'm sure people are looking at that and saying another potentially ready-to-go project is obviously Fort Hills," said another Calgary investment source. "So UTS could be a beneficiary of that."

UTS holds a 20 per cent stake in the proposed Fort Hills oil sands mine, which is majority owned by Suncor Energy Inc. after its acquisition of Petro-Canada. UTS rebuffed a bid by French energy giant Total S.A. to buy that share earlier this year.