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Chinese companies turning focus to conventional oil assets Add to ...

After pouring billions of dollars into Canada’s most difficult energy resources, Chinese companies are now turning their attention to the bedrock oil and gas fields that have long sustained the country’s oil patch.

The fourth-ranked Chinese state-owned oil firm, Sinochem, is actively looking for conventional oil and gas assets, Li Pilong, assistant president of Sinochem Group, told a Calgary conference Thursday.

If Sinochem follows through, it will be the fifth major Chinese firm to buy Canadian energy resources. But unlike previous Chinese buyers, which have spent $10-billion in the past two years to snap up assets across Western Canada, Sinochem has no interest in either the oil sands or the huge natural gas shale reserves of northeastern British Columbia.

Instead, “we are more focused on conventional oil and gas, as preferred to oil sands,” said Mr. Li, who is spending a week in Alberta looking at potential acquisitions for the Chinese energy giant, which boasts annual operating profit of some $50-billion (U.S.).

The senior executive is “visiting a number of oil companies to see whether or not we can work together for a kind of co-operation on the energy field,” he said following a speech at the Canada-Asia Energy Cooperation Conference in Calgary.

Conventional energy resources are those that can be more easily pulled from the ground, often from reservoirs that have produced oil and gas for decades. Sinochem’s interest comes amid a renaissance in those conventional reservoirs, as new drilling techniques – including the use of underground fracturing – allow the industry to extract resources once considered inaccessible.

Buying into one of those promising new Canadian plays – which include the Bakken, Cardium and other fields – could provide Sinochem with more than oil reserves.

“I believe that they want new technology,” said Bill Andrew, vice-chairman of Penn West Petroleum Ltd., which has done deals with Japanese and Chinese investors.

But, he added, Chinese investment stands to benefit Canada as well. Asia has become “the premier source of capital in the world,” Mr. Andrew said. “The United States has been a marvellous partner, but there are problems in the United States. There are problems in Europe. Asia has been less affected by that global economic situation.”

And it’s clear the Asian appetite for Canada’s resources is far from waning. In a separate presentation at Thursday’s conference, Yothin Tongpenyai, president of PTTEP Canada Ltd., a subsidiary of the Thai energy company that bought oil sands assets from Statoil last year for $2.28-billion (U.S.), said his company remains on the hunt.

PTTEP has not established how much production or reserves it wants to buy. But it sees “more assets that we need to acquire” in Canada, Mr. Tongpenyai said.

It is casting a wide net.

“We are open to opportunities, both in conventional and unconventional resources, including shale gas, tight gas, coal-bed methane, oil sands, oil shale,” he said.

For Canadian companies looking to profit from growing overseas demand, the ambitions of Asian investors are a positive sign. For example, Enbridge Inc. is looking to build the controversial $6.6-billion Northern Gateway pipeline that would connect the oil sands with the Pacific, where crude could be loaded onto tankers and exported to Asia and California.

Having investors keen to buy in Canada “reinforces the fact that we have a valuable resource and people want to access it,” said Paul Fisher, a vice-president of Gateway. “We’ve got this huge resource in Alberta. We’ve got this huge growing demand in Asia. And we need to marry them up.”

And as increasing volumes of capital flow across the Pacific, investors in China are looking for more than just energy.

Sinochem’s Mr. Li said potential acquisitions “can range wide to cover the mid- and downstream petroleum business, agriculture and chemicals, etc.”

Follow on Twitter: @nvanderklippe

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