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A Nexen oil sands facility seen from a helicopter near Fort McMurray, Alta. Tuesday, July 10, 2012. (Jeff McIntosh/THE CANADIAN PRESS)
A Nexen oil sands facility seen from a helicopter near Fort McMurray, Alta. Tuesday, July 10, 2012. (Jeff McIntosh/THE CANADIAN PRESS)

foreign investment

In China, growing frustration over Canada's ‘outdated’ oil sands Add to ...

Canada’s oil sands risks being left behind by the global energy industry if the pipelines needed to carry bitumen to the west coast do not soon materialize, a Chinese oil industry academic warned.

“It’s the same situation as the leftover single women. … It will be the same for the oil sands, they will be outdated just like unmarried single women,” Chen Weidong, the chief energy researcher at the CNOOC Energy Economics Institute, told the annual Canada-China Forum on Energy and the Environment in Beijing.

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The remark – jarring to Canadian ears, though a common if impolite reference in China – shows the growing frustration in China about Canadian delays in approving takeovers and building needed pipeline infrastructure to ship oil sands crude to global markets.

“The Nexen project is delayed again and again there. I am not speaking on behalf of CNOOC,” Mr. Chen said in his address. "We have a lot of economic considerations to facilitate co-operation between the two countries … I think that is very urgent. We want the energy but we can’t get it. They want to sell the energy but can’t sell it. That is a problem,” he said said.

Gordon Houlden, director of the China Institute at the University of Alberta in Edmonton, said Mr. Chen’s statement, while ineloquent, is accurate.

“If you put aside the unfortunate [gender] reference, I would argue that there is an element of truth in the comment,” he said in an interview from Beijing. “I don’t see it as a threat. I see, rather, an observation.”

The Canadian government has extended to Dec. 10 its deadline to decide whether it will approve a $15.1-billion (U.S.) bid by China’s CNOOC Ltd. for Calgary-based Nexen Inc., which has oil sands holdings along with other operations abroad.

Ottawa blocked a separate bid by Malaysia’s Petronas for Calgary’s Progress Energy Resources Corp. last month, though more talks are ongoing. Enbridge Inc., meanwhile, faces uncertainty and opposition as it seeks approvals to build the Northern Gateway pipeline from Alberta to the West Coast.

Representatives from the Canadian oil and gas industry, including a vice-president from Nexen, are to meet executives from China’s state-owned oil companies this week, amid reassurances that Canada is still open to foreign investment.

“I think this is the most decisive year in Canada-China relations since Tiananmen,” said Paul Evans, a professor in the University of British Columbia’s Institute of Asian Research who was part of the forum’s debate. “The trigger at the moment is Nexen. There are exaggerated fears about China, a negativity about China.”

Canada’s new ambassador to China, Guy Saint-Jacques, addressed the forum’s opening on Monday, saying that Canada still welcomes foreign investment and that the extension of the Nexen review was necessary because of the deal’s unprecedented size. Alberta’s provincial government also sent deputy and assistant deputy ministers of energy to reinforce support for foreign investment.

“I think the delay has created some uncertainty but I wouldn’t read anything positive or negative into that. It’s a significant transaction and the government needs to review that,” said Canadian Association of Petroleum Producers president Dave Collyer, on the forum’s sidelines.

But the mixed messages sent by the delays have led to confusion and frustration, observers warn.

Canada is “advertising a big dinner party, the Chinese paid for a big ticket, and now they come and we say, ‘Oh sorry, it’s just appetizers.’ It’s not that the Chinese invited themselves to dinner. We invited them,” said Wenran Jiang, the forum’s organizer, who also advises the Alberta government on its energy policy.

At stake for Canada in Chinese investment in the oil sands, at least in part, is the issue of reciprocity: As Chinese acquisitions in Canada get larger, China’s own exploration and extraction industries remain largely off-limits to foreign investment, with the exception of joint ventures and some new, limited foreign bidding on exploration rights in shale gas blocks.

Although China’s state-owned priority industries such as energy have traditionally been difficult to access, state-owned industries are thought to be up for further reform under the next administration, after a power transition which begins with the opening of the 18th Communist Party Congress on Thursday.

Conference participants also heard the warnings of First Nations Summit Grand Chief Edward John, an ardent opponent of the Northern Gateway on behalf of BC First Nations, fearing the risks posed by a pipeline rupture far outweigh any financial benefits to the province or their people.

“We have been standing up against proposals that we feel provide tremendous risks to our communities,” he said, urging his audience – in a country where human-rights defenders often serve jail time on convictions for subversion of state power – to examine the UN Declaration on the Rights of Indigenous Peoples and involve First Nations in development proposals. “We have to receive genuine recognition, we have to receive genuine benefits…We can’t settle for less.”

With files from reporter Carrie Tait in Calgary

Special to The Globe and Mail

(Editor's note: A quote by Chen Weidong was changed to reflect that he was not speaking on behalf of CNOOC Ltd. Due to a translation problem at the source, an earlier online version contained an incorrect quote.)

 
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