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The failure of a multibillion-dollar natural gas joint venture is stirring new concerns about the ability of other companies to strike attractive deals with foreign companies to develop the prolific energy fields of northeastern British Columbia.

On Tuesday, Encana Corp. announced that it had been unable to complete $5.4-billion with PetroChina that would have seen the Chinese company take a 50-per-cent stake in a massive Canadian gas resource. The deal would have formed the largest Chinese energy investment in North America and, as part of a series of rich natural gas joint ventures, had raised hopes among other companies that deep-pocketed overseas firms could provide the cash needed to finance expensive drilling programs.

Some companies had begun looking to foreign firms "as being sugar daddies," said Brian Tuffs, the head of acquisitions and divestitures at Calgary-based Peters & Co. Ltd.

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Markets have not punished Encana for the failed deal – and some analysts said the company may be able to negotiate future agreements that allow it to give up less of its current production. Such agreements could be seen as more favourable to Encana, they said.

But others believe the deal's demise will prompt a rethink of how hard those deals may be to reach – and how lucrative they may be.

"I think there's a naiveté in how difficult it will be to actually execute a deal and how savvy some of these guys are in terms of negotiating those deals," Mr. Tuffs said. "As always, the power is in the hands of those that have the money. And if you go knocking on somebody's door looking for a deal, expect them to recognize that they have the power in that equation."

The failure of the PetroChina deal comes amid growing "indications that the Chinese have become choosier" in their investments, said Wenran Jiang, who holds a research chair at the University of Alberta's China Institute.

"We used to think – even three or four years ago – that the Chinese would scope the earth for pots of energy resources and overbid anybody to grab on at any price," he said. "It's just not the case."

The past year has seen acquirers from Japan, South Africa, Malaysia and elsewhere commit billions to drill and extract gas from land in B.C.'s Horn River and Montney plays, which contain vast quantities of energy.

Comparisons between the deals are difficult to make, since each included substantially different assets – some with largely unproven land while others, like the scotched Encana venture, included a mix of gas production and future potential. But in the Calgary investment community, the $5.4-billion Encana deal had been seen as a high-water mark for how much gas land could be worth.

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Encana itself is seeking two further joint ventures on other B.C. land, and said this week it expects future deals to generate $1-billion (U.S.) to $2-billion this year. Other majors looking for deals in the area include Devon Energy Corp. and Nexen Inc. A series of smaller companies is also either looking for joint venture partners or corporate sales. Those include Daylight Energy Ltd., Birchcliff Energy Ltd., TriOil Resources Ltd., Painted Pony Petroleum Ltd. and Quicksilver Resources Inc.

For its part, Nexen said it's far too soon to say what impact the Encana deal will have, and that its efforts continue as before.

"We've indicated that our process would work its way through to the middle of the summer, and we're on course for that," said Pierre Alvarez, Nexen's vice-president of corporate relations.

The specifics of why the Encana deal failed remain unclear – sources close to the company have said the two sides failed to reach agreement on issues related to who would control the joint venture. On Wednesday, Encana spokesman Alan Boras said PetroChina had applied to Investment Canada for approval on the deal, but said the Canadian government had no role in derailing the process.

"The reasons that negotiations ended were business reasons. They were not regulatory reasons," he said.

And, Mr. Boras said, Encana continues to expect "there will be strong interest in" the other assets it hopes to sell into joint ventures. "They're very premium assets," he said.

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NATURAL GAS PARTNERSHIPS

Shale natural-gas partnerships in northeast B.C. and northwest Alberta:

February, 2010: Korea National Oil Corp. pledges to spend $1.1-billion over five years, giving it a 50-per-cent stake in roughly 20 per cent of Encana Corp.'s Montney and Horn River assets.

August, 2010: Japan's Mitsubishi Corp. buys a 50-per-cent stake in a Penn West Exploration project for $250-million, as well as covering an additional $200-million of Penn West's exploration costs.

December, 2010: South Africa's Sasol Ltd. agrees to a $1.05-million deal for a 50-per-cent stake in one of Talisman Energy Inc.'s Montney assets, as well as forming a partnership to explore the viability of a gas-to-liquids facility in the area.

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June, 2011: Malaysia's Petronas agrees to $1.07-billion deal for a 50-per-cent stake in three of Progress Energy Resources Corp.'s Montney holdings.

LNG export terminal proposals:

Kitimat LNG: $4.7-billion, 700 million cubic feet a day. Backers are Apache Canada Ltd., Encana and EOG Resources Canada Inc. Investment decision is expected later this year.

BC LNG: $360-million to $450-million, 125 million cubic feet a day. Backed by a U.S. private investor pitching a co-operative model to potential gas shippers.

Royal Dutch Shell PLC, Mitsubishi Corp., Korea Gas Corp.: Companies are jointly studying LNG export possibilities on B.C.'s West Coast.

Petronas and Progress Energy: As part of a joint venture, Malaysia's state-owned Petronas and Calgary-based Progress Energy Resources Corp. have agreed to pursue an LNG export terminal.

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