Chinese-backed firm sees export opportunity for Alberta oil

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Last January, an oil tanker filled with Canadian crude slipped beneath Vancouver's Lions Gate bridge. It was headed for the Chinese port of Dalian, the first dispatched across the Pacific by a new company that was testing the waters on a much bolder plan.

The oil was transported from Alberta wells on Kinder Morgan Inc.'s Trans Mountain pipeline. But as it looks to boost shipments, Canadian Advantage Petroleum Corp., a tiny entity backed by Chinese investors, is quietly studying a proposal to bring crude on trains to the Vancouver area and then pump it into tankers – if it can secure authorization from a local First Nation.

So far, the company has delivered two million barrels of oil to China from North America, most of it Alberta heavy-grade, in three shipments. In the future, it hopes to send that much on a single ship from Tsawwassen, the British Columbia port and ferry outpost just south of downtown Vancouver.

Under the radar: China's stealthy return to Alberta's oil patch

The plan appears to be part of the rationale for a series of acquisitions by private Chinese investors in Canada's oil patch, some of whom are also eager to move money abroad, a Globe and Mail investigation has found.

Canadian Advantage is majority owned by Sinoenergy Investment Corp., which has spent nearly $1-billion in recent years amassing assets and companies. It now produces 50,000 barrels of oil equivalent a day and intends to double that tally by next year. It also owns a 65,000-barrel-a-day refinery in Rizhao, on the shores of the Yellow Sea roughly midway between Beijing and Shanghai.

"We have invested in Canadian upstream companies in hopes of transporting our products to our refinery or selling in the Chinese market," said Hu Hai, president of Canadian Advantage, in an interview.

That desire stands to pitch the Chinese-owned firm into the fury of the Canadian political debate over finding new markets for crude oil. The prospect of crude-carrying trains is sure to be met with intense opposition in a region already riven by Kinder Morgan's planned $7.4-billion Trans Mountain expansion.

Canadian Advantage can move forward only if it receives a raft of government approvals. It must also contend with a newly emboldened BC Green Party, led by former climate scientist Andrew Weaver, potentially holding the balance of power in the province.

Crucially, it needs the blessing of the Tsawwassen First Nation, which the company says could vote on the proposal as early as June. A spokesperson for the group said she knew of neither the plan nor the firm behind it, as did a representative with Westshore Terminals Ltd.

Though rumours have circulated locally about an oil-by-rail project, "I haven't seen anything in my mailbox about a community vote, that's for sure," said former Tsawwassen chief Kim Baird.

In late 2015, members of the First Nation voted down a proposal for a liquefied natural gas project on their land.

As for oil exports, it "seems like a big uphill battle to get a project like that through," Ms. Baird said. "I don't know that the Tsawwassen members would be all that interested, especially if you look at what happened with the last LNG vote."

Even so, Canadian Advantage says it has already completed a feasibility study and early engineering work on what it estimates will be a $600-million oil-loading terminal in a port area already home to major coal and dry-bulk handling facilities.

Plans call for 180,000 barrels a day to be delivered by rail and then loaded onto very large crude carriers, or VLCCs, which can haul roughly two million barrels of oil.

Such vessels are too large to traverse the Vancouver harbour and take on oil from the Kinder Morgan pipeline, which ends at an existing dock in Burnaby, B.C. Mr. Hu said potential exists to connect the planned terminal to the expanded pipeline.

But for now, Tsawwassen already has substantial rail connections and tankers that dock there will "sail through open waters rather than passing by cities," he said.

Canadian Advantage was founded in 2015 by onetime Alberta cabinet minister Gary Mar. It capitalized on a new policy by the Chinese government, released in February, 2015, that allowed refineries to import their own crude rather than relying on oil brought in by state-owned firms.

"For Canada to continue to be relevant in the energy business in the world, we have to break out of the mould of selling 99 per cent of our oil to one marketplace only," Mr. Mar, who was later Alberta's envoy in Hong Kong, said in an interview. He sold his interest in the company last December.

"And if the reality can be recognized that the future prosperity of Canada rests in part with being able to move oil to importers in China or in India, I think that this would be a very positive thing for the resource industry in Canada," Mr. Mar said.

Mr. Hu said the Chinese investors he represents have also signed a letter of intent for the $200-million purchase of an oil-by-rail company. They also plan to purchase storage tanks in the U.S. Pacific northwest, he said, a stopgap measure until facilities can be built in Canada.

He conceded that the road ahead will not be simple: Without sign-off from the Tsawwassen First Nation, "the project will shut down," he said. Even if members agree, the provincial and federal governments must also follow suit.

"But there's a good possibility it will get passed," Mr. Hu insists. "We put our chances at 70 per cent."

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