FUELING AMERICA/China moves fast to claim oil sands /Although Chinese holdings in Alberta are still small, they are a foothold on the North American continent as the U.S. rival seeks to develop energy sources worldwide to boost its rapidly growing economy
Robert Collier, Chronicle Staff Writer
Sunday, May 22, 2005
Calgary, Alberta -- If Americans think the oil sands bonanza in their northern backyard will solely benefit the United States, they may be surprised. Chinese officials are making fast inroads into Alberta, snapping up petroleum deals with the skill of Texas oilmen.
While the deals involved are still relatively small, analysts say China's booming, oil-starved economy could eventually become a significant player in the oil sands.
Last month, two Chinese oil companies announced deals for Alberta oil sands.
China National Offshore Oil Corp. bought a $150 million share in oil sands producer MEG Energy Corp. And PetroChina Co. signed a memorandum of understanding with Enbridge Inc. for half of the supply on the proposed $2 billion Gateway pipeline, which will move 400,000 barrels per day from Alberta to the port at Prince Rupert in British Columbia.
Hou Hongbin, a vice president of Sinopec, predicted his company would soon announce a "much bigger" deal for oil sands.
China's interest in the oil sands comes only a few months after China National Offshore Oil lost a close bidding race with Chevron Corp. to acquire Unocal Corp.
"The Chinese have come to nearly every skyscraper in Calgary, and they ask very probing, intelligent questions," said Roland George, an analyst with Purvin & Gertz in Calgary. "They are in this for the long haul."
Hou, the Sinopec executive, said that Canada is a key link in China's attempts to diversify its oil supplies. "The more sources of import, the more safe" those supplies are, he said during a recent visit to Calgary, Canada's oil industry capital.
"We are looking for profitable projects," which could include everything from minority stakes to full ownership of oil sands companies, he added.
The Bush administration, which has tried to curb Chinese influence around the globe, is concerned about China's inroads in Canada.
"I've had a number of calls from U.S. officials, who assumed that the next 3 billion barrels per day will go to the United States," said Greg Stringham, vice president of the Canadian Association of Petroleum Producers.
"They ask me, 'What's going on? Should we be concerned?' And I tell them they shouldn't worry, but their concern is understandable."
Canadian officials play down China's potential role. "The market itself, not politics, will determine the future of the oil sands," said George Anderson, deputy minister of natural resources. "And market conditions -- including transportation costs and the proximity to the United States -- mean Canada will continue to be a major U.S. supplier."
Some analysts in Washington say the administration needs to act to prevent China from grabbing up the oil sands.
"The oil sands are a huge part of our energy future, but we can't take them for granted," said Frank Gaffney, president of the Center for Security Policy in Washington. "The Chinese are scouring the globe for oil, and we need to make sure that we don't lose the race in our own backyard."
The Canadian press has been somewhat gleefully saying that Americans may be getting their comeuppance for paying Canada insufficient attention.
"There is a chess game going on involving the oil sands between the Chinese and the Americans -- with the Americans yet to make a move beyond what they already have in place," Deborah Yedlin, a business columnist for the Globe and Mail, Canada's largest-circulation daily newspaper, wrote recently.
"The Chinese, on the other hand, appear to be methodically staking out their territory."
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