MercoPress. South Atlantic News Agency

Chinese company buys further into Canada’s oil-sands

Sinopec according to Forbes is among the world’s ten largest corporations

China Petroleum and Chemical Corp, Sinopec more than doubled China's presence in Canada’s oil-sands by paying 4.65 billion US dollars for US for ConocoPhillips' 9% stake in Syncrude Canada Ltd.

Houston-based Conoco confirmed the sale after details leaked out of Hong Kong early Monday, sending the share prices of Canadian oil-sands producers higher.

Conoco had been soliciting offers for its stake in Syncrude since last October. In a news release, the company said the deal is part of plans to shed more than 10 billion USD assets around the globe. The sale is expected to close in the third quarter, pending Canadian and Chinese government approval.

“We are pleased that SIPC has recognized the value of this quality asset” Jim Mulva, ConocoPhillips' chairman and chief executive officer said in a statement.

Other potential buyers were rumoured to include Canadian Oil Sands Trust -- the largest Syncrude owner with 36%, various pension funds and other international players from countries like India.

Sinopec was founded in 2000 as a subsidiary of China Petrochemical Corp. and is the first Chinese company to trade on stock exchanges in Shanghai, Hong Kong, London and New York. According to Forbes magazine, it is the largest company in China and the ninth-largest corporation in the world, employing some 640,000 people.

In its 2009 annual report, Sinopec said its extraction division produced 825,000 barrels of oil and 819 million cubic feet of natural gas per day, with proven reserves of 1.35 billion barrels.

By contrast, Syncrude's proven plus probable reserves were 5.1 billion barrels as of March 26, according to a filing by Canadian Oil Sands.

China has been scouring the world for oil deals and this could be just the beginning of a major buying spree in Canada, observers said.

Although the deal has “huge” symbolic importance, Gordon Houlden, who heads the University of Alberta's China Institute, said the Syncrude sale is relatively small given China's massive capacity -- and appetite -- for foreign investments.

“It's still tiny compared to what they could do,” he said. “They could do deals 10 times the size. They are going to become a major player” in Canada's energy sector, he added.

Houlden said the deal marks a strategic shift in China's thinking in that its interest in energy goes beyond just wanting it for domestic use.

“The Chinese preference is to take the product, and that hasn't changed,” he said. “But there's recognition that a profit is a profit. It confirms an alternate strategy of taking equity stakes rather than flying the flag on the side of every building and facility they buy”.

On March 31 Athabasca Oil Sands Corp., which is 60% controlled by PetroChina, launched a 1.35 billion USD initial public offering, which was the largest Canadian oil-sands IPO since Suncor went public in the 1990s.

Sinopec is also partners with French oil giant Total in the Northern Lights oil-sands project formerly owned by Synenco Energy. On March 29 Sinopec paid 2.5 billion to purchase an oilfield in Angola, in what the company touted as its first acquisition of overseas production assets.