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Chinese enter Gateway Sinopec joins Northern Gateway, replacing PetroChina, which abandoned equity option in 2007; Enbridge confident, faces new hitch Gary Park For Petroleum News
A Chinese energy firm has joined the planned C$5.5 billion Northern Gateway project, which Enbridge Chief Executive Officer Pat Daniel is confident will overcome “very vocal (but) very influential opposition.”
Sinopec (officially China Petroleum & Chemical Corp.) said it is participating in the attempt to open up Pacific Rim markets to 525,000 barrels per day of crude from the Alberta oil sands, provided Enbridge can overcome regulatory hurdles and opposition from First Nations and environmentalists.
Hou Hongbin, vice president of a Sinopec subsidiary, told a recent energy forum Sinopec is “involved in pre-stage work in the project” and is providing unspecified financial support.
Daniel confirmed at a Jan. 20 investment conference in Whistler, British Columbia, that Sinopec is part of the project, having acquired one of 10 units of C$10 million each to help fund regulatory costs, make equity investments or reach commercial agreements.
He said the 10 investors include a “strong group of producers and refiners.” Identities of the others remain confidential.
Renewed Chinese interest The disclosure points to renewed Chinese interest in Northern Gateway, four years after PetroChina walked away from an option to take a 49 percent stake in the pipeline, accusing the Canadian government and oil sands producers of failing to support its attempt to aggregate 200,000 bpd of production.
PetroChina has since returned to the oil sands by paying C$1.9 billion for 60 percent of two leases owned by Athabasca Oil Sands.
Sinopec is the largest Chinese participant in oil sands through a joint venture with France’s Total in the Northern Lights project which is engaged in a feasibility study and the US$4.65 billion it spent for acquire ConocoPhillips’ 9.03 percent of Syncrude Canada.
Hou told the Chinese forum it is important to build a pipeline from Alberta to the British Columbia coast to help Canada diversify its oil export markets.
He said that if Northern Gateway gains regulatory approval, Sinopec and Total will consider stepping up the timetable for Northern Lights.
But he also said that Sinopec is primarily interested in maximizing returns on its oil sands production, which could mean shipping the volumes to markets other than Asia.
Challenging regulatory process However, Enbridge is immersed in a challenging regulatory process, facing strong opposition from First Nations and environmentalists to an overland pipeline to a deepwater port at Kitimat and tanker traffic in British Columbia waters.
A federally appointed review panel said this week it wants more details on engineering and the environmental risks before making a decision on Northern Gateway’s public benefits.
The panel said the additional information is needed based on its assessment of Enbridge’s application and comments made during public hearings.
It noted that the design and risk assessment of the pipelines (which include a parallel 193,000 bpd system to import condensate) are complicated by “the difficult access and unique geographic location of the proposed project.”
The panel did not set a deadline for Enbridge to reply, or indicate when it expects to make a final ruling.
Opponents have raised concerns about the dangers of pipelines crossing 1,000 rivers and streams and tankers operating in British Columbia waters.
Daniel said Enbridge will ultimately succeed in gaining regulatory approval “as long as we follow the proper consultation process, as long as we continue to present our arguments as logically as we have, as long as we’ve got a very strong federal government and, I think, general Canadian support for broadening out our markets.”
More investment possible Speculation about even more Asian investment in the oil sands was heightened by Bryan Gould, vice president of corporate development at Athabasca Oil Sands, who told an investment conference that a commercial deal involving more joint venture partners could be in the offing.
“If two parties are aligned and motivated, these things can happen very quickly,” he said. “Or it can go on forever and you never consummate a deal.”
He said Athabasca is considering proposals from big companies that want to participate in large-scale development as their first investments in both Canada and the oil sands.
UBS analyst Chad Friess said Athabasca is getting a double lift from the run-up in world oil prices and its progress towards being a producing company.
Gould said that if current tests are successful, Athabasca could apply this year for approval of a 12,000 bpd demonstration project to come on stream in 2014 at its Leduc site, about the same time its Dover/MacKay project is due on stream, starting at 50,000 bpd and growing to 250,000 bpd.
He said the company’s Hangingstone project, with contingent resources of 600 million barrels and potential output of 70,000 bpd, is deemed too small by potential partners, who are suggesting a venture that combines Hangingstone and more northerly leases with 1.1 billion barrels of resources and a possible 88,000 bpd project.
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