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China sets trade rules Canada told free-trade pact hinges on pipelines to Pacific Coast, removal of ban on Chinese oil asset ownership; Trudeau plans trip GARY PARK For Petroleum News
Opening energy pipelines to the Pacific Coast is suddenly emerging as vital to Canada’s hopes of negotiating the first bilateral free trade deal between China and any North American country.
And that would likely need to be accompanied by an end to Canada’s restrictions on Chinese state-owned investments in the oil and gas sector, Han Jun, Beijing’s vice minister of Financial and Economic Affairs, told a briefing earlier in January at an Ottawa law firm.
He set those conditions about two months before Prime Minister Justin Trudeau is due in China and India to explore trade opportunities and the chances of free trade pacts beyond the proposed Trans Pacific Partnership.
That would follow Trudeau’s expected bilateral meetings with President Barack Obama as Canada seeks to re-establish cordial and working relationships with the United States in the wake of Obama’s rejection of the Keystone XL pipeline.
At stake for Canada is an estimated incremental rise in exports to China of C$7.7 billion a year on top of the current C$17 billion, still leaving a huge trade imbalance compared with C$49 billion in Chinese imports in 2015.
Sinopec purchases US crude The need for urgency by Canada, especially if it gives priority to the shipment of crude bitumen from the oil sands, got a sharp jolt with reports that China’s state-owned refiner Sinopec has purchased its first batch of U.S. crude oil since sporadic shipments in the late 1990s from Alaska.
Traders say a cargo is due to leave the U.S. Gulf Coast in March and could set the stage for a sustained flow from the U.S.
Although the Gulf has shipping limitations, Unipec, China’s trading arm, has leased oil storage tanks in the Caribbean, which would allow it to blend U.S. shale oil with heavy Latin American crudes, which would suit the refining facilities in China.
If there was any need for a further prod to action by Canada it has come with the lifting of sanctions on Iran and the certain prospect of resumed oil exports from that country.
Han, who held discussions with senior officials in the Canadian government, said that any free-trade agreement with Canada could open the door to a “flood” of energy products as well as fertilizers and agricultural products, as well as offering an outlet for green technology to reduce carbon emissions.
Concern with ban But he emphasized that China is “highly concerned” about Canada’s ban on outright ownership of oil sands producers by foreign state-owned enterprises, which he said is seen as discrimination against China.
The tightened rules were imposed in 2012 after the federal government approved the US$15 billion takeover of Nexen by China National Offshore Oil Corp.
Colin Robertson, with the Canadian Global Affairs Institute, said the Chinese want a re-examination of those rules.
Han said his government also wants to extend talks begun with the government of former Prime Minister Stephen Harper on establishing a maritime energy corridor in Canada.
Robertson said China, Japan and India are eager to buy Canadian oil and gas, but they can’t access the resources without pipelines.
Survey sees positive results A survey released earlier in January by the Canada-China Business Council/Canadian Council of Chief Executives explored whether a free trade deal with China would make sense.
The answer was a resounding “yes,” with up to 25,000 new jobs being created over the next 15 years, reinforcing preliminary results from a 2012 study that concluded there was “untapped potential for further growth” in a wide range of sectors.
Sarah Kutulakos, executive director of the Canada China Business Council, said Canada is suddenly at the “back of the (trade) bus” following the completion of a free trade pact that was 10 years in the making between China and Australia.
She said that deal gives Australian resource companies and banks - two of the underpinnings of Canada’s economy - tariff-free access to the Chinese market for 95 percent of its exports.
But critics of free trade with China note that the World Bank governance indices rate China as a medium-range risk for corruption, regulatory quality and rule of law.
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