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China comes shopping Eyes Canadian assets to satisfy its resource appetite; makes C$7 billion bid for Noranda; country said to be contender for Encino’s Ecuador stake Gary Park Petroleum News Calgary Correspondent
China has landed squarely on Canada’s doorstep in its search for natural resources to feed the world’s fastest-growing economy.
China Minerals, an arm of the government, launched exclusive talks in September to buy all of Noranda for C$7 billion, while state-controlled Sinopec is exploring the potential of either a joint-venture or outright ownership of an oil sands project in Alberta and Petro-China is reportedly among those eyeing EnCana’s troublesome holdings in Ecuador.
Howard Balloch, a former Canadian ambassador to China, describes China as a “very hungry dragon (whose) demand for copper and nickel and oil have long outpaced domestic supply.”
He said China will never again be self-sufficient in base metals and hydrocarbons.
For example, Bank Credit Analyst reported recently that domestic crude oil production edged up by only 1 percent between 1998 and 2003, while consumption rose 8 percent, forcing China to import more than 1.75 million barrels a day of oil and resulting in liquefied natural gas deals with Australia, Indonesia and Iran. Sales to China an issue But as China has fanned out around the globe to secure its own supply sources, the prospect of its 53 state-owned enterprises embarking on a takeover spree has triggered a debate over the issue of selling assets through market systems to a government with a dubious human rights’ record.
In Canada, the immediate focus is on the prospect of Minmetals acquiring Noranda, the mining and smelting giant that controls Falconbridge, the world’s third-largest zinc and ninth-largest copper producer.
Terence Corcoran, a columnist in the Financial Post, asked whether Canada “will just sit idly by while Canadian assets are essentially taken over by the government of China?”
While conceding that it may not be possible under Canadian or international law to scuttle the Noranda deal, he said: “There is too much going on to justify the silence on the part of Canadians.”
Toronto Globe and Mail columnist Eric Reguly countered that: “You can’t say economic freedom is good for the world, but not for China.”
Whatever the arguments, Noranda would be China’s largest takeover of a foreign company, although Chinese companies have recently invested US$12 billion in overseas assets. On the oil and gas front, state-owned oil trader Sinochem wrapped up a deal Oct. 1 to buy South Korean refiner Inchon for US$549 million.
State oil firms have spent US$5 billion over the past 10 years rounding up oil and gas fields to support flagging production and satisfy China’s thirst as the second-largest oil consumer after the United States. Oil sands also of interest While the attention has been on the Minmetals-Noranda negotiations, state-controlled Sinopec has stepped up its interests in the oil sands after sending delegations to Alberta over the last three months to “examine the potential,” according to Alberta Premier Ralph Klein, who promoted the oil sands during a Beijing visit in June.
He said Sinopec is interested in shipping synthetic crude through a proposed Enbridge pipeline from northern Alberta to a British Columbia deepwater port for shipment to China.
Enbridge has held meetings with unidentified Chinese parties this year as it pursues Asian markets for the 400,000 barrels per day it expects to start delivering on the Gateway pipeline by late 2009.
Sinopec could also be a candidate to take an equity position in new oil sands projects by either UTS Energy, which is targeting a 50,000 bpd start-up of its Fort Hills operation in 2009, or Synenco, whose Northern Lights project is scheduled to come on stream at 50,000 bpd in 2009.
Now PetroChina is rumored to be snooping around EnCana’s assets in Ecuador, which produce 78,000 bpd and carry a price tag of C$1.5 billion, although the front-runner has been identified by Reuters news agency as India’s state-run ONGC Videsh, the buyer last year of Talisman Energy’s oil assets in Sudan.
Subir Raha, chairman of ONGC, has conceded there are other rivals for the trouble-plagued Ecuador properties, although EnCana has avoided getting drawn into the guessing game.
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