By Shaun Polczer, Calgary Herald December 30, 2009 7:15 AM
CALGARY - The federal government on Tuesday gave the go-ahead for Petro- China to buy a $1.9-billion stake in a pair of oilsands projects in northeast Alberta in what observers are saying heralds warming trade ties between the two countries.
In a statement, Industry Minister Tony Clement said he's satisfied the deal is in the best interests of Canada despite criticisms that oil and gas is a vital strategic and economic resource and should be off -limits to state-owned entities.
"I am satisfied that the investment is likely to be of net benefit to Canada. Our future prosperity relies on open markets and two-way trade and investment flows that will benefit Canada and Canadians. After a thorough review of the individual merits of this transaction, I have concluded that it will benefit Canada."
On Aug. 31, privately held Athabasca Oil Sands Corp. announced PetroChina had agreed to take 60 per cent interests in a pair of oilsands leases, at Dover and MacKay River, marking the largest direct investment in Calgary's oilpatch by the Chinese to date.
Wenran Jiang, who heads the University of Alberta's China Institute, said the deal marks a turnaround in policy on the part of the Harper government, which had previously been critical of the communist country's human rights record.
But a series of high-profile visits by Canadian officials in recent months, including a state visit by Prime Minister Stephen Harper himself, has rekindled the once-chilly relationship leading to greater confidence on the part of the Chinese to invest in Canada.
"It's a very small number, but it's big for Canada," he said in an interview. "The Chinese recognize there has been a major policy shift. Expect more Chinese investment in the resource and energy sectors . . . there will definitely be more."
Under the Canada Investment Review Act the federal government has the right to review and implement conditions for foreign transactions over $312 million.
PetroChina will be required to spend more than $250 million in each of the next three years, maintain an Alberta head office for its operating subsidiaries for at least five years, and ensure that Canadians occupy a majority of the senior management positions associated with the projects.
Legal experts said the Petro-China deal was a test of newly implemented provisions for state-owned entities. Although PetroChina is traded on public stock exchanges in New York and Hong Kong, its majority shareholder is the China National Petroleum Corp., which is wholly owned by the Chinese government.
A further condition of the deal is that PetroChina maintain its stock exchange listings during the life of the Dover and MacKay River projects.
The announcement came after the close of markets Tuesday, when PetroChina shares lost 46 cents US on the New York Stock Exchange, to close at $120.11 US.
