MAC/20: Mines and Communities

Saskatchewan says China itching to acquire oil, uranium assets

Published by MAC on 2005-10-26

Saskatchewan says China itching to acquire oil, uranium assets

By GEOFFREY YORK, Toronto Globe and Mail

October 26 2005

BEIJING -- Chinese investors, including state-owned companies, are strongly interested in acquiring ownership stakes in Saskatchewan oil fields and uranium mines, Premier Lorne Calvert says.

With its oil consumption continuing to soar, China has been increasingly anxious to develop a reliable new chain of energy supplies, including foreign oil sources and an expanded domestic nuclear industry. Saskatchewan could be a vital source of supplies for both of these sectors, according to provincial leaders who held two days of meetings with senior Chinese officials in Beijing this week.

Mr. Calvert yesterday reached agreement with the chairman of China National Petroleum Corp., the biggest Chinese state-owned oil producer, to set up a high-level working group to pave the way for Chinese investment in the Saskatchewan oil patch as quickly as possible. The goal is "to take our conversations to tangible action," the Premier said in an interview in Beijing last night.

CNPC is keen to invest in the heavy oil sector in Saskatchewan, he said. "They are demonstrating some real interest. They floated some ideas for the actual purchase of [oil field] properties that they would develop themselves. They gave every indication that it's on their option list. And they mentioned the possibility of joint ventures with Canadian players."

Officials from CNPC have already visited Saskatchewan three times in the past 12 months, showing their strong interest in the province. A subsidiary of the Chinese company has contributed $500,000 to a $2-million research fund at a Regina-based research centre to study oil recovery techniques.

But one Canadian prize seems to have escaped the grasp of these Chinese investors, at least for now. Despite persistent rumours, there's no sign that Husky Energy Inc. -- the Calgary-based oil company with major assets in Saskatchewan -- will be sold to a state-owned Chinese company, Mr. Calvert said.

The Saskatchewan Premier, in the midst of an Asia tour, held lengthy talks this weekend with Hong Kong billionaire Li Ka-shing, who controls Husky. With oil prices rising, Mr. Li seems eager to retain and perhaps expand Husky's interests in Canada, the Premier said.

Chinese state companies, including China Petroleum & Chemical Corp. (Sinopec) and PetroChina, are often rumoured to be potential suitors for Husky, and media reports last year suggested that Mr. Li was discussing a possible sale to a Chinese company, although Husky officials denied it.

China's nuclear industry, meanwhile, has a strong appetite for possible investments in Saskatchewan uranium mines, according to Eric Cline, the Saskatchewan Minister of Industry and Resources.

He said the Chinese are beginning to realize that Saskatchewan's uranium is much richer than the uranium in Australia, its main rival. Some Chinese investors have already visited the head office and mining sites of Cameco Corp., the province's main uranium producer.

"As they become aware of the resource in Saskatchewan, I think they're more and more interested," Mr. Cline said.

"We're at an exploratory level, but the level of interest is indicated by the level of officials we're speaking to. The meetings we're having are at a very high level. Certainly they're looking very seriously at Saskatchewan as a source of uranium. They would be a stable long-term customer for us, because they're going to have a lot of nuclear energy."

China is also a major customer for two of Saskatchewan's biggest commodities: grain and potash. Chinese demand for both is likely to increase because of the growing affluence of Chinese urban consumers and their rising appetite for more expensive food products, Mr. Calvert said.

Chinese consumers are buying more products such as pasta and beer, for example, which helps creates a market for Saskatchewan's durum wheat and malting barley, he said. Saskatchewan potash, meanwhile, helps China grow its own variations of these crops.

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