China on acquisition spree in North America

Beijing’s footprint in the energy patch of North America grew considerably after a unit of China National Petroleum Corp. (CNPC) agreed to purchase a huge chunk of a shale-gas play in Canada from Royal Dutch Shell PLC. Two other Chinese companies had earlier sealed energy agreements in the North American continent: PetroChina, a Hong-Kong-listed unit of CNPC, announced its purchase of a 20% stake in Shell’s Groundbirch natural gas project in British Columbia; and China Investment Corp. acquired a minority stake in EIG Global Energy Partners, which is headquartered in Washington. During the past years, producers in North America were able to fine-tune a technique that enables them to crack tight shale-rock formations through water and chemical injections, which frees up trapped oil and gas. The technology is now used around the world to reach gas and oil reserves once considered unreachable. As a result of the growing gas supply in North America, natural gas prices have tumbled and assets have become relatively cheap.
Canada eager to sell oil to China
Mark Gilman, a research analyst for Benchmark Co., said that the flurry of purchases by the Chinese is not so much about the commodity; rather, it has more to do with gaining access to the technology. “They are trying to learn about this business, on the basis of their belief that it will better position them to assess and develop similar resources within China,” said Gilman. China has invested heavily in Canada’s oil-sands developments, which involves extraction of bitumen from a mix of quartz sand through an expensive and intensive process. It had previously limited its interest in Canada’s energy developments to stakes in projects or joint ventures. But in 2011, Chinese companies began buying small companies in Canada. Following the U.S.’ rejection of a proposed pipeline from Canada to Texas, Canada’s Prime Minister Stephen Harper expressed willingness to export the country’s oil sands output to China. He went to Beijing in early February to promote his country’s energy potentials. (February 3, 2012)