Canadian Manufacturing

Chinese oil giant to take $2.1B bite of Calgary project

CNOOC Ltd. to get stake in Long Lake project through purchase of Opti Canada Inc.



CALGARY—China’s largest oil and gas producer is buying a struggling Alberta oil sands company in what’s becoming a series of Asian takeovers in the province.

China National Offshore Oil Corp. (CNOOC Ltd.) has agreed to purchase Opti Canada Inc. for $2.1 billion.

The Calgary-based junior oil sands producer filed for bankruptcy protection last week after ongoing difficulties at its Long Lake oil sands project.

The oil sands project uses a process called SAG-D, which pumps steam deep underground to soften bitumen so it can flow to the surface. But operational problems with the process have delayed production.

Long Lake is falling short of its target production rate of 72,000 barrels per day. It produced only about 27,900 barrels in the most recent quarter.

CNOOC will take Opti’s 35 per cent stake of the Long Lake project. The other owner is Nexen Inc., one of Canada’s largest oil and gas producers.

The Opti board of directors has voted unanimously in favour of the transaction with CNOOC.

“CNOOC Ltd. is a technically experienced and well-capitalized company that is equipped to support further development at Long Lake and future expansions in the Canadian oil sands,” Opti president and CEO Chris Slubicki said in a statement.

Yang Hua, the CEO of CNOOC, said the purchase strengthens his company’s Canadian presence in the oilsands business.

It’s not the first —and likely not the last— instance of Chinese companies making major thrusts into Canada’s oilsands.

Firms in China are scooping up other resource companies, seeking out new sources of energy and material to support the rapidly growing economy.

In November, PTT Exploration and Production, Thailand’s sole oil and gas company, bought a 40 per cent stake in Norway-based Statoil’s largely undeveloped holdings in northern Alberta for US$2.28 billion.

Last year in April, China’s Sinopec spent US$4.65 billion for a stake in the Syncrude Canada Ltd. partnership, which owns the world’s largest oilsands mining operation north of Fort McMurray, Alta.

Sinopec had already grabbed a foothold in the oilsands through its 50 per cent stake in Total E&P Canada’s Northern Lights project.

The same year, China Investment Corp., a state-run sovereign wealth fund, said it would kick in $1.25 billion to help Penn West Energy Trust develop some of its oilsands leases.

The CNOOC-Opti deal is expected to close in the fourth quarter of 2011, pending regulatory approvals in Canada and China.

Under the terms of the agreement, CNOOC Ltd. will pay $1.18 billion to lenders who hold Opti’s second lien notes and assume $825-million of first lien notes.

The Chinese company will also pay $37.5 million to backstop parties and $34 million to shareholders.

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