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China’s new play for Canada’s oil and gas
CALGARY— Chinese energy giant Sinopec International Petroleum Exploration is testing the waters on a bold new energy strategy in Canada, as it moves to buy out an Alberta oil and gas company for $2.2-billion in cash.
Sinopec’s bid for Daylight Energy Ltd., whose large portfolio of Alberta and British Columbia land contains potentially significant quantities of natural gas, comes amid a new push by Asian firms to lock up Canadian energy that could soon be loaded onto tankers and shipped across the Pacific.
But the Daylight deal marks a departure from previous Chinese acquisitions, which have been carried out with a deliberately soft touch, fashioned to avoid a nationalistic backlash by buying only small portions of other companies, or scooping up troubled firms.
Now, however, Sinopec is cementing a new trend that has seen Asian entities seek greater control in their North American investments. In buying Daylight, Sinopec is assuming a newly confident stance in Canada, where it has operated since 2005.
“This is breaking new ground,” said Wenran Jiang, an expert on Asian energy investments in Canada who holds a research chair at the University of Alberta’s China Institute.
Sinopec must still win over Daylight shareholders, who will receive $10.08 a share, more than double Daylight’s $4.59 Friday closing price. The company also needs to secure the approval of Canadian federal authorities. Under the Investment Canada Act, all direct foreign acquisitions over a set amount – the threshold was $299-million in 2010 – trigger a review by the Minister of Industry, who has 45 days to determine whether or not to allow the investment.
If it succeeds, Sinopec will have opened an important door to expanding Chinese activity in a country whose resources and stability are increasingly coveted by foreign powers.
“The message here for the Canadian oil industry is that China has a good appetite, China is willing to invest in a wide range of our energy sectors,” Mr. Jiang said.
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