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The friendly “divorce” announced Tuesday between PetroChina and Athabasca Oil Sands Corp. puts a Chinese company in charge of a Canadian oil sands project for the first time. Is it ready?
Yes, says Zhiming Li, president and CEO of Dover Operating Corp., the company that will operate the asset on behalf of a PetroChina subsidiary, Cretaceous Oilsands Holdings Ltd.
In an interview, Mr. Li said Dover’s strategy is to establish itself as a Canadian company staffed predominantly by Canadians. “Some 90% of the employees are Canadian experts,” he said. “These people are well experienced with lots of knowledge in developing SAGD projects. We will use local talent to do the project execution. We expect no problem.”
With a staff of 90, Dover plans to add 50 to 60 people this year as it moves ahead with its first project in Alberta, MacKay River. Its strategy is to ramp up to 150,000 barrels a day in four phases. The first phase, 35,000 barrels a day, is scheduled for startup in late 2014.
The transaction marks a quiet rise in Canada for the Chinese oil giant. The unusual unwinding of the MacKay River joint venture doesn’t require federal approval since PetroChina, the largest of China’s state controlled oil companies, is already in control of the project.
Indeed, PetroChina’s expansion in Canada wasn’t its call. Athabasca said it was its call to exercise its option to divest its 40% interest in the MacKay River oil sands project for $680 million in cash because it can use the cash more profitably elsewhere.
Athabasca is expected to take a similar step around the end of 2012 with its Dover oil sands project, where it has a similar arrangement with the Chinese giant.
Sveinung Svarte, president and CEO of Athabasca, said the separation is friendly and is no reflection on PetroChina, the largest of China’s state-controlled oil companies, as a partner.
Both companies had the ability to get out of the arrangement, as part of joint ventures struck in 2010. Athabasca had originally sold 60% stakes in MacKay River and Dover to PetroChina for $1.9-billion, with put/call options on the remainder triggered by regulatory approvals. The options allowed Athabasca to sell its remaining 40% interest to PetroChina in each of the two projects for $1 a barrel of contingent resource, and PetroChina to buy it for the same amount.
“It was us who exercised the option, but having said that this was a perfect divorce with both parties happy that we exercised because they are pleased to see the barrels come to them, and we can do even better with the money elsewhere,” Mr. Svarte said in an interview.
For the rest of this column, please go to the National Post/Financial Post website: http://business.financialpost.com/2012/01/03/chinese-take-helm-of-mackay-river-oil-sands-project/