PetroChina, Encana strike natural gas pact – by Shawn McCarthy (Globe and Mail – December 14, 2012)

Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

OTTAWA — Encana Corp. reached a $2.2-billion joint venture with PetroChina to develop the hot new Duvernay property in Alberta, in a deal that will fly just below the radar of Investment Canada’s new guidelines on state-owned enterprises.

The pact comes less than a week after the federal government unveiled investment rules that raise new hurdles for foreign state-owned companies to take over Canadian oil and gas producers and encourage exactly the type of deal that Encana and PetroChina concluded Thursday.

The deal shows foreign players remain anxious to invest in the Canadian energy industry even with the new guidelines. Chinese officials have said the government’s rules could put a chill on their investment plans in Canada, but PetroChina was clearly eager to proceed with Encana. Sources say the deal was essentially done weeks ago, but the firms held back their announcement until after Ottawa released its CNOOC decision and the new rules of engagement for state-owned enterprises.

Encana CEO Randy Eresman said the partners received assurances from Ottawa that the transaction would not be reviewed under the Investment Canada Act prior to closing the deal on Thursday because there is no transfer of control.

“We think this kind of transaction . . . largely to bring foreign capital in to help us develop undeveloped resources but having a minority interest is the ideal way to go,” Mr. Eresman said in Calgary.

In a statement last night, Industry Canada said investments that do not involve acquisition of control are not reviewable. But the government will undertake further due diligence to ensure this investment does not involve transfer of control.

Under the terms of the agreement, PetroChina – China’s largest international oil company – will gain a non-controlling, 49.9-per-cent interest in Encana’s 445,000 acres in the Duvernay in west-central Alberta for $2.18-billion.

Encana will remain the operator with a 50.1-per-cent interest. The partners expect to spend $4-billion over the next four years to develop the Duvernay land that is rich in natural gas and condensates, an oil-like substance that is used to dilute bitumen for shipment in pipelines.

Encana entered into a similar $2.9-billion joint venture with Japan’s Mitsubishi Corp. last February to develop a shale gas field in Alberta and British Columbia.

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