China faces buyer’s remorse in Canada’s oil patch – by Jeffrey Jones (Globe and Mail – August 18, 2014)

The 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.

CALGARY — Chinese companies have shelled out more than $30-billion in Canada’s energy industry, but many of those investments have been hit with operational problems, delays and weak returns, leading to growing impatience in some quarters in China.

PetroChina Co. Ltd., Sinopec, CNOOC Ltd., China Investment Corp. and other state-owned enterprises made a raft of big bets on oil sands projects, shale developments and domestic companies since 2005 and many have yet to pay off.

There is “absolutely” some buyer’s remorse stemming from many of China’s big-ticket acquisitions, said Samir Kayande, vice-president of energy research at ITG Investment Research, who has done intensive studies of some of the deals.

Some problems were the result of purchases made during a rush on assets across the industry, when competition from both domestic and foreign buyers was brisk, Mr. Kayande said. Eventually, assets in the best geological regions are likely to pay off, and those further from the earliest developments will lag in performance, he said.

Officials with the Chinese companies, and Canadians familiar with their thinking, say it is far too early to deem the buying spree, in a notoriously difficult industry, a bust.

Not all China’s problems are directly related to the land its companies acquired. Some could not have been predicted.

However, recent high-profile troubles have brought China’s record in Canada’s oil patch into sharp focus.

Among trouble spots, PetroChina has yet to pay its partner, Athabasca Oil Corp., for its 40-per-cent stake in the Dover oil sands project five months after exercising an option to acquire it. Athabasca chief executive officer Sveinung Svarte said this month the two sides have a timetable for closing the deal, but declined to give details.

Meanwhile, PetroChina’s parent company, China National Petroleum Corp., is investigating embezzlement at its global subsidiaries, including PetroChina, with unknown ramifications on Canadian operations.

Executives tied to the Canadian business have been detained in China in recent weeks.

Syncrude Canada Ltd., in which Sinopec and PetroChina have stakes, has been forced to seek solutions to technical problems that have hampered the reliability of its massive equipment.

It has resulted in drops in production and has prompted the joint venture to push back expansion plans by several years.

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