Petrochina buys 60 per cent stake in Canada’s oilsands for $1.7 billion

China's largest oil company, Petrochina Company Ltd, (Petrochina), has agreed to acquire 60 per cent stake in Canada's Athabasca Oil Sands Corp. (Athabasca) for about $1.7 billion, in a continuing resource acquisition spree by the world's second largest energy consuming nation.

The acquisition will be effected through Petrochina's wholly-owned subsidiary, Petrochina International Investment Company Ltd, Athabasca announced through a press release yesterday.

Calgary, Alberta-based Athabasca is a privately held oil sands company focused on the development of oil sands resources in the Athabasca region of northern Alberta, Canada. The company is among the largest lease holders in the region with interest over 5,300 sqkm with majority of the resource assets located within McMurray formation, a prolific and highly exploitable portion of oil sands.

Athabasca had recently visited several of PetroChina's oil facilities in northeastern China where PetroChina operates a number of heavy-oil projects using sophisticated technologies, including various SAGD processes and firefloods.
 
Their field developments, operational methods, heavy-oil experience and research facilities are world class, which will bring these very valuable attributes to the MacKay River and Dover projects in Alberta, said Gallacher.
 
Oil sands are naturally occurring mixtures of bitumen, water and sand that are found in large deposits in three main areas of the Province of Alberta, Canada.  These key oil sands areas are Athabasca, Peace River, and Cold Lake.  The Athabasca deposit is the largest of the three oil sands deposits.
 
It has been calculated that about 28 billion cubic meters (179 billion barrels) of crude bitumen are economically recoverable from the three Alberta oil sands areas at current oil prices using current heavy oil recovery technologies. 

 
This is equivalent to about 10 per cent of the estimated 1,700 and 2,500 billion barrels of bitumen in place.
 
Estimates show that the Athabasca deposits alone contain 5.6 billion cubic meters (35 billion barrels) of surface mineable bitumen and 15.6 billion cubic meters (98 billion barrels) of bitumen recoverable by in situ methods.  This volume places Canadian proven oil reserves second in the world behind those of Saudi Arabia.

Under the deal, Petrochina will acquire the MacKay River and Dover oil sands projects which are estimated to contain about 5 billion barrels of bitumen resource, and also provide certain financing arrangements to Athabasca.

Athabasca's chairman Bill Gallacher said, "Oil sands projects are very capital-intensive long-term investments and difficult to fully finance in the traditional equity market, and therefore the company decided to look for joint venture partners, and these strategic joint venture arrangements with PetroChina, one of the world's largest energy companies, can ensure that the MacKay River and Dover projects will be developed in timely manner, which is excellent news for Alberta and the rest of Canada.''

Petrochina operates a number of heavy-oil projects using sophisticated technologies including SAGD ('steam assisted gravity drainage', using high pressure underground steam injections to bring the bitumen to surface) and Gallacher believes that its world class technology, experience and research facilities would be very valuable for the Alberta projects. 

The companies intend to use common in-situ methods for the development of their oil sands projects. Athabasca has filed applications to regulatory authorities for the approval of two pilot projects in the areas.

Athabasca also intends to file an application by end of the year for the 150,000 barrels per day (bpd) MacKay River project, which is expected to produce 35,000 bpd in the first phase, by 2014.  

In a separate development, PetroChina said last Friday that it plans to acquire some upstream and downstream assets from its parent company, China National Petroleum Corp for $3.22 billion to increase its capacity. (See: PetroChina plans to acquire assets worth $3.22-billion from CNPC)