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China gets big foothold in Canadian oil sector

business Updated: May 14, 2010 09:12 IST

IANS
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The Chinese got another major foothold in the Canadian energy market on Thursday with a billion-dollar cash deal with the energy major Penn West Energy Trust. Canada holds the second largest reserves of oil after Saudi Arabia, and is the biggest energy provider for the US.

Penn West is one of the largest oil and natural gas producers in North America, and the China Investment Corp is wholly owned by the Chinese government.

Announcing what it called a strategic partnership with the Chinese, Calgary-based Penn West Energy Trust said the China Investment Corp - one of the top sovereign investment funds globally - will pay it $817 million to buy a 45-per cent stake in its oilsands joint project in Alberta province.

The Canadian company also sold its five percent stake to the Chinese at $435 million, taking the whole cash deal to $1.25 billion.

After the completion of the joint venture, the oil output at the project, which produces 2,700 barrels a day, will jump to 10,000 barrels a day within two years.

Since oil extraction from oilsands is highly capital-intensive, Penn West spokesman Jason Fleury. said, "We're very excited because it's going to allow us to develop assets that we didn't have the capital for.''

This is the third major acquisition by the Chinese in the Canadian energy market in recent months. Just last month, China Petroleum & Chemical Corporation (Sinopec) acquired a nine percent stake in Syncrude Canada. Late last year, PetroChina inked a $1.9 billion deal with Athabasca Oil Sands Corp.

Apart from energy, China used Canada in March to make a big opening into the Latin American mineral market by inking a $1-billion deal with Canadian copper major Quadra Mining Ltd for a stake in its copper operations in Chile. It was the biggest stake gained by the Chinese in a Canadian metal resource company.

Chile accounts for 35 percent of the world's copper output.