PetroChina goes long oil sands

What price oil sands? We wrote in June about renewed interest in oil sands projects, as investment prices fell just as oil prices were rising. Not long after, Greenpeace released a paper arguing the high price of extracting oil from tar sands could make such projects uneconomic in the long-term.

But PetroChina, for one, believes that oil sands are a good deal, having agreed to pay C$1.9bn (US$1.7bn) for 60 per cent of two oil sands projects in Northern Alberta. The deal reportedly came after years of watching the market.

The projects, Mackay River and Dover, are being developed by Athabasca Oil Sands, a privately-held company.

Sveinung Svarte, Athabasca’s chief executive, told the FT’s Bernard Simon that PetroChina “told us they had looked at all the players [around the world] over the past 10 years. They decided to go for it once prices were more reasonable”.

The company says it can break even on both projects at an oil price of $50 – $60. But Svarte added that both companies “have to reach decisions on the major issues”.

Interestingly, Athabasca’s statement says its executives have visited PetroChina facilities in north-eastern China where the company is using techniques such as steam-assisted gravity drainage – an ‘in situ’ method of extracting oil from tar sands regions without mining.

Bloomberg reports the investment as the biggest Chinese acquisition in North America – although it’s far from the first time China has taken a bet on oil sands. Sinopec bought a stake in the Northern Lights oil sands project and China Investment Corporation bought a stake in minority stake in a company which Teck Resources, which in turn has a stake in the Fort Hills oil sands project. In 2005, CNOOC and PetroChina’s fully state-owned parent CNPC both bought stakes in tar sands producers.

Related links:

Alberta decision disappoints environmentalists (FT Energy Source, 21/08/09)
Canadian oil sands: Falling costs begin to kick in, just as prices rise (FT Energy Source, 03/06/09)

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