Canada Oil Sands Likely To See More Chinese Investment

Canada is encouraging Chinese companies to invest in its oil sands, which recently witnessed aggressive divestments from several international companies.

This year, Canadian oil sands assets worth approximately $23 billion were sold to domestic companies like Cardinal Energy Ltd., Cenovus Energy Inc. (CVE - Free Report) , Canadian Natural Resources Ltd. (CNQ - Free Report) and others by the retreating companies. Canadian Natural Resources has a Zacks Rank #1 (Strong Buy).

Recent Divestments in Canadian Oil Sands

In Mar 2017, Shell (RDS.A - Free Report) announced the sale of its interests in Canadian oil sands to Canadian Natural Resources.

ConocoPhillips (COP - Free Report) sold its assets to Cenovus in a $13.3 billion deal.

Marathon Oil (MRO - Free Report) signed an agreement with Shell and Canadian Natural Resources to sell its Canadian oil sands assets for $2.5 billion.

In Dec 2016, Statoil ASA sold its oil sand assets in Canada to Athabasca Oil Corp. incurring a loss of more than $500 million.

Chinese Energy to the Rescue?

With international capital draining out of oil sands, the opportunity of growing assets in the area is facing a decline. The government of Canada is thus seeking new foreign investments from its Chinese counterparts.

Although the details of the investment have not been divulged, investors need to remember why companies like ConocoPhillips, Marathon Oil, Apache Corp. (APA -Free Report) , Royal Dutch Shell plc and others shifted their focus elsewhere. The oil companies believe that factors like tight environmental regulations, limited export pipeline capacity, comparatively high production cost and slow growth played a huge role in the sell-off.

Chinese investments in Canadian oil sands is nothing new as companies like CNOOC Ltd., PetroChina Company and Sinopec (SNP - Free Report) had bought stakes here during 2005-12. The previous deals created issues, given conservative Canadian policies. This raises questions on how Chinese investors will response to this call for new investments.

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