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Friday, February 11

Jan. 20 Chinese-Canadian Oil/Uranium Agreement

China, Canada Agree on Oil,
Uranium Development


Rob Delaney in Beijing and Ian McKinnon in Calgary

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

Jan. 20 (Bloomberg) -- China and Canada signed agreements in Beijing today to help develop uranium mines and oil reserves, including Canada's oil sand deposits in Alberta, to expand trade between the two countries.

The agreements followed meetings between Chinese Premier Wen Jiabao and Canada's Prime Minister Paul Martin. Canada's Martin and Trade Minister James Peterson are on a six-day visit to China with representatives of 250 Canadian companies to boost commercial ties with its second-largest trading partner.

"Canada and China have decided to work together to promote cooperation in the oil and gas sector, including Canada's oil sands, as well as in the uranium resources field," the two governments said in a statement. No specifics were given on companies that may be involved, and details of the agreement weren't available on a Web site for Canada's prime minister.

Companies including Exxon Mobil Corp., Royal Dutch/Shell Group and Canadian Natural Resources Ltd. plan to spend billions during the next decade to develop Alberta's unconventional oil deposits as demand for crude rises and output from existing fields decline. Oil-sands output in Alberta may double to 2 million barrels a day by 2013, according to a presentation last week by Enbridge Inc.

Feasibility
Economics, not today's agreements, will decide whether China becomes an investor in the oil-sands projects, said Mike Tims, chairman of Peters & Co., a Calgary brokerage specializing in oil stocks.

"I wouldn't say that anything in this agreement is likely to cause anyone to do anything that isn't fully sensible on a commercial basis,"' Tims said in a telephone interview.

Enbridge, Canada's second-biggest pipeline company after TransCanada Corp., said last week that PetroChina Co. or China Petroleum and Chemical, the country's two biggest oil companies, will agree by next month to buy oil from Alberta oil sands to meet growing energy demand in China. Calgary-based Enbridge is proposing a C$4 billion ($3.25 billion) pipeline to export Alberta's oil to California, China and other markets

Shares of Calgary-based Husky Energy Inc. rallied in November after Toronto's Globe and Mail said China was negotiating to take control of the producer through a state oil company. Chinese buyers may be attracted to Husky because it is developing two oil-sands projects, some analysts have said.

Chinese Oil Demand
China is scouring the world for oil to fuel its expanding economy, and the agreements could help Canada compete with countries in the Middle East, Central Asia and South America for Chinese investment, Peters's Tims said.

"Companies from countries like China like the whole notion that they have the blessing or imprimatur of the government when they go to negotiate a commercial arrangement," he said. "It puts investments in Canada in the same ballpark as investments in other countries which are similarly receptive to them."

Canadian exports to China totaled C$4.8 billion in 2003, about a quarter of the value of its C$18.6 billion in imports from the world's most-populous nation, the Canadian embassy in Beijing said.

Exports from Canada surged 55 percent in the 10 months ended Oct. 31, 2004, from the same period a year earlier, said Ian Burchett, public affairs counselor at the embassy.

Oil sands are deposits of bitumen, an extra-heavy oil that must be treated to convert it into crude oil for use in refineries to produce gasoline and diesel fuels, according to the Web site of the Alberta Department of Energy.

Canada has the world's largest oil reserves after Saudi Arabia since the U.S. Energy Department revised its global oil resource estimates to include oil sand deposits, Canada China Business Council President and former Canadian Ambassador to China Howard Balloch said in an interview last week.

Alberta's oil sands deposits contained around 174 billion barrels of proven reserves that can be recovered using current technology at the end of December 2003, the department said. Saudi Arabia has proven reserves of 262 billion barrels, according to the Energy Department.

To contact the reporters on this story:
Rob Delaney in Beijing at robdelaney@bloomberg.net; and
Ian McKinnon in Calgary at imckinnon1@bloomberg.net.

To contact the editor responsible for this story:
Peter Langan at plangan@bloomberg.net.


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