Northern Gateway pipeline would strengthen trade ties to China

Pipeline proponents bill Enbridge Inc.’s (ENB-T39.99-0.45-1.11%) Northern Gateway pipeline as critical to the ongoing success of Canada’s energy industry. If built, the conduit connecting the oil sands to the West Coast would give Asian countries access to Alberta’s oil patch, home to the world’s second-largest petroleum reserves behind Saudi Arabia. Gateway would facilitate expansion in the oil sands and strengthen trade ties to China, a key partner in developing energy here. It would drive up the price companies with operations in Western Canada would receive for their crude because it would create an export market other than the United States.

But what if the pipeline, or other export lines such as the proposed expansion of Kinder Morgan Inc.’s Trans Mountain system, never come to fruition? China sunk over $16-billion into Canada’s energy industry over the past two years, with the majority of that in the oil sands. It wants to secure supply – and make a profit. Will the Asian powerhouse stick around if the chance to secure supply never happens?

“China’s companies invest [in Canada’s oil patch] not just [to ship] the resources back to China,” Zhang Junsai, China’s ambassador to Canada, told reporters at a conference in Calgary Friday. “They come here to participate. There’s investment opportunity because Canada is open for the international investment. If there’s opportunity, China’s companies will come to take some shares [and] to learn from Canada.”

The bilateral relationship, he said, is “not definitely tied to [ensuring] this production goes to China.” The country imports oil from all over the world, although it, too, could stand to ease its enormous dependence on energy from the Middle East. China wants to diversity its import partners as much as Canada wants to add to its export markets.

“We can buy our resources, energy, from other channels,” Mr. Zhang said. “But we’ll work on Canada’s export to China – oil and gas.”

Swaths of North Americans fear Chinese investment in the continent’s energy resources. The Chinese government owns majority stakes in China’s three energy companies, and Mr. Zhang stressed this is no reason to assume the three are only concerned about pleasing Beijing.

“China’s [state-owned enterprises] are not agents of the government,” he said at the conference. “The boss is appointed by the government on the condition they make money. If they are not making money, they are out.”

Original Article
Source: Globe
Author: Carrie Tait