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. (TO:CVE) , Canadian Natural Resources Ltd. (TO:CNQ) and others by the retreating companies. Canadian Natural Resources has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Recent Divestments in Canadian Oil Sands

In Mar 2017, Shell (LON:RDSa) RDS.A announced the sale of its interests in Canadian oil sands to Canadian Natural Resources.

ConocoPhillips (NYSE:COP) sold its assets to Cenovus in a $13.3 billion deal.

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

In Dec 2016, Statoil (OL:STL) 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. (NYSE:APA) , 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 (NYSE:SNP) 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.

About Canadian Oil Sands

Oil sands in Canada are the world's third largest reserves of crude oil. It has 165 billion barrels of recoverable oil. These are located mainly within Alberta province, Athabasca, Cold Lake and Peace River regions, covering more than 142,000 square kilometers. More than 3,400 companies are presently serving in this area are expected to create over 350,000 direct jobs within 2035. Over the next 20 years, these are expected to inject $4 trillion into the Canadian economy.

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