Calgary, April 19th, 2010 - The implications of China's first-ever investment in an established oilsands project will depend on what the emerging economic superpower ultimately plans to do with its new source of crude.
China's energy security was repeatedly cited by experts as the main reason state-owned refinery giant Sinopec is shelling out a rich US$4.65-billion for ConocoPhillips' nine per cent stake in Syncrude Canada Ltd., the largest oilsands project on earth and one of the oldest.
But it's not a foregone conclusion that barrels of oil squeezed from Syncrude's vast operations north of Fort McMurray, Alta., will literally cross the Pacific Ocean and end up in Chinese refineries. And even if that were the case, it's not clear whether China would want raw bitumen, or more a more processed and easier-to-refine variety of oil.
If China takes the bitumen route, it has the potential to draw the ire of Ottawa. On the federal election campaign trail in September 2008, Prime Minister Stephen Harper promised to restrict the export of the impure heavy crude to countries that have weaker greenhouse gas emissions rules than Canada, which would appear to include China.
"Clearly the government of Canada does have the ability to regulate exports in order to address environmental issues, be it either through a ban or some kind of tariff."
In any event, oilsands crude wouldn't be able to make its way to China until at least 2016, when Enbridge Inc.'s controversial Northern Gateway pipeline connecting Alberta to the northern port city of Kitimat, B.C., is set to come into service.
The wait wouldn't be much of a concern for China, which makes its decisions with an eye to its citizens' needs decades into the future.
Northern Gateway could also open up another front in a long-running battle to keep high-paying upgrading and refining jobs in Alberta, if Sinopec, Asia's largest refiner, opts to process its share of crude in its own facilities. Labour groups have already been raising alarm bells over the toll major U.S.-bound pipeline having on Alberta jobs.
University of Calgary business professor Bob Schulz said China has no interest in bringing oilsands crude to China, since oil is a globally traded commodity. Sinopec could swap its slice of Syncrude production on the world market for other supplies that are easier to bring home.
"It enables them to have a large asset in Canada that can be monetized and traded into oil for China," said Schulz.
"The Syncrude product is unlikely to go to China. The product is still going to go to the U.S."
Schulz said China is mainly interested in grabbing a seat at a table occupied by some of the globe's top energy companies, Syncrude partners like ExxonMobil Corp.'s subsidiary Imperial Oil Ltd. and Suncor Energy Inc., and benefit from their technical expertise.
The Chinese company could then apply that knowledge to other heavy oil operations in countries like Venezuela.
"What they'd like to do is to learn the technology in Canada, move that technology to other parts of the world where they're 100 per cent owners and they're not nine per cent owners." - The Canadian Press
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