Acquisition of (under-capitalized) Nexen is just another step in China's plan
to "take care of itself"
-- Canada should do the same thing!
Dear Gentlemen and friends,
May I suggest that the Industry Minister not approve the sale of the Canadian assets of Nexen to the Sovereign entity CNOOC , but that we give our blessings to the sale of the balance of Nexen worldwide assets.
Despite that complexity, the Canadian Crown must ensure that the total Long Lake Project remains, at minimum, 51% Canada/CPPIB, and that the TOTAL of both the existing Sinopec 9% share+ the proposed 7.23% CNOOC (via Nexen) share in Syncrude is also be (at minimum) a 51-49 joint asset.
The Nexen $15Billion agreement will have to be amended to exclude the Canadian assets (that shouldn't matter to Nexen shareholders - as long as they receive the same premium to TSE-price), but assuming the CDN assets are $5-7billion of the $15 billion...51% of that $5-7Bn is a relatively medium-sized deal for the largest(by a hair) $165.8 Billion Pension fund in Canada.
If China/CNOOC balks at the arrangement - nationalize the Canadian assets (but pay Nexen) .... this IS China we're talking about ....they ain't overpaying and they ain't stupid. Talk about having a "National Energy Program" - we're squabbbling internally over peanuts in revenue ....they're BUYING the assets!
All China really want is to learn how to apply the "OrCrude" system for Steam Assisted Gravity Drainage (SAGD) - an OPTI-proprietary technology- to develop China's OWN oil sands in Junggar Basin in the northwestern region of Xinjiang (Reuters Aug 22/12) excerpted below --- read the whole thing before deciding/approving anything
Don't waste this opportunity to play in the big leagues ... don't let the pre-existing (and awaiting Chinese approval) Scotiabank and/or Manulife deals interfere with a sound Canadian-sovereignty decision. After all who "owns" the resource-in-the-ground? Who granted the land-lease, in exchange for a few dollars in Royalties?
As a Canadian, I must insist that the Stewards of the Crown's Assets and Treasury take the long-term view on the Nexen sale of these Crown-in trust Assets. Buy a controlling share of them, invest in the joint-development and let's all reap (at minimum) a 51% of our own harvest.
rce
BEIJING/HONG KONG, Aug 22 (Reuters) - CNOOC's planned $15 billion purchase of Canada's Nexen will make the Chinese state energy giant the operator of a major oil sands project for the first time, giving Beijing the expertise to be able to tap massive unconventional oil reserves at home.
China estimates the oil-soaked sands it sits on could hold as much as 14.5 billion barrels, which would be double the country's proven oil reserves. It also estimates it has huge reserves of heavy oil and shale oil -- oil trapped in shale formations.
But the world's second-largest oil consumer has pumped little from domestic sands and shale so far as Beijing focuses on Canada's oil sands industry -- the world's third-largest oil deposit -- and cleaner unconventional gas resources at home.
China will eventually need the oil at home to fuel its expanding economy and keep expensive imports in check, and the purchase of Nexen, which would be China's largest overseas acquisition if it wins Canadian and U.S. regulatory approval, would give it new technology and operational experience to help extract its domestic oil.
"The Chinese companies must learn both ends, technology and its operational application," said Al Troner, president of Houston-based Asia Pacific Energy Consulting. "It is definitely not something that Joe Shmoe comes into and can do efficiently on their own."
"Key benefits (of buying Nexen) include gaining operatorship of key oil sands assets" and improving the economics of projects with an oil sands producing technology known as Steam Assisted Gravity Drainage (SAGD), CNOOC said in a presentation to investors on July 23 after announcing its bid for Nexen.
Among Nexen's international portfolios that CNOOC would take over is the operation of Nexen's Long Lake project in Alberta, Canada, a major project in the Athabasca oil sands region, and its oil sands technology.
TECHNOLOGY RIGHTS
Nexen is a 65 percent owner and operator of the geologically complicated Long Lake project, expected to have a production capacity of 72,000 barrels of bitumen per day and upgrading capacity of 58,500 barrels per day.
Tar-like bitumen needs to be upgraded into synthetic oil for use in refineries in order to produce gasoline or diesel.
Long Lake is also the first Canadian bitumen project to combine SAGD with an upgrading technology called OrCrude that can help producers consume less natural gas in the process of generating steam used to pump bitumen to the surface. The process of SAGD, widely used in Canada, involves injecting steam into the earth to loosen up bitumen so it can be pumped to the surface.
Nexen has the exclusive right to use the OrCrude technology with Canadian oil sands company OPTI -- bought by CNOOC for $2.1 billion last year -- within certain parts of Long Lake, Nexen said in its 2011 annual report. Nexen also has the right to use it elsewhere in Canada and most of the rest of the world, subject to certain rights for OPTI to participate, Nexen said.
Excerpt end -continued
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