Chinese Buy $5 Billion Stake in the Tar Sands

Timing, they say, is everything. Yesterday I blogged on the US military’s latest warnings on peak oil and how we face a severe energy crunch.

The military planners examined different production methods and flagged up potential problems.

With the Canadian tar sands they warned that “legal constraints may discourage investment.”

I am sure what they military meant by that was the  legal constraints that will follow in a carbon-constrained world.

These contraints will arise first in the EU and US – the later being the historic market for Canadian oil.

But with perfect timing, the Chinese have given the Canadians a get-out-of-jail card to avoid any carbon legilsation by investing a whooping $4.65bn in the world’s dirtiest oil, that will now be destined to the hungry markets of the Chinese rather than the slowly declining American one.

China’s Sinopec oil company is to pay the American company ConocoPhillips $4.65bn for a 9% stake in Syncrude Canada.

This is the largest project in Canada’s tar sands industry, pumping an estimated 350,000 barrels a day, about 13% of Canada’s overall oil output.

It is also one of China’s largest investments in North America, although not the first time the Chinese have invested in the tar sands.

Last August PetroChina bought a 60 percent stake in two undeveloped oil sands properties held by Athabasca Oil Sands Corp.

Earlier this year,  Sinopec acquires an additional 10 percent stake in Total SA’s undeveloped Northern Lights oil sands project bringing Sinopec’s stake in Northern Lights to 50 percent.

Analysts said that the price paid by Sinopec for the Conoco stake was about $2bn more than was expected. “It just shows that the Chinese are a different kind of buyer,” said Phil Skolnick, an analyst with Genuity Capital Markets.

Not surprising the Canadian proponents are crowing about the investment “This legitimizes the value of our oilsands operations; it shows that there is a place for oilsands development in the world environment,” argues analyst Peter Linder from Delta One.

So, basically the bottom line for the Canadians is that Chinese investment is a way of getting round the carbon constraints likely to be imposed by America.

Given the “environmental concerns” of the American market “it would be a matter of prudence for Canadian producers to seek alternative markets,” argues Vincent Lauerman, president of Geopolitics Central Inc.

Surely this is just exporting pollution then – from Canada to China.

As this picture shows from an anti-tar sands protest in London yesterday – the tar sands is a global climate crime, no matter where the oil goes…