CNOOC’s blockbuster deal for Nexen, if nothing else, is a stark indication of how far the goal posts have moved not only for Canada’s oil patch, but also for world oil demand. Only four or five years ago, the notion that a state-owned Chinese company could buy—lock, stock and barrel of bitumen—one of Canada’s premier oil names was politically unthinkable. Any such deal was sure to be turned down by Ottawa under its Foreign Investment Review Act (not to mention the hue and cry that would come from Alberta’s provincial government).

Today, that’s all changed. CNOOC’s $15-billion offer for Nexen follows a number of major foreign transactions in Canada’s energy sector. Among others, Malaysian energy giant Petronas is paying $5.5-billion to get at Progress Energy’s natural gas reserves in British Columbia. Earlier this year, PetroChina completed a two-pronged deal for Athabasca Oil Sands Corp. that tallied $2.5-billion. In 2010, Sinopec paid $4.65-billion for a 9 percent stake in Syncrude, which runs Alberta’s largest oilsands mine.

The welcome mat for Chinese mega-investment is being rolled out as Ottawa, along with the rest of the world, comes to accept the preeminent role that Asian fuel demand will play for future commodity prices. Where the development of Alberta’s oil sands may have once relied on America’s energy needs, those days are passing. As the Nexen deal shows, Calgary’s economic compass, which used to point south to Houston, is now being drawn east to Beijing.

Oil demand is a function of economic growth. As US GDP growth continues to falter, so too will the country’s energy needs. In that light, it’s no surprise to hear so many rumblings about the need to strengthen trade ties with Asia coming from the Harper government.

Ottawa’s attempts to fast track Enbridge’s Northern Gateway pipeline are just one example. By allowing Canadian oil to be loaded onto tankers bound for Asia, Northern Gateway would open up new markets, and higher prices, for Canadian crude. Those are just two reasons why it seems certain the Canadian government will have no qualms approving CNOOC’s takeover of Nexen. Ottawa can see who’s going to be paying the bills in the future. If China is where Canadian oil production is going to flow, it’s only natural that Chinese-owned companies will want to be involved in taking it out of the ground.

  • Montrealstewart

    As an oil sands truck driver, I am wary of  rgis deal. I see no way that it is in my interest

  • Jimmy

    Why not?

  • Heather

    Hi Jeff — Your sentence on Athabasca Oil is incorrect.  PetroChina bought Athabasca’s 40% share of the MacKay commercial oil sands project in January, 2012.  Athabasca still holds 40% of the Dover commercial oil sands project.  Also, Athabasca changed its name from Athabasca Oil Sands Corp. this spring to Athabasca Oil Corporation.

  • Catfish

    You are assuming that Northern Gateway will go through. There is a lot of opposition to it here in BC, including many first nations along the route who are threatening legal action. The BC government wants more money, and the opposition wants it scrapped. There’s an election not too far in the future. If Northern Gateway goes through at all, it will likely be years before Enbridge gets to build any of it.

  • Ian MacLeod

    When do we expect the influx of Chinese labor to get to Ft. McMurray? Projects there are estimated to be completed in X units, but actual progress is .1 to .2 X units, because the labor force is spoiled rotten and its productivity is a laughingstock. Chinese investors (he who has the gold makes the rules) will not stand for it.

    I am at Lake Okanagan, and have noticed the price of marine fuel at 1.55 Cdnlitre. A guy just filled his ski boat from just under half tanks – 250 Cdn. Not needless to say, because it is my point, way fewer (loud and over – powered) boats on the Lake this trip.

    I sold my Suburban years ago and now operate a diesel Smart. It’s a good thing that the intervening years have accelerated the mellowing of my assertiveness level because other motorists treat Smart operators way differently that they do Suburban operators! Your points of view should be heeded and acted upon by anyone who wants to enjoy and contribute in the next 30 to 50 years (I would be 108 if it were the latter!).

    Have a nice day.

    Ian MacLeod

  • Guest

     They better make a new pipe line to Montreal. This could stop the imports from Middle Eastern oil for eastern Canada & north eastern U.S. + what ever capacity is left over could be shipped to Asia.

  • Doug

    That’s something that should have been done years ago. What’s required is a joint venture between the two countries to bring more of that western oil to the east. It’s starting to happen now, starting with the flow reversal in Enbridge pipeline #9 from Sarnia to Hamilton, Ontario and ultimately to points beyond.

  • Instincts

    Energy and Food, Jeff, Energy and Food.  That’s the next hot topic that you should focus on.  Oil’s increasing again in price, grain commodities have gone through the stratisphere, drought is hitting hard in many places, and more and more people are competing for access to food.

    Perfect recipe for chaos.  But like oil prices did in 2008, unsustainable grain prices are already starting to cause demand destruction, through livestock herd culling and a very likely soon-to-come lightened corn-ethanol mandating in the U.S.

    I can see a time in the future when current unsustainable agricultural practices will have to shift back to more land- and energy-friendly methods, but not without a whole lot of aches, pains, and complaining along the way.  Because heaven forbid that the majority of food producers and a lot more people have to resort back to more manual and land-friendly methods of food production.  But what an improved economy we’d have if we reversed the rural-urban demographic trends by seeing increasing rural populations and decreasing urban populations, by getting a lot more people involved in producing food and thereby using less finite fossil energy, and more good ‘ole and entirely renewable muscle power.

    Its too bad that we’ll have already fried the atmosphere and climate/weather stability, soils, biodiversity, bio-resilience, and much of the fresh water stores before that ever comes about.

    …heck, you can just use my ranting here as the basis for your next column if you want, free of charge!

  • Baronfowler

    Hi Jeff:
    Love your book. Read it 3 times so far. 
    I am from Edmonton and now live in South Africa. No snow and lots of sun. 
    Biggest problem here energy wise is a very tight power production. We are 90%+ coal based. Very little solar/wind despite one of the best solar energy places anywhere. However, that is changing fast. Numerous projects on the go. Also 25% unemployment.

    Biggest future problem is water in S.A.Growing population. Numerous other countries have a similar shortfall. Canada could supply this demand with super tankers of water coming from the west coast. I know this is a hot issue but the future is not oil, its water. I wonder if fresh water could be sent back in empty oil tankers rather than sea water and then filtered. Might be cheaper than desalination.

    Vast reserves of gas have been found off the east Africa coast. No demand other than here in South Africa. We could phase out coal and go to gas turbines for our power and CNG for transport. We have two coal plants under construction, both over budget and behind schedule.

    I certainly agree with you that $200/barrel oil is inevitable once the economy picks up, but that could be 10 years away as you mentioned if this recession turns into a depression. I would not be the slightest bit surprised.

    Regards to all, 
    Baron Fowler, Montagu, Western Cape, SA