petrochina walks away from canada gas deal
Last Updated : GMT 13:03:42
Arab Today, arab today
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PetroChina walks away from Canada gas deal

Arab Today, arab today

Arab Today, arab today PetroChina walks away from Canada gas deal

Beijing - Arabstoday

Petro-China walked away from what would have been its biggest overseas acquisition, the C$5.4 billion (Dh20.2 billion) purchase of natural-gas assets in Canada, after failing to agree on a price. Asia\'s largest energy producer and Encana were unable to reach a final accord because of differences over asset valuation, Mao Zefeng, a Beijing-based PetroChina spokesman, said. The 50 per cent stake purchase in Encana\'s Cutbank Ridge assets would have given PetroChina its first shale gas reserves in North America as it competes with global rivals for energy supplies. The deal\'s collapse may indicate Chinese companies are becoming more discerning after paying an average premium of 7.2 per cent on $95 billion of energy acquisitions since 2006. \"Unless Encana can come down 20 per cent, I don\'t think PetroChina would go ahead,\" Gordon Kwan, the Hong Kong-based head of regional energy research at Mirae Asset Securities, said. \"The problem is Encana is not going to come down 20 per cent because there are other buyers out there, especially Exxon Mobil, BP, ConocoPhillips are all eager to get into shale gas.\" Gas prices have risen 8.4 per cent in New York since February 9, when the deal was announced, increasing the cost of acquisitions. The Cutbank Ridge assets hold the equivalent of about one trillion cubic feet of gas, according to Encana. The company had total gas reserves of 13.3 trillion cubic feet as of the end of 2010. The failed transaction is the second in Canada by a Chinese company since April, when a hostile bid by Minmetals Resources for copper producer Equinox Minerals was topped by a C$7.32 billion offer from Barrick Gold Corp. Encana fell 2.3 per cent to C$28.78 at the close of Toronto trading Tuesday. PetroChina declined 0.4 per cent to HK$11.04 in Hong Kong, while the benchmark Hang Seng Index was almost unchanged. \"The stereotype of the Chinese grabbing any deal at any price just isn\'t valid,\" said Wenran Jiang, a University of Alberta professor and senior fellow at the Asia Pacific Foundation. \"The Chinese are tough negotiators and have become more nuanced and scrutinise every deal.\" Encana and PetroChina failed to agree on a joint operating agreement, Alan Boras, an Encana spokesman based in Calgary, said Tuesday. PetroChina\'s rejection of the Encana deal shouldn\'t be seen as a slackening of Chinese interest in North American shale properties, according to John Stephenson, a senior portfolio manager at First Asset Investment in Toronto. Shale is a dense rock formation into which drillers inject water, chemicals and sand to release oil or gas. The Encana deal would have surpassed PetroChina\'s C$1.9 billion purchase of two Alberta oil-sands projects a year ago. The failed transaction won\'t affect PetroChina\'s strategy in North America, spokesman Mao said. Other Asian companies have entered the Canadian gas market. Encana in 2010 reached a $1.1 billion agreement to sell stakes in three gas fields to Korea Gas. China has acquired overseas shale gas assets to gain expertise in producing the hard-to-extract resource and brought in foreign partners including Royal Dutch Shell and Chevron to assess the nation\'s shale potential. The country may have 26 trillion cubic metres of shale gas, Zhang Dawei, deputy director of oil and gas strategy research at the Ministry of Land and Resources, said in April. PetroChina\'s parent, China National Petroleum, and Shell are exploring the Jinqiu shale gas block in southwestern Sichuan province. Both are already operating the Changbei tight-gas field in the Ordos Basin in northern Shaanxi province. From / Gulf News

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