Canadian Energy Company Terminates Negotiations with PetroChina for Natural Gas Development
Release time ：
2015-07-07
Economic Observer Network reporter Zhou Aiyun said on Tuesday that the Calgary based Canadian Energy Company (Encana) and PetroChina (13.63,0.62,4.77%), a subsidiary of China National Petroleum Corporation (CNPC), had failed to negotiate the cooperative development of shale gas, and the two companies finally abandoned the plan to develop a large shale gas reservoir in western Canada, according to FT.
Economic Observer Network reporter Zhou Aiyun said on Tuesday that the Calgary based Canadian Energy Company (Encana) and PetroChina (13.63,0.62,4.77%), a subsidiary of China National Petroleum Corporation (CNPC), had failed to negotiate the cooperative development of shale gas, and the two companies finally abandoned the plan to develop a large shale gas reservoir in western Canada, according to FT.
Industry analysts point out that the main reason for terminating the cooperation this time may be that PetroChina believes that Encana has overvalued the project. However, this is an important opportunity for PetroChina to enter the high-end market in North America. PetroChina will not abandon the Canadian market just because of a failed cooperation.
As China's largest natural gas production, transportation, and supplier, PetroChina's sense of urgency in obtaining natural gas resources is becoming increasingly strong. According to the previous agreement between PetroChina and Canadian Energy Company, the two sides will form a joint venture of CAD 5.4 billion (USD 5.6 billion). After the establishment of the joint venture, PetroChina can hold 50% shares of Cutbank Ridge shale gas field, a Canadian energy company. At the beginning of the cooperation, Canadian Energy Company will continue to operate the joint venture and market sales. Afterwards, a joint management committee will be established to manage and operate the joint venture company. If the transaction is successful, it will be the largest direct investment by a Chinese company in Canada to date.
CutbankRidge assets are located in the provinces of British Columbia and Alberta, including 1.3 million acres of natural gas fields, approximately 7 million cubic feet of daily production, 3400 kilometers of pipelines, and underground gas storage.
Canadian Energy Corporation recently issued a statement stating that after a year of negotiations with PetroChina, the two sides have different views on the "key components" of this transaction, including a joint operation agreement that defines the responsibilities of each company. And refused to disclose specific details on the grounds of confidentiality agreement. PetroChina did not disclose the losses that would result from the termination of the project, but the news that the transaction has been terminated has been confirmed.
Ren Haoning, a researcher in the energy industry of CIC Consulting, believes that "the failure of cooperation is a major loss for both sides. PetroChina will delay the pace of expanding shale gas exploration and entering the Canadian oil and gas market." Ren Haoning said that Encana had hoped to improve the company's asset liability ratio through this investment, which will force it to find new partners.
It is also understood that on the day before the termination of the project, PetroChina and Shell signed a global cooperation agreement and stated that they would establish a well construction enterprise with 50% of each party's shares to jointly develop unconventional natural gas resources. PetroChina has always hoped to establish a joint venture to provide a platform for entering major markets in North America.
Analysis suggests that this may have a significant impact on PetroChina's development layout in Canada. First, Canada has strict control over foreign companies' acquisition of its own energy. Second, it is not easy to obtain large shale gas projects. The failure of this cooperation means that PetroChina may need long-term efforts and preparation to obtain the next opportunity.
Industry analysts point out that the main reason for terminating the cooperation this time may be that PetroChina believes that Encana has overvalued the project. However, this is an important opportunity for PetroChina to enter the high-end market in North America. PetroChina will not abandon the Canadian market just because of a failed cooperation.
As China's largest natural gas production, transportation, and supplier, PetroChina's sense of urgency in obtaining natural gas resources is becoming increasingly strong. According to the previous agreement between PetroChina and Canadian Energy Company, the two sides will form a joint venture of CAD 5.4 billion (USD 5.6 billion). After the establishment of the joint venture, PetroChina can hold 50% shares of Cutbank Ridge shale gas field, a Canadian energy company. At the beginning of the cooperation, Canadian Energy Company will continue to operate the joint venture and market sales. Afterwards, a joint management committee will be established to manage and operate the joint venture company. If the transaction is successful, it will be the largest direct investment by a Chinese company in Canada to date.
CutbankRidge assets are located in the provinces of British Columbia and Alberta, including 1.3 million acres of natural gas fields, approximately 7 million cubic feet of daily production, 3400 kilometers of pipelines, and underground gas storage.
Canadian Energy Corporation recently issued a statement stating that after a year of negotiations with PetroChina, the two sides have different views on the "key components" of this transaction, including a joint operation agreement that defines the responsibilities of each company. And refused to disclose specific details on the grounds of confidentiality agreement. PetroChina did not disclose the losses that would result from the termination of the project, but the news that the transaction has been terminated has been confirmed.
Ren Haoning, a researcher in the energy industry of CIC Consulting, believes that "the failure of cooperation is a major loss for both sides. PetroChina will delay the pace of expanding shale gas exploration and entering the Canadian oil and gas market." Ren Haoning said that Encana had hoped to improve the company's asset liability ratio through this investment, which will force it to find new partners.
It is also understood that on the day before the termination of the project, PetroChina and Shell signed a global cooperation agreement and stated that they would establish a well construction enterprise with 50% of each party's shares to jointly develop unconventional natural gas resources. PetroChina has always hoped to establish a joint venture to provide a platform for entering major markets in North America.
Analysis suggests that this may have a significant impact on PetroChina's development layout in Canada. First, Canada has strict control over foreign companies' acquisition of its own energy. Second, it is not easy to obtain large shale gas projects. The failure of this cooperation means that PetroChina may need long-term efforts and preparation to obtain the next opportunity.