Chinese Investment into the Canadian Oil Sands

Abstract

As the demand for energy and the price of oil continues to increase, Canada has become a major player in the global oil market. China's continuous economic growth over the past decade has created an increased demand for energy and natural resources. Active outward investments from Chinese National Oil Companies (NOC) over the past three years in the Canadian oil sands suggest the need for a better understanding of NOCs, investment trends, and possible impacts to Canada with future DFI. Although it appears that Chinese NOCs have been acting according to estimated market guidelines and principles of conduct, it is clear that there have been strategic purchasing of key energy systems in developed countries. Until the recent proposed acquisition of Nexen by PetroChina, Chinese investments into Canadian oil sands were limited by comparison with other oil producing countries. In the absence of new pipeline capacity aiming at the Pacific Coast, the primary customer for Canadian crude supplies remains the United States. This is problematic since it artificially limits the market, and exposes Canadian producers to price manipulation and non-competitive behavior. This project concludes that the Canadian government should seek to diversify the energy economy by allowing the building of a pipeline to the Pacific Coast and allow for competition in the oil sands market by exploring potential customers in Asia though new and increased infrastructure development. To improve diversification, it is recommended that a positive and welcoming diplomatic attitude towards China is crucial. Lastly, advancements in the transparency of investment sources and enhancing dialogues between stakeholders of the oil sands can better inform Canadians and improve communication between the energy community, foreign companies, and the Canadian government.