TORONTO (AP) — A subsidiary of China's state-owned PetroChina and Canada's Encana Corp. have entered into a multibillion dollar joint venture agreement to explore and develop shale natural gas in Alberta, the Canadian oil and gas company said Thursday.
Encana said the PetroChina subsidiary, Phoenix Duvernay Gas, will invest $2.21 billion for a 49.9 percent interest in about 445,000 acres (180,000 hectares) Encana has in the emerging Duvernay formation.
The deal comes just days after Canada's Prime Minister Stephen Harper said it's "extremely unlikely" his government will allow any more foreign takeovers in the oil sands sector by state-owned companies after approving China's CNOOC's $15.3 billion takeover of Calgary-based Nexen Inc. Once finalized, it will be China's largest overseas energy acquisition.
The government, however, said it would welcome joint ventures by state-owned companies or investments that didn't constitute a controlling interest.
"I think Prime Minister Harper was clear that Canada was still welcoming foreign investment," said Geoff Hill, a partner at Deloitte's Calgary's office. "Where he was also clear was that control and complete ownership, especially by (foreign) state-owned enterprises, would be much more difficult."
Encana said it will remain the operator of the Duvernay joint venture, which will see the partners together spend $4.06 billion on drilling, completion and processing facilities over the next four years.
Encana estimates that the Duvernay joint venture lands contain about 9 billion barrels of oil equivalent petroleum.
"Phoenix's investment demonstrates the tremendous value that Encana has created ... and enables us to accelerate the pace at which the full production potential of our Duvernay lands can be achieved," Encana president and CEO Randy Eresman said in a statement Thursday.