November 2, 2012
 

China's energy giants may invest in Canada's fertiliser sector

This is according to government documents obtained by Postmedia News show.

The documents also reveal the Conservative government (Canada) was aware for the past year, well before the recent controversy over foreign investment rules and the takeover bid for Nexen, that CNOOC was interested in cooperating "with other oil majors in investments in Canada." China was also looking for "early completion" of the Northern Gateway oilsands pipeline currently under review by a federal panel.

As the Conservative government finalises a new policy framework on foreign investment and considers CNOOC's US$15.1-billion takeover bid for Calgary-based petroleum producer Nexen - it has been doing so knowing that major Chinese national oil and gas companies have been looking to invest in potash and fertiliser processing as well.

The Harper government has already blocked an attempted hostile takeover of Potash Corp. of Saskatchewan by Australian mining giant BHP Billiton, arguing that crop nutrient potash was a strategic resource for Canada. With that fresh in the minds of investors and the federal government, documents obtained by Postmedia News under access to information legislation show Chinese state-owned oil and gas companies such as CNOOC and Sinopec have told the federal government about their potential interest in investing in Canada's potash sector and fertiliser processing.

The documents also show China already viewed Canada as a desirable place to invest and wanted an "early conclusion" of the recently signed Canada-China foreign investment promotion and protection agreement that is being hotly debated in the House of Commons.

Emails from Natural Resources Canada detailing Minister Joe Oliver's trip late last year to China show he and senior officials met with the chairmen of CNOOC and Sinopec, who expressed their desire to possibly stake a claim in Canada's potash sector and fertiliser production. The email also highlights a meeting during the China trip with the Sinopec chairman and Sinopec International CEO, where they identified they were keen on investing in Canadian natural gas and possible fertiliser processing with Canadian potash.

"Sinopec looking at LNG (liquefied natural gas) purchases for import to China as well as potential fertiliser processing in Canada using Canadian potash and natural gas," says the email, which came in the midst of Sinopec purchasing Canadian oil and gas company Daylight Energy Ltd. for US$2.2-billion.

Two smaller private Chinese companies and one larger firm (which is a subsidiary of a Chinese state-owned coal producer) have already obtained potash holdings in Saskatchewan that are in the early stages of exploration, according to the Saskatchewan government. Kent Campbell, deputy minister of the provincial Ministry of the Economy, said he's not aware of any particular interest in potash or fertiliser production investments from CNOOC and Sinopec.

With such large potash resources controlled by a few major producers and a handful of countries being the main consumers, a major takeover could change market behaviour, he said.

The email also explains that Oliver met with Zhang Xiaoqiang, vice-chairman of the National Development and Reform Commission (which helps plan the Chinese economy), who said China was already "positive on Canada's friendly investment climate" and saw "great potential" for further Chinese investment in Canadian natural resources.