PetroChina pays US$1.2b to form joint venture with Encana

PetroChina agreed to pay Encana C$1.18 billion (US$1.2 billion) for a 49.9 per cent stake in an Alberta shale formation as Asia’s biggest oil producer steps up acquisitions of overseas oil and gas assets.

PetroChina will also pay C$1 billion over four years to fund development of the project, Encana said in a statement. The accord follows Beijing-based PetroChina’s purchase this week of a US$1.63 billion stake in the Browse liquefied natural gas venture in Australia.

This week’s deals more than double PetroChina’s spending on overseas assets this year, and come less than a week after Canada approved the US$15.1 billion takeover of Nexen by rival Cnooc. The state-owned company wants half its oil and gas output to come from overseas by the end of the decade.

“It seems obvious that they were waiting for the government approval for Nexen so they could get clarification of the rules surrounding state-owned ownership,” Eric Nuttall, a portfolio manager who oversees C$100 million at Sprott Asset Management LP in Toronto, said in a phone interview.

The deal marks the first between Canada and a state-owned company since Canadian Prime Minister Stephen Harper unveiled new foreign investment rules on December 7. The rules, announced after the approval of Cnooc’s purchase of Nexen, prohibit state- owned enterprises from taking control of Canadian oil-sands businesses unless there are “exceptional circumstances.” Joint ventures and minority stake acquisitions aren’t barred under the rules.

It’s the first time Encana has announced a deal with PetroChina since a C$5.4 billion agreement to develop the Calgary-based company’s Cutbank Ridge acreage collapsed in June 2011.