Chinese investment in Canadian oil shows bigger isn’t always better

The Communist Party’s third plenum pledged in late 2013 a “decisive role” for market forces. Critics have been debating ever since to what extent the central government is committed to that pledge. But there is one investment area, admittedly somewhat obscure, in which it has pursued that goal: private Chinese investment in oil and natural gas in Canada.

Early this decade, the big three state-owned oil giants, Sinopec, CNOOC and PetroChina, made headlines with megadeals, especially those involving Canada’s abundant but expensive-to-extract oil sands.

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But the outcome has been anything but smooth, as the transactions were often mired in political controversy, and operational and integration issues. In recent years, investment has slowed and ambitions moderated. In have come the small and medium-sized mainland investors that few people have heard of outside the industry. They take advantage of low oil prices and the industry slump by snapping up Canadian energy companies, many from the oil-rich Alberta province, and quite a few in financial distress that can be had for a song. Most investments focus on the more traditional oil and gas resources, rather than oil sands.

Between 2013 and last year, smaller private mainland investors have taken over at least a dozen Canadian energy companies, according to Alberta government records. Now, people are taking notice, as oil is again touching US$80 a barrel, proving such private entities may be nimbler and more driven by quick profits than the state behemoths.

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A handful of commercial groups with close ties to mainland financial sources have pumped about C$4 billion (US$3.11 billion) into Alberta’s oil and gas sector since the onset of the oil price slump.