Heightened foreign investment in Canada’s unconventional oil
and gas industry will be driven primarily by Asian NOCs.
Source: Derrick Petroleum M&A Database-www.derrickpetroleum.com
In 2010, the number of inbound oilsands-focused transactions
from Asia tripled, as countries like China, Japan, Thailand and South Korea
actively sought to secure natural resources around the world and completed
several major deals in Western Canada.
The last 12 months have seen several notable transactions in
the sector, including Sinopec International Petroleum Exploration and
Production Company’s acquisition of ConocoPhillips’ 9.03% interest in the
Syncrude Canada Ltd.’s oilsands operation for US$4.65 billion. Thailand made
its first foray into the Canadian oilsands with PTT Exploration and
Production’s purchase of 40% of the Kai Kos Dehseh oilsands project from
Statoil ASA for US$2.28 billion. In all, Asian investment accounted for US$9.2
billion during 2010 (compared to US$5.9 billion in 2009 and virtually nil in
2008).
Source: Derrick Petroleum M&A Database - www.derrickpetroleum.com
About Canadian attractiveness
There are a host of reasons why Canada is such an attractive
destination and why foreign companies are investing here. “Rising oil prices,
high debt levels of the junior players, a stable financial and regulatory
environment, huge reserves, proximity to the United States, vast expertise and
a well-established infrastructure are just a few of them. But to make the most
of these transactions, Canadian and foreign companies need robust due diligence
and careful integration planning.
Challenges ahead
“Foreign interest in the oilsands is expected to continue in
2011 and this investment activity significantly increases the likelihood of
integration challenges and complexities, which often occur in the form of
cultural and business differences. To date, most investments have been in a
non-operated capacity, but as foreign companies begin to take on operator
roles, like in Korea National Oil Corporation’s acquisition of Harvest Energy
in early 2010, various issues could surface.”
Some of these challenges could include the need for foreign
investors to hang on to local talent to ensure the right skills are in place
when transitioning to an operator role. A supplier challenge could also arise,
with foreign companies wanting to use their own trusted suppliers instead of
sourcing local resources. In addition, local companies may have difficulty
adapting to new systems and processes, while foreign acquirers may be
unfamiliar with local laws, regulations, as well as environmental and security
guidelines.
Companies need to recognize cultural differences, embrace
innovations that enable growth –
wherever they come from - and integrate systems globally as quickly as possible.
A big part of determining success will come from their ability to establish
effective knowledge exchange processes and programs to the benefit of all
parties involved.
Asian pursuit to
continue in 2011
The 2010 trend that saw Canadian and foreign entities
partnering through strategic alliances and joint ventures is also expected to
continue. This enables risk sharing and the pooling of Canadian technology with
foreign financial strength and resources. Technology will also play a strategic
role in transactions with foreign buyers looking to reap the benefits from
advancements being made by Canadian oil and gas players.
The company projected 2011 net entitlement production to be approximately 22,000 bopd, which will be supplemented by a full year's contribution from the Kaliakra and Kavarna fields in Bulgaria
