Breakdown of Australian natural gas deal shows China becoming more market savvy

The Canadian Press ~ The News
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CALGARY - The disintegration of PetroChina's deal to invest in a US$40-billion Australian natural gas project shows resource-rich countries like Canada can't sit idly by and wait for Chinese investment to roll in, an expert in China-Canada relations said Wednesday.
"They're getting more sophisticated in dealing with the international market," said Wenran Jiang, chair of the University of Alberta's China Institute.
Australia's Woodside Petroleum said this week that PetroChina had let a preliminary agreement lapse past the Dec. 31 deadline.
The deal would have seen the Chinese state-owned firm buy up to three million tonnes of liquefied natural gas per year from the Australian offshore project for up to two decades.
While PetroChina did not immediately offer an explanation for its move Tuesday, observers said the Australian project likely lost some of its financial appeal since it was first conceived in Sept. 2007.
"You can see that when the market is not that favourable, they just drop it like that," said Jiang.
With its burgeoning population and breakneck economic growth, China has been hunting around the globe for raw resources like oil, natural gas and minerals.
However, the idea that countries can passively wait for Chinese investment to arrive on their doorstep is flawed, Jiang said.
"We have to remember that everybody else has resources, too - real and potential," he said. "The Chinese do not have to come to Canada when they don't see terms that are comfortable."
Last year, PetroChina made its first significant foray into northern Alberta's oilsands through its nearly C$2-billion investment in two projects owned by privately held Athabasca Oil Sands Corp.
The announcement grabbed headlines in Canada, but the size of the deal hardly registers when compared to multibillion-dollar investments China has made elsewhere in the world.
There are some factors that may give the Chinese pause when thinking about investing in Canada, Jiang said.
Labour costs are higher here, the regulatory regimes are complicated and, until recently, the Tory government was "not particularly friendly" toward China, though relations are warming, he said.
Additionally, China would have to vie with Canada's largest trading partner, the United States, for its resources.
And there is currently no way to transport Canadian oil and gas across the Pacific, and plans to do so are years away from coming to fruition.

Organizations: PetroChina, University of Alberta, China Institute Woodside Petroleum Athabasca Oil Sands

Geographic location: China, Canada, United States CALGARY Australia Northern Alberta Pacific

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