Kuwait closes in on Athabasca deal – by Shawn McCarthy, Jacquie McNish, Carrie Tait (Globe and Mail – August 31, 2012)

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Ottawa, Toronto, Calgary – Kuwait’s state-owned petroleum company has signed a preliminary deal to invest as much as $4-billion in a joint venture with Athabasca Oil Sands Corp. to develop some of its oil sands properties in northern Alberta.

Kuwait’s Ambassador to Canada, Ali al-Sammak, confirmed in an interview that senior Kuwait Petroleum Corp. officials signed a memorandum of understanding earlier this month. A final agreement is expected in October.

“It’s a plus-or-minus $4-billion deal and in October they’ll be coming back to follow up what has been signed,” Mr. al-Sammak said i n a telephone interview. “So we’re doing very good – this proves that we’re good close friends.”

He said Kuwait Petroleum is seeking to diversify its operations beyond the Middle East and to improve its access to oil sand extraction technology, which could be used in its own heavy oil fields.

The proposed investment highlights the rising interest from state-controlled enterprises in the Middle East and Asia in capturing a piece of the oil sands boom – and the political challenge facing the Harper government in deciding how to deal with them. If the deal is completed, Kuwait Petroleum would join a growing list of state-owned oil companies targeting Canadian oil and natural gas assets. Two proposed takeovers are now before Investment Canada for review: CNOOC Ltd.’s $15-billion offer for Nexen Inc. and the $6-billion bid by Malaysia’s Petronas for Progress Energy Resources Corp., which was approved by shareholders this week.

Athabasca signalled last month in a conference call with financial analysts that it was in the final stages of negotiating a joint venture with an unidentified investor.

Industry sources say the recent deals could mark the beginning of a large wave of foreign investments and acquisitions in the Canadian energy sector. These sources said that state-owned or private companies from South Korea, Russia, China and emerging Asian nations are currently in discussions with a number of Calgary-based companies.

“It is very, very busy right now. There is a lot of intensity on the acquisition front,” said Brock Gibson, Calgary-based chairman of Blake Cassels & Graydon LLP. Mr. Gibson declined to discuss specific transactions, but said his law firm has not seen so much deal activity since the mid-2000s. The increased interest puts pressure on the Harper government to clarify its stance on foreign investment in the energy sector.

The government is currently grappling with a host of issues raised by the CNOOC-Nexen deal that go beyond the benefits of the specific transaction, sources said Thursday. They include how much offshore presence they should encourage in key sectors such as the oil sands and B.C.’s booming gas fields.

Ottawa is also reviewing its policies toward state-owned acquirers, amid questions about whether companies from interventionist, emerging-market countries like China, Malaysia and Kuwait should be treated differently from Norway’s Statoil, a government-owned but commercially-run company whose investments the government has welcomed.

For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/report-on-business/kuwait-closes-in-on-athabasca-deal/article4510896/

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