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CALGARY – In a move that adds uncertainty to PetroChina’s plans for Canada, Zhiming Li, the PetroChina executive who built and headed the Chinese company’s operations in this country for the past four years, has been arrested by the Chinese government.
According to a July 16 report in Caixin, a Beijing-based financial media news organization, Mr. Li “was taken in for questioning … directly at the airport” as he returned to China last month from Canada.
As reported in the Financial Post July 10, Mr. Li was unexpectedly replaced last month as CEO of Brion Energy Corp., as PetroChina’s subsidiary in Canada is known, by Shudong Chen.
Mr. Chen is still in China as he has not yet received a permit to work in Canada. The Chinese newspaper, which didn’t cite sources, said Yiwu Song, the deputy manager of overseas exploration and development at China National Petroleum Corp., was also taken away last week. The newspaper said the arrests follow a probe into Qiliang Bo, the former chief of PetroChina’s international business.
Mr. Li’s questioning links PetroChina’s Canadian operation to a corruption probe in China that has targeted the country’s top oil companies, has resulted in many arrests and is expected to slow down decisions.
Shares of Athabasca Oil Corp., which is awaiting a $1.23-billion payment from PetroChina after the Calgary-based company exercised an option to sell 40% of its Dover oil sands project, slid 5.5% to close at $6.70 in Toronto, after earlier dropping 10%, the most intraday since Oct. 18.
Investors are worried PetroChina will drag its feet honouring the deal or that it will try to renegotiate it. The Chinese have expressed disappointment with their Canadian oil and gas investments and seem focused on cutting costs rather than growing them. Many executives have been fired for failing to meet expectations.
There is no deadline for PetroChina to hand over the cash, other than it is obligated by a contract to do it in a reasonable timeframe. Athabasca needs the money to fund other parts of its business, particularly its Duvernay play where it’s seeking partners.
The uncertainty has weakened Athabasca shares, particularly since the payment didn’t land in June, as expected.
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