On September 1, 2020, PetroChina Canada Inc. and Ovintiv (formerly Encana) announced the formal dissolution of their Duvernay shale gas joint-venture project. The Canadian Press reports that the “acreage is being split between the two and each will wind up with the same production of about 13,000 barrels of oil equivalent per day and the same oil and gas reserves.”
PetroChina – the publicly listed subsidiary of the state-owned China National Petroleum Corporation – paid US$2.2 billion in 2012 for a 49.9% stake in the project, according to data collected from the China Institute Investment Tracker. The deal was an early stage trial of new ministerial guidelines governing foreign state-owned investments in Canadian energy assets. Despite increased scrutiny towards Chinese SOE investment at the time, the deal was not subject to a net benefit review under the Investment Canada Act as it did not constitute a controlling interest in the project.
PetroChina is involved with six major assets in Western Canada. It wholly owns the MacKay River Oil Sands project, Dover Oil Sands project, and now partitioned Duvernay Shale Gas project. It holds partial interests in the Grand Rapids Pipeline (non-operated 50% share), Groundbirch Tight Gas project (20% share), and LNG Canada project (15% share). Despite unspectacular production in Alberta, Chinese companies like PetroChina have expressed a commitment to their investments.
In October 2019, Ovintiv announced that it was changing its name from Enanca and shifting its headquarters from Calgary to Denver. While there was no direct impact on jobs or investment in Alberta at the time, it was a blow to the already beleaguered Alberta energy sector. With revenues drying up, there is very little optimism for both current business operations and the potential for future investment. Ovintiv has since cut 650 jobs across Canada and the United States.
While the reasons behind the joint-venture split are not known, Ovintiv’s move away from Alberta and the current financial turmoil surrounding Alberta oil and gas operations could be potential motivating factors. The now-U.S. based firm could also be wary of a joint venture project with a Chinese state-controlled firm, given the current bilateral tension between the two countries. As for PetroChina, the company has stated that it will hire new staff and continue project operation. But only time will tell if the project will continue to be financially viable in the context of broader sectoral uncertainty.