The Alberta and Chinese governments see each other as potential suppliers and consumers of each other’s products and resources. This is evident by the number of recent visits made by government officials to both Alberta and to China. In June 2008, Deputy Premier and Minister of International and Intergovernmental Relations Ron Stevens spent 11 days in Asia meeting with government and industry contacts to help build relationships and gain insights to advance Alberta’s trade priorities. In February 2008, China’s State Grain Administration visited Alberta. In October 2007, Alberta’s Minister of Employment and Immigration, Iris Evans visited China to try to attract investment and promote Alberta. Before leaving on that trip, Minister Evans said, “This mission is a chance to highlight Alberta’s positive investment environment, vast opportunities in all industry sectors and our employment options for foreign workers, as we work to increase our industrial development capacity.” Other visits between Alberta and China took place in June, May and March of 2007 and with similar frequency in the two preceding years.
China has a huge labor market that Alberta is interested in taking advantage of. China has been Alberta’s top source country of immigration since 2002 and the Alberta government is making efforts to increase those numbers. This was part of the goal of Minister Evans’ trip to China in October 2007. Alberta has a shortage of labor in almost every industry and is looking for foreign workers to fill those positions. There is also the potential to source products from China, which would employ many Chinese workers. This has already been done with projects like Synenco Energy Inc. and Sinopec’s Northern Lights oil sands project. They decided to build the modules required for the project in China using Asian workers, which saved the project roughly $1.2 billion in construction costs cut the need for labor in half. This is just one example of sourcing work and labor from China.
China has been attracting foreign investment quite heavily since 1990. According to the United Nations Conference on Trade and Development, China has become the largest recipient of foreign direct investment (FDI) in the world. The Ministry of Commerce of the People’s Republic of China even has a website () aimed at attracting investment in China. This presents an opportunity for Alberta companies to invest in foreign markets and take advantage of the massive labor force in China. The more Alberta invests in China, the stronger the economic relationship will become.
The Energy Market
Until 1993, China was an oil exporter. However, since then they have become a net importer of oil as seen by the graph to the right. Their consumption of oil has far exceeded their production and they are looking for more resources to meet their growing demand. China is the second largest consumer of oil in the world and is the third largest net importer of oil after the United States and Japan.
China has been investing in Alberta oil since 2004, primarily by China's three largest oil companies, Sinopec, the China National Petroleum Corporation (CNPC) and China National Offshore Oil Corporation (CNOOC). However, up until 2005 China had yet to purchase any significant amount of Canadian oil. There had been lots of talk and little action in terms of energy trading. That all changed in 2005 when Alberta’s oil sands were reclassified as economically recoverable and Canadian oil reserves were ranked as the second largest in the world.
On April 14, 2005, Enbridge Inc. announced that it had entered into a memorandum of understanding with PetroChina International Company Limited to develop the Gateway Pipeline. PetroChina is a subsidiary of CNPC, one of the world’s largest oil companies. This pipeline would transport approximately 400,000 barrels of oil per day from Edmonton to a port in B.C. wehre it would be shipped by tanker to China and other destinations. The agreement would see approximately 200,000 barrels of oil per day shipped to China. At that time Enbridge had completed preliminary design work, engineering and environmental assessments of the pipeline and they were targeting a late 2009, early 2010 opening of the pipeline. However, on July 13, 2007, CNPC and PetroChina withdrew support of the pipeline, citing delays due to “lack of support from Canadian firms and challenged by native land claims along the proposed route.” The vice-president of CNPC felt that the delays reflected the Canadian government’s unwillingness to open its markets to China and that the oil producers/shippers were unwilling to commit enough supplies to the pipeline to make it worthwhile. Enbridge is still pushing to complete the Gateway pipeline by 2012-14, and are still hopeful that China could be a market for the oil. An article in the East-West Energy Chronicle questioned whether China’s goal was the completion of the pipeline or the skills and expertise to unconventional natural resource projects.
During 2005 and 2006, China also invested in two other Alberta oil companies and projects, continuing their pursuit of Alberta’s resources. In 2005, Sinopec invested in 40% of the Northern Lights oil sands project, with the other 60% interest coming from the Canadian firm Synenco. This project is still ongoing as of 2009. As well, in 2006, CNOOC took a 16.69% share of MEG Energy Corp. in Calgary, and announced later that year that they were interested in further investments in Alberta’s oil sands. Whether their interests in the Gateway pipeline was to acquire expertise with the oil sands to help them with their other investments, or whether their support of the pipeline was genuine, these investments and agreements are signs that China is definitely interested in what Alberta has to offer.
Worldwide demand for oil has been increasing since the 1990s, which has led to a corresponding increase in oil prices. In July 2008, crude oil prices peaked at over US$147, but have since fallen to below US$35 as of February 18, 2009. Due to the global recession, oil demand worldwide has dropped, which has led to an increase on worldwide inventories. According to “Investor Insight,” China has begun stockpiling oil inventories now that prices are low. They will store it for future use and to avoid oversupply in their own market. The Chinese government is looking at a three-phase stockpiling of 37 million tons of oil and is buying large quantities through the world markets. This stockpile will give them more control over their domestic selling prices and more control over their energy policy when the recession ends.
Canada has the second largest oil reserves in the world behind Saudi Arabia, and over 95 percent of them are located in Alberta. Canada is the largest supplier of oil to the U.S., with over 99 percent of Canada’s oil exports being sent south of the border. With development of the oil sands in Alberta expanding, the supply of oil from Alberta is expected to increase.
In a press conference in Beijing on October 17, 2007, Alberta's Minister of Employment, Immigration and Industry Iris Evans said, "We have been telling friends that we meet here in China that we have very large energy capacity. We have 173 billion barrels of established reserves ... we believe we can share technology with China.” This sentiment is still there; Alberta’s Provincial Energy Strategy, released on December 11, 2008, recognizes the increasing demand for oil throughout the world and that both China and India want Alberta’s oil. With the U.S. dominance in the world’s economy diminishing, Alberta has the opportunity to reduce its reliance on the U.S. market and develop additional markets, including China.
China – Alberta Relations, .
Alberta Government News Release, September 27, 2007, “Minister talks investment and skilled labour attraction in Asia”, .
East-West Energy Chronicle, December 7, 2006, “Synenco says Asian labor will cut Northern Lights project cost by $1.2B”, .
UNCTAD Investment Brief Number 2, 2007, .
Business Wire, April 14, 2005, “Enbridge and PetroChina Sign Gateway Pipeline Cooperation Agreement”, .
The Globe and Mail, July 13, 2007, “Beijing quits pipeline, blasts Ottawa; China walks away from $4-billion oil-sands project.”
East-West Energy Chronicle, July 25, 2007, “Canada, China: A Pipeline to Oil Sands Expertise”, .
InvestorsInsight, February 16, 2009, “China Stockpiling Oil; Opec Cuts Forecast”,
China International Electronic Commerce Center .