China invests in Canadian oil sands firm

China Investment Corporation has agreed to invest C$1.25 billion (S$1.7 billion) oil sands giant Penn West.

A wholly-owned China Investment Corporation (CIC) subsidiary will ‘develop Penn West’s bitumen assets located in the Peace River area of northern Alberta’, Penn West said in a statement.

‘CIC has also agreed to purchase trust units of Penn West on a private placement basis,’ it said.

The partnership will allow the Canadian firm to launch ‘commercial scale development and production’ of its vast oil sands resources, said Penn West, which is contributing to the joint venture leases for 237,000 acres of oil sands that are now producing 2,700 barrels of oil per day and are believed to contain ‘significant bitumen resources’.

The leases are valued at approximately C$1.8 billion, the company said. Penn West will retain a 55 per cent interest in the partnership. CIC will invest a total of C$817 million to acquire a 45 per cent stake in the joint venture.

CIC has also agreed to buy 23,524,209 discounted shares of Penn West, or five percent of Penn West’s issued and outstanding shares, for C$435 million. The deal is due to close on June 1, subject to regulatory approval.

straitstimes