Chinese arrest of former PetroChina Canadian chief casts shadow over Athabasca Oil projects
AP Photo/Kin Cheung, FileChina’s major oil companies have been targeted in a sweeping corruption probe that has resulted in many arrests.
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.
Ben TsuiAccording 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.
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 PostJuly 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.
Athabasca spokesman Matthew Taylor said the company remains optimistic the payment will be made. A weekend report quoting Mr. Chen, the new Brion CEO, said PetroChina remains committed to the purchase and that it is working to complete the deal.
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CNOOC Ltd. subsidiary Nexen Energy ULC is restructuring its operations and letting go staff despite pledges to Ottawa by China’s largest offshore oil producer to keep all employees and senior management and turn the Calgary-based company into a platform for growth, industry sources say.
PetroChina faces lawsuits in Canada if it doesn’t honour its contractual obligations to Athabasca and could result in loss of assets worth more than the $1.23-billion, investment industry sources said.
PetroChina and Athabasca formed a $5-billion joint venture in 2010 to develop the MacKay River and Dover steam-assisted gravity drainage oil sands projects.
The innovative deal was aided by a close relationship between Sveinung Svarte, the president and CEO of Athabasca, and Wang Dongjin, the president of PetroChina, who has not been affected by the corruption probe.
The companies negotiated options that allowed Athabasca to sell its remaining 40% interest in both projects to PetroChina.
Athabasca has exercised and been paid for its MacKay River share, and exercised its option to sell its Dover interest in April.
Athabasca worked closely with Mr. Li during his stay in Calgary. With an MBA from the University of Alabama and a Masters degree in petroleum exploration from Northwest University near Seattle, Mr. Li was well-liked and helped grow PetroChina’s Canadian operation to 350 employees, from 38 four years ago, and aiming to produce 400,000 barrels a day.
Athabasca worked closely with Mr. Li during his stay in Calgary. With an MBA from the University of Alabama and a Masters degree in petroleum exploration from Northwest University near Seattle, Mr. Li was well-liked and helped grow PetroChina’s Canadian operation to 350 employees, from 38 four years ago, and aiming to produce 400,000 barrels a day.
“Brion Energy is a truly modern Canadian oil company, evolving in step with Canada’s energy industry,” Brion says on its website.
“With the support and financial backing of PetroChina — one of the world’s largest energy companies—our future melds unmatched stability with explosive growth.”
Industry sources said Mr. Li was asked to return to China because of his employer’s disappointment over development of the MacKay River project.
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