Athabasca Oil's Chinese JV gets regulatory nod

Canadian oil sand developer Athabasca Oil Corp has received the green light from Alberta Energy Regulator for its Dover project in Northern Alberta, a joint venture with Chinese petroleum giant PetroChina Co Ltd.

With this approval, Athabasca Oil can now sell its 40-per cent stake in the project to PetroChina which is valued over $1.3 billion and use the proceeds to fund its upcoming projects.

In 2010, PetroChina had acquired 60 per cent of Dover and MacKay River thermal oil projects from Athabasca Oil for $1.9 billion. Last year, it further bought the remaining 40 per cent interest in MacKay River thermal oil project for $680 million.

Further to the regulatory nod, the project requires final approval from the provincial government.

Calgary-based Athabasca Oil Corp owns or has interests in leases in the Athabasca oil sands of northeastern Alberta, which spreads over 3.5 million acres. The company has approximately 10.6 billion barrels of bitumen resources and growing light oil production.

According to some analysts, the approval is ''highly positive'' as the Chinese funding will help Athabasca Oil to advance its oil sands and light-oil development programmes. The company expects to achieve a total production capacity of up to 260,000 barrels of oil equivalent per day by 2020.

The transaction would be Canada's second major oil sands deal with a Chinese company. Earlier this year, another state-owned Chinese oil company CNOOC completed its acquisition of Canada's Nexen Inc for $15.1 billion.

The Dover project is operated by Brion Energy Corp, a joint venture between Athabasca Oil and PetroChina. It has the potential produce approximately 4.1 billion barrels of bitumen.

At its full capacity, the project is expected to create an estimated $5.3 billion of economic activity per year, the company said in a statement.

The regulator has stipulated ten conditions for the Dover project including progressive reclamation of land affected by the oil extraction process.

There has been stiff opposition to the Dover project from Alberta's aboriginal groups. The community of Fort McKay demanded a 20-km ''no development buffer zone'' around the Moose Lake reserve to protect the area's cultural and environmental integrity. A part of the Dover project is believed to be close to the area.

Following the regulator's decision Fort McKay First Nation chief Jim Boucher said that ''the fight to protect Moose Lake is not over. Fort McKay is gearing up to mount a rigorous opposition to the Brion Energy project until a satisfactory solution is found."

Further to the news, shares in Athabasca surged about 18 per cent in the morning trade yesterday in Toronto before closing 10 per cent higher at $8.12, still below the share's issue price of $10 in 2010. The stock has fallen around 28 per cent in the past six months.