Chinese partnerships with Canadian companies ‘have not disappointed’

Chinese partnerships with Canadian companies ‘have not disappointed’
Sep 25, 2012 21:30
guest70194	source: financial post Jameson Berkow \| Sep 25, 2012 9:04 AM ET \| Last Updated: Sep 25, 2012 2:18 PM ET More from Jameson Berkow \| @crudereporter Canadians wary of China’s growing presence in Alberta’s oil patch can rest easier. As Ottawa mulls approval of the communist country’s largest foreign investment to date — the $15.1-billion bid from state-controlled CNOOC Ltd. to purchase Calgary-based Nexen Inc., which was approved by shareholders last week — Canada-based experts on China argue the country infamous for replicating the innovations of others has a newfound respect for intellectual property rights. A Canadian energy executive with years of experience dealing with a Chinese state-owned enterprise, meanwhile, continues to sing the praises of the rising Asian superpower. “When we closed the joint venture with PetroChina, we went into it with the expectation that they would be a very good partner to work with,” said Sveinung Svarte, chief executive of Athabasca Oil Corp. “They have not disappointed.” The Calgary-based mid-cap oil and gas producer first agreed to sell a 60% interest in its MacKay River and Dover oil sands projects to the Chinese state-owned company in 2009 for $1.9-billion. In January, PetroChina paid another $680-million for complete ownership of the 150,000 barrel-per-day MacKay River project. Access to financing tends to be among the key reasons joint venture deals like that are signed. And with more than $3-trillion in foreign cash reserves, China seems an ideal source of capital for cash-strapped Canadian companies. ------------- De-mining for black gold Army of innovators lines energy’s road to success “But that money can come from any company worldwide, it doesn’t have to be Chinese,” said Mr. Svarte. “However, what the Chinese bring to the table is a very large crude oil expertise and specialties in things like engineering, geoscience studies and cost structure.” He argues the closer economic relationship being fostered between Canada’s energy industry and China will help increase overall productivity for the sector. Cost pressure will go down and as firms hire more workers and the percentage of less productive employees grows, Mr. Svarte said Chinese contributions can help to offset any potential losses.

Sep 25, 2012 21:30

guest70194

source: financial post

Jameson Berkow | Sep 25, 2012 9:04 AM ET | Last Updated: Sep 25, 2012 2:18 PM ET
More from Jameson Berkow | @crudereporter

Canadians wary of China’s growing presence in Alberta’s oil patch can rest easier.

As Ottawa mulls approval of the communist country’s largest foreign investment to date — the $15.1-billion bid from state-controlled CNOOC Ltd. to purchase Calgary-based Nexen Inc., which was approved by shareholders last week — Canada-based experts on China argue the country infamous for replicating the innovations of others has a newfound respect for intellectual property rights. A Canadian energy executive with years of experience dealing with a Chinese state-owned enterprise, meanwhile, continues to sing the praises of the rising Asian superpower.

“When we closed the joint venture with PetroChina, we went into it with the expectation that they would be a very good partner to work with,” said Sveinung Svarte, chief executive of Athabasca Oil Corp. “They have not disappointed.”

The Calgary-based mid-cap oil and gas producer first agreed to sell a 60% interest in its MacKay River and Dover oil sands projects to the Chinese state-owned company in 2009 for $1.9-billion. In January, PetroChina paid another $680-million for complete ownership of the 150,000 barrel-per-day MacKay River project.

Access to financing tends to be among the key reasons joint venture deals like that are signed. And with more than $3-trillion in foreign cash reserves, China seems an ideal source of capital for cash-strapped Canadian companies.

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De-mining for black gold

Army of innovators lines energy’s road to success

“But that money can come from any company worldwide, it doesn’t have to be Chinese,” said Mr. Svarte. “However, what the Chinese bring to the table is a very large crude oil expertise and specialties in things like engineering, geoscience studies and cost structure.”

He argues the closer economic relationship being fostered between Canada’s energy industry and China will help increase overall productivity for the sector. Cost pressure will go down and as firms hire more workers and the percentage of less productive employees grows, Mr. Svarte said Chinese contributions can help to offset any potential losses.

Sep 25, 2012 21:32

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“So by getting partnerships with a country that has a lot of capabilities like China, you actually see an improved productivity,” he said. “That is why it is very good for Canada to have these partnerships.”

Yet part of the reason CNOOC’s proposed acquisition of Nexen has been so hotly debated in Canada since it was proposed on July 23 is because Canadians remain skeptical of the intentions of Chinese state-owned companies. Last spring, the Asia Pacific Foundation of Canada released a poll finding 75% of Canadians were opposed to Chinese state-owned companies gaining controlling stakes in Canadian firms and 57% viewed the rise of China’s economic power as a threat to Canada’s interests.

Such results are not surprising to Josephine Smart as “the Chinese disregard of intellectual property rights can be very blatant [and] they have a long history of doing that,” the economic anthropology professor at the University of Calgary said in an interview.

Earlier this month, she published a paper through her University’s School of Public Policy in which she warned Canada could be trading short-term gains for long-term pain through its dealings with China.

Many interpreted the paper as an argument against more business relationships between the two countries and for Ottawa to reject CNOOC’s bid for Nexen. But that was not message the author intended to send.

“That kind of relationship is indeed quite desirable,” Prof. Smart said. “That kind of mutual learning is good not just for the Chinese to learn how to do things, but I think more importantly it is good for us to learn how they do things.”

After decades of maintaining a lax intellectual property (IP) enforcement regime, China today possesses the most robust patent system in the world. As of 2011, more patents are filed in Beijing each year than in Washington, D.C., and massive companies like Apple Inc. have recently become more successful at curbing widespread piracy and IP theft in the country.

Sep 25, 2012 21:33

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“What is shifting the ground to some extent is that China now has things to protect of its own,” said Gordon Houlden, a political science professor at the University of Alberta and director of the Edmonton-based institution’s China Institute.

“They are trying very hard to move from a cheap manufacturer where the engineering is copied from elsewhere to an innovation economy.”

Yuen Pau Woo, chief executive of Vancouver-based think-tank Asia Pacific Foundation of Canada, notes some of those things include expertise in exploration and land-based drilling “that could be helpful to Canadians companies,” he said. “What is also often overlooked, I think, when looking at Chinese investment in Canada is the access to markets that those investors bring to Canadian companies.”

There is also no doubt that developing Canada’s vast natural resources will require help from multiple global sources, with China having the deepest pockets by far.

“Fully developing a massive continent with 30 million people is not something easily done, particularly when it comes to a large resource development,” said Prof. Houlden. “A Chinese partner will give you easier access to a certain skill set and their business culture to access that market.”

Such partnerships are necessary if Canadian companies hope to bridge the cultural gap and do business in China, argues Prof. Smart’s paper. Her husband and colleague Alan Smart first made the point in 1993 when he wrote “the line between a bribe and a gift is a fine one that requires a high level of cultural competency to handle without setting off negative outcomes and misinterpretations.”

It is critical to bear in mind that Canada’s energy industry bears little resemblance to other innovation-focused sectors such as consumer electronics, where closely-held corporate secrets and multi-billion-dollar patent lawsuits are commonplace. In other words, if Chinese companies wanted to take some made-in-Canada energy innovations for themselves, all they would have to do is ask.

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