Are The Chinese Really coming?

If you live in Canada and particularly of you live in on of Canada’s oil-rich provinces, you have heard for years of the coming Chinese take-over of our resources. Ok that might be a bit of a stretch, but there is some truth to it. The question is whether this buying will pick up anytime soon? We all know that the Chinese are very strategic in their thinking, planning and thus their ‘buying’. One only has to have a look around the world to see that over the past few month the Chinese have acquired large resource assets in Australia and throughout South America – including a deal with Venezuela.

Look at the numbers: Canada has the world's third largest oil resource base with approximately 600 Billion barrels of recoverable oil - dwarfing China's oil resources and a population of about 1.3 billion (compared to Canada's 31 million).

“The first, and most obvious, is energy security. On a comparative basis, relative to the size of their economy, they are not blessed with that many natural resources themselves, so they want to get access themselves to the physical barrels, if possible.

The second thing, which drives the importance to the Chinese, is their own view that the industry is running short of natural resources and so it would be a good long-term investment, in and of itself.

The third thing that is really driving the importance of the Chinese market is the fact that that they've got the money They can finance these deals and, particularly in today's marketplace where raising capital is more difficult than it was a year ago, this ends up being a critical factor in deciding if you're a seller that we want to do business with.

We don't have the depth of capital markets to fully develop our own natural resources: the total amount of capital that's going to be required to be able to develop the oil sands business is well over $100-billion over the next 15-20 years; it'll be by far the largest capital expenditure program in a single sector in Canadian history. The Canadian capital markets are simply not deep enough to be able to finance that, so we have to be prepared to welcome foreign investment if we want to be able to develop this important strategic globally admired resource.”

Source: The G&M: Karl Moore of the Desautels Faculty for The Globe and Mail interviewing Adam Waterous, Scotia Waterous.



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