Penn West Gets China Partner To Develop Peace River Assets

Penn West Energy Trust (PWE) is partnering with a Chinese state-owned company to develop its oil-sands assets in northern Alberta, marking China's latest move into the oil-rich Canadian province.

Penn West, one of North America's largest conventional oil and natural gas producers, said it and a unit of China Investment Corp. will form a joint venture to develop the assets, which are in the Peace River area. Penn West will contribute assets worth about C$1.8 billion (US$1.77 billion) for a 55% stake in the venture, and will act as operator.

China Investment Corp., or CIC, will invest C$817 million for a 45% stake. Of the total, C$312 million will be payable on closing, with the remaining C$505 million applied to Penn West's future capital and operating expenses.

The assets include about 237,000 net acres of oil-sands leases and current production of about 2,700 barrels of oil equivalent a day. The potential of the project is "substantial," Penn West said.

Penn West said the Chinese company's support will assist in moving the project from the current resource-appraisal phase through to commercial-scale development and production.

CIC has also agreed to subscribe for about 23.5 million Penn West units, or about 5% of its outstanding units, for gross proceeds of about C$435 million. The units will be issued at C$18.48 each. Penn West is up 4.8% to C$20.39 in Toronto.

CIC's investment is just the latest in a series of investments that China's national energy firms have made in Alberta as China moves to secure energy resources around the globe. The country is now the world's biggest automobile market.

Last month, ConocoPhilips (COP) agreed to sell its stake in Alberta's Syncrude oil-sands project to China Petroleum & Chemical Corp., or Sinopec. That deal is worth US$4.65 billion. Earlier this year, PetroChina Co. moved to buy a 60% working interest in Athabasca Oil Sands Corp.'s (ATH.T) MacKay River and Dover oil-sands projects for C$1.9 billion.

-By Carolyn King, Dow Jones Newswires; 416-306-2100; [e-mail]