Jul. 21, 2011 (UPI NewsTrack) --
SHANGHAI, July 21 (UPI) -- China National Offshore Oil Corp. (NYSE:CEO) is purchasing Canadian oil sands (OOTC:COSWF) producer OPTI for $2.1 billion.
CNOOC Ltd. is China's dominant offshore oil producer and has been aggressively purchasing overseas unconventional energy resources.
CNOOC said in a news release that it will pay $34 million for OPTI's outstanding shares as well as assuming OPTI's more than $2 billion in debt, the Shanghai Daily reported Thursday.
"The company will monitor trends in global energy markets and continue to look at and select projects," said CNOOC Chief Financial Officer Zhong Hua. "As the company currently has relatively ample cash, we will consider any projects that fit our strategy."
OPTI's assets include proven oil sands reserves of 195 million barrels of extractable oil. Zhong said the acquisition of OPTI will boost CNOOC's proven reserves by 5.3 percent and production by 1 percent.
Despite relatively high initial production costs, oil sands are expected to play an increasingly significant role in the oil sector. The International Energy Agency predicts that unconventional sources of oil will meet 10 percent of global demand by 2035 as compared with 3 percent two years ago. In that mix, Canadian oil sands will become an increasingly significant element.
OPTI has been struggling financially since the Toronto Stock Exchange halted trading of its stock. The company is under a delisting review after losing more than 90 percent of its value in the past year.
Struggling with its finances for more than a year, OPTI had been conducting a strategic review, hoping that a corporate or asset sale would help resolve cash flow problems.
The OPTI board of directors voted unanimously in favor of the CNOOC transaction as being in the company's best interests.
"CNOOC Ltd. is a technically experienced and well-capitalized company that is equipped to support further development at Long Lake and future expansions in the Canadian oil sands," OPTI President and Chief Executive Officer Chris Slubicki said.
CNOOC CEO Yang Hua said the OPTI acquisition strengthens his company's Canadian presence in the oil sands market.
"We believe that upside potential of the assets will facilitate local energy supply and our production growth in the long term," he said.
The OPTI deal isn't China's first foray into Canadian oil sands assets. In April 2010 Chinese company Sinopec (NYSE:SNP) spent $4.65 billion to acquire a stake in the Syncrude Canada Ltd., which owns the world's largest oil sands mining operation north of Fort McMurray in Alberta. It also has a 50 percent stake in Total EP Canada's Northern Lights project.