Li Ka-shing, Beijing and Canadian Energy

An interesting article from the Globe-Mail of November 2004 showing Li Ka-shing’s collaboration with the Chinese government in the purchase and exploitation of Western strategic assets.

Husky Shares Surge to New High Fuelled by Report China’s Government in talks to Buy Calgary Giant

by Patrick Brethour, Jacquie McNish, Nov 27, 2004

CALGARY, TORONTO — Husky Energy Inc. stock rocketed to its highest level on record yesterday after The Globe and Mail reported that the Chinese government is in talks to buy the energy giant from Hong Kong tycoon Li Ka-shing* — and some analysts said any offer would be priced above $40 a share.

Sources familiar with the talks said Chinese officials and Li family representatives started talks for a takeover, which could be worth more than $14-billion, several weeks ago in Beijing and Hong Kong. The Li family controls nearly 71 per cent of Husky, directly and through its ownership of Hutchison Whampoa Ltd. It is understood China is seeking to acquire full control of Husky through one of its state-owned energy companies, although it is not clear which agency might make the offer, or what the nature and timing of that bid could be.

State-controlled PetroChina Co. Ltd. discussed a possible acquisition of Husky with the Li family two years ago, but the talks foundered on price after a steep runup in Husky stock.

The Chinese are indeed intensely interested in Alberta’s oil sands resources in the longer term, although for the moment there is no economical way to transport synthetic crude from Western Canada to that country. According to sources close to the negotiations, Husky’s short-term appeal to China is the hedge its oil and gas sales offer against rising petroleum prices. With Husky in its control, China could cushion the blow of oil price hikes with rising profits at the Calgary company. Over the longer term, it is understood that China hopes to import unrefined oil from Husky’s fledgling oil sands projects in Alberta.

This summer, a delegation of Chinese engineers and executives toured Alberta’s oil sands, visiting Husky and a number of other players. According to Alberta Premier Ralph Klein, the delegation said China wants to ship synthetic crude across the Rockies — perhaps through the Prince Rupert terminus being proposed by Enbridge Inc. — and across the Pacific.

China is also seeking to tap Husky’s expertise in offshore oil drilling. The East China Sea is largely unexplored and the state-owned China National Offshore Oil Corp. has awarded Husky’s subsidiary Husky Oil China Ltd. a number of contracts in recent years to conduct deep-water drilling in the South China and East China seas. A Husky spokesman said his company does not comment on takeover speculation, and Hutchison Whampoa could not be reached for comment.

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