Crude Oil Tar Sand Companies

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Challenges abound for India if it makes $2.5-billion oilsands investment
CP
Lauren Krugel, The Canadian Press
Fri, 4 Jul 2008 17:32:00 CST



CALGARY - India's state-owned firm may be keen on
making a $2.5-billion investment in Alberta's
oilsands, but one analyst wonders how far
that money will go.

"I think at the end of the day their challenge
in deploying the $2.5 billion will be what
makes their money any better than anyone
else's money?" asked Barry Munro, an oil
and gas analyst for Ernst & Young.

At an international energy conference in Madrid,
Indian officials suggested they would
be looking to Canada's enormous oilsands
resource to feed the booming country's
voracious appetite for energy.

But, in relative terms, $2.5 billion is not
a large amount for an oilsands investment
and there are a number of other challenges
that might put a damper on any of India's
oilsands ambitions, Munro said.

"From an organic perspective, lots of people
have said that most of the good prospective
lands have already been acquired." he said.

Another option could be to forge a partnership
with an existing oilsands player - in the same
way EnCana Corp. (TSX:ECA) and ConocoPhillips
as well as Husky Energy Inc. (TSX:HSE)
and BP linked up their production and refining
operations.

But unlike ConocoPhillips and BP, though,
a partnership with India's state-owned firm
might be a tough-sell, Munro said.

"If you're an existing oilsands player and wanted
a partner, you'd be looking for somebody
who could bring some technology to the table
because advancing technology seems to be a
big thing," he said.

Companies like Husky and Petro-Canada (TSX:PCA)
have peripheral oilsands properties that
could potentially be scooped up by the Indian
firm, but Munro points out that India passed
up on two similar opportunities recently.

California-based Occidental Petroleum recently
bought the Joslyn oilsands property from
Enerplus Resources Fund (TSX:ERF.UN) for
$500 million.

And French oil giant Total is pursuing Synenco
Energy Inc. (TSX:SYN) in a deal valued
at $480 million. However, Total's takeover
offer was extended on Friday after it failed
to obtain enough shares before the deadline.

A company like Total is better able to compete
in the oilsands game because it has experience
handling heavy oil at its properties in
Venezuela, Munro said.

"They actually brought some intellectual capital
and know-how around heavy oil capabilities.
I'm not sure that the Indians would have
that," he said.

"I don't believe in the oilsands today money is
the issue."




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