China’s Stake in Canada’s Oil Sands a National Security Threat, Says May

May 23, 2012 Updated: April 6, 2013

 As foreign ownership of the Alberta oil sands increases, the leader of the federal Green Party warns that China’s large—and rapidly growing—stake in Alberta oil is putting Canadian national security at risk.

In a period of 18 months between 2009 and 2011, Chinese state-owned companies invested $15 billion in the oil sands, according to a study sponsored by the Canadian Council of Chief Executives (CCCE).

Green leader Elizabeth May says this is cause for alarm because these companies are owned by the Chinese Communist Party, and the more Beijing controls Canada’s natural resources, the more influence it can exert on federal policies.

“There’s really no separation between the Chinese Communist government and their capitalist enterprises—they’re the same thing. In that light there are concerns with national security,” she said in an interview.

“This is the kind of concern that should be reviewed in advance of Chinese investments.”

In recent years Chinese companies have been aggressively investing in Canada’s natural resources, especially the oil patch.

Since 2010, notable investments include a $1.25 billion share of Penn West Petroleum by the China Investment Corporation, and the purchasing by Chinese National Offshore Oil Corporation of Opti Canada for $2.34 billion.

Sinopec recently took over Daylight Energy Ltd. for $2.2-billion, and Petro-China became the owner and manager of the MacKay River oil sands project to the tune of $1.9 billion.

In the largest deal to date, state-owned Sinopec Corp. purchased a $4.65-billion piece of Syncrude in 2010, securing a 9 percent stake in the company.

Sinopec, which is also a partner in Enbridge’s Northern Gateway Project, has a long history of major scandals involving allegations of corruption, human rights violations, and environmental pollution. It is also known to enthusiastically engage in business with oppressive regimes around the world.

May said the 9 percent share is enough for Sinopec to get a seat on the Syncrude board, which gives them veto power and an ability to indirectly represent the interests of the Chinese regime.

“It gives the Chinese government quite a significant level of control over decisions that should be made by Canadians and the Canadian national interest,” she said.

“It’s not a company where the corporate behaviour would suggest that Canadian norms will be observed.”

A recent shareholder analysis released by environmental group ForestEthics Advocacy shows that close to three-quarters of oil sands production is now foreign-owned.

According to Statistics Canada, the oil and gas sector in Canada has nearly double the amount of foreign investment compared to the national average. In addition, over half (51.1 percent) of all oil and gas operating revenue in Canada goes to foreign entities.

Other Sectors

Chinese state-owned companies are gaining a foothold in other sectors as well.

Bell and Telus recently signed contracts with massive Chinese tech firm Huawei, raising fears that the deal could compromise the security of Canadian communication systems, making them vulnerable to espionage.

Australia and the U.S. have both blocked the Chinese firm from telecom projects due to security concerns.

And on Monday, Chinese company Wanda Group announced it will buy AMC—the second-largest theatre chain in North America—for $2.6 billion. The acquisition is being seen as part of the Chinese regime’s efforts to expand its global influence through soft power.

Headquartered in Dalian, Wanda is a subsidiary of China National United Oil Corporation Co. Ltd., according to Bloomberg Businessweek. AMC has hundreds of multiplexes in Canada and the U.S.

Given the increasing Chinese investment in Canada, especially in the oil sands, May wonders why she is the only MP questioning the associated risks. She says a strict screening process to review foreign investment in Canada is urgently needed to protect the national interest.

“We really need to have had, in the Investment Canada Act, a proper, consistent national security screen before foreign investments from any country are made in Canada,” she said.

“Prime Minister Harper explicitly refused—in 2009 when amending the Investment Canada Act—to include a clear, criteria-based definition of national security or to include a national security review.”

May also questions the decision to aggressively market oil resources to Asia while roughly half of Canada continues to rely on imported oil from world markets such as Saudi Arabia, Africa, and Venezuela.

“Eastern Canadians are buying oil at world prices while Canada is exporting most of its oil to the U.S. at lower prices. So we’re buying high and selling low. There are many layers on which our current approach to oil is devoid of any notion of the national interest,” she said.

 “If you have Chinese-controlled oil sands operations producing bitumen that is owned by China, that wants to go through a pipeline being built by China, and to tankers heading for China to refineries owned by China, what about that scenario is opening up a new market for Canadian products? It’s not.

“It’s selling out our resources to a foreign power that will remain under their control.”