China invests in Canadian oil project

Sinopec, the second largest energy and petrochemicals group in China, will pay about C$105 million to purchase 40 percent of the proposed Northern Lights project to develop oilsands deposits in northern Alberta, Canada.

The deal is an indication of China’s interest in procuring access to long-term oil supplies. Another Chinese oil company, CNOOC, earlier bought one-sixth of MEG Energy, a privately held company looking at developing oilsands projects.

Oilsand is a tar-like substance that is obtained through either surface mining or by injecting steam into wells. The oilsand then goes through an extraction process to get the oil out of it.

It is an expensive process, but current high oil prices make oilsands a much more attractive source of oil now than when it first began to be exploited in the late 1970s.

The Northern Lights project is expected to begin producing oil in 2010 at a cost of C$4.5 billion (US $3.6 billion). Sinopec’s partner in Northern Lights is Synenco Energy of Calgary, a privately held company.