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A deal to talk joint ventures with a Chinese national oil company could shrink the 12 years Sun-shine Oilsands Ltd. has allot-ted to grow to 200,000 barrels per day of bitumen output, says its chief executive.
John Zahary said Friday the $580 million the Calgary-based company raised in a Hong Kong Stock Exchange initial public offering this week, along with previous private equity, will cover its first two 10,000-bpd thermal projects in northern Alberta.
After that, a memorandum of understanding signed last month with China Petroleum & Chemical Corp. (known as Sinopec Corp.), could provide the next level of support.
"They want to talk about project-level investment, essentially something like a JV," he said.
"We've got a bunch of capital now, but the asset base is a couple of orders of magnitude bigger than our funded projects today so there's an opportunity to accelerate the activity."
He said Sunshine estimates it will cost an average of $33,000 per flowing barrel to grow to 200,000 bpd, a total of $6.6 billion, with earlier phases costing $45,000 to $50,000 per flowing barrel due to constructing roads and other infrastructure.
National companies China Investment Corp., a sovereign wealth fund, and producer/re-finer Sinopec were "corner-stones" in the Sunshine IPO financing, each taking $150 mil-lion worth of the deal before the shares were priced, said Zahary.
They wound up with eight per cent equity stakes.
Wenran Jiang, a senior fellow at the Asia-Pacific Foundation of Canada and a professor at the University of Alberta, said Sinopec is adopting new roles beyond being an oil and gas producer and refiner.
"The new role of Sinopec is not just as a Chinese entity but as an international leader of financing and gathering different capital streams from institutions globally," he said.
He said buying shares in Sunshine doesn't guarantee Sinopec will back its project directly, but it doesn't preclude that happening either.
Sunshine's initial 10,000-bpd steam-assisted gravity drain-age project, called West Ells, has received Alberta regulatory approval and is under construction, and the company has applied for similar initial phases at Thickwood and Legend Lake.
All are located west of Fort McMurray in northern Alberta. West Ells is to grow to 100,000 bpd through future phases and the other two to 50,000 bpd each.
Zahary said the projects represent 20 per cent to 25 per cent of the company's asset base. It has identified up to 54 billion barrels of petroleum initially in place on its 465,000 hectares of oilsands leases.
Zahary was reached in Vancouver on his way back from Hong Kong where, in a ceremony on Thursday, company founders Michael Hibberd and Shen Songning opened the day's trading.
"It's bang the gong to list in Hong Kong," Zahary quipped.
About 60 guests attended, half from Asia and the other half from Canada, made up of company executives, family members, investors and bankers.
That night, a crowd of about 200 came to a gala dinner to celebrate the listing.
Zahary said the listing took longer than expected and the shares were priced at the bottom end of its target of HK$4.86 to HK$5.08, but he's satisfied with the result.
"It was a time-consuming process but ultimately it positions us in a part of the world where investors are looking for oil and gas exposure, where they like Canada."
Zahary said the company is already thinking about applying for a secondary listing in Canada and plans to get in line with Canadian requirements for public companies.
The stock closed unchanged at HK$4.70 Friday, about 60 cents Canadian, valuing the company at $1.7 billion.
Along with the rapid development of China's energy industry, China Oil & Gas Pipeline network is experiencing unprecedented great structure, large-scale construction and giant leap. Read More >
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